Two types of Budget-Status Indicators

Per capita amounts
Subnational governments differ in terms of the number of people for whom they must provide services: some have millions more people than others. Measuring budgets (either revenues or expenditures) on a per capita basis overcomes the issue of population size differences. Per capita revenue amounts reveal the amount of money available for each person in each area while per capita expenditure amounts reflect the amounts allocated per person in each area. Large differences in per capita revenues, or per capita expenditures, between one government and another, raise issues of equity and fairness and questions as to why the differences might exist. For example, different levels of expenditure on human capital development programs (be it on health and education) by governments may be related to the different levels of health or education among their populations. They also lend to discussions as to how any excessively large inequalities might be reduced in favor of greater equity.

Percentage shares
The percentage share measure refers to the share a subcomponent of revenues has of total revenues or the share a subcomponent of expenditure has of total expenditures. While some governments have much larger budgets than others, the percentage shares measures assume that the total revenues or total expenditures of all areas are the same size. They are a useful comparative measure because they reveal the relative importance of a revenue subcomponent or expenditure subcomponent within budgets. For example, it can be concluded that a government that spends 10% of its total expenditures on health gives health a higher priority among its concerns than other governments that spend 5% or less of their total expenditures on health. Percentage share measures are also commonly used to examine how the structures of budgets are changing over time.

Relative merits of the two measures
A warning: readers should be aware of the danger of reaching misleading conclusions by simply comparing the percentage share figures of different subnational governments as presented in the maps. Having a higher percentage share value for any component of interest does not necessarily mean that one subnational government is more responsive in addressing a concern than another government that spends a lower share of its budget on that concern, or vice versa. Therefore, again using the example described above, it can not be concluded that a government spending a greater share of its total expenditure on health is doing more for health than the government that is spending a smaller share of its total budget on health. This is because the percentage share measure says nothing about how much is actually being spent by those governments. It only reveals the relative importance of the item within each governments’ budget.

There is another issue about which some caution is needed. This relates to inter-government comparisons concerned with a particular budget-line item (ie a subcomponent of revenue or a subcomponent of expenditure) when both per capita and percentage share based indicators are presented. If, as might be expected, budgets of different subnational governments are roughly proportional in size to the size of their populations then it follows that the rank order of subnational governments, sorted from low to high, using one type of budget measure will remain very similar when using the other type of measure too. That is, areas with lower than average per capita expenditures will also tend to be the ones with lower than average percentage shares.

However, as will be seen when ranking subnational governments from low to high for some of the budget indicators that follow (for example, personnel expenditures) those with low percentage shares are not necessarily the same ones as those with low per capita amounts and vice versa. There are in fact cases of governments that have a low ranking among all subnational governments when ranking them on the basis of percentage shares but a high ranking when ranking them on a per capita basis (and vice versa). This unexpected finding informs that there are factors more important than population size in determining the overall size of subnational government budgets. When asking which measures are best for ranking subnational governments in terms of their efforts it is important to remember the dictum that ‘money counts most’. Higher per capita money amounts reflect higher inputs into issues of concern and should always be used as the primary measure of activity when making inter-area comparisons.