Democratization, decentralization, and local environmental policy capacity: Hungary and Mexico

The Social Science Journal 40 (2003) 249–268

Democratization, decentralization, and local environmental policy capacity: Hungary and Mexico Valerie J. Assetto a,∗ , Eva Hajba b , Stephen P. Mumme a a

b

Colorado State University, Ft. Collins, CO 80523, USA Budapest University of Economics and Public Administration, Budapest, Hungary

Abstract Democracy is thought to promote administrative and political decentralization in countries committed to its practice. This is particularly true in the area of environmental policy which is often associated with public participation, government accountability and responsiveness, environmental stewardship, and the accrual of local policy capacity for environmental protection. Most of the operating assumptions on the relationship between democratic governance and environmental decentralization are drawn from mature democracies, however, not from those emerging from authoritarianism. This study compares the institutional, fiscal, and political experiences of two recently democratized countries, Hungary and Mexico, to ascertain whether democratic transition has been associated with the accrual of local environmental policy capacity. Our findings show that democratic transition is favorably associated with the decentralization of environmental policy responsibility but that many impediments to local capacity accrual remain. Democratization should be treated as a necessary but insufficient condition for developing local policy capacity for environmental protection in countries newly emerging from authoritarian rule. © 2003 Elsevier Science Inc. All rights reserved.

1. Introduction The transition to democracy from authoritarian political systems is supposed to promote administrative and political decentralization and foster the accrual of local government capacity in administrative and political processes. As the spatial dispersal of administrative and political authority, decentralization is closely linked to sub-national government policy capacity. Government capacity, of course, will normally vary across policy areas and is generally addressed in reference to particular problems or policy areas. ∗

Corresponding author. Tel.: +1-970-491-5369. E-mail address: [email protected] (V.J. Assetto).

0362-3319/03/$ – see front matter © 2003 Elsevier Science Inc. All rights reserved. doi:10.1016/S0362-3319(03)00007-7

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Environmental protection is one area where democratization might well be expected to promote decentralization and capacity accrual by local governments. Both in theory and practice, the development and implementation of national environmental policy has been associated with democratic values and institutions, to include the opportunity for greater public participation and local involvement in public decision making and the need for greater public accountability at all levels of government, including the local. While not all environmental problems are local, many compelling concerns, such as water quality, air quality, solid, and toxic waste management, are. Moreover, comparative studies of environmental policy point to citizen desire for local input as a distinctive feature of this policy domain. In mature democracies, local government is often the guardian of key environmental arenas, particularly water quality and waste management. Citizens expect local officials to be stewards of environmental values and often act to pressure governments neglecting this responsibility. Environmental protection is thus regarded as one of local government’s core functions in modern democracies (Ben-Elia, 1993). Democratization, therefore, should enhance environmental governance at all levels of government or, as the Organization for Economic Cooperation and Development (OECD) puts it, enhance “a society’s ability to identify and solve environmental problems” (Janicke & Weidner, 1997, p. 1). It should promote environmental decentralization and local capacity accrual by a variety of means to include new constitutional arrangements, laws, institutions, and new opportunities for citizen involvement in environmental policy making. It should have the effect, following the OECD’s formulation of the concept of government capacity, of strengthening government’s ability: (1) to undertake strategic actions—to adopt and implement policies that respond to public concern and protect the environment; (2) to integrate contending concerns and perspectives in policy solutions; and (3) to accommodate citizen participation in the policy process. Unfortunately, most of the operating assumptions in this area are drawn from experiences in mature democracies and not from those that are newly democratic. The literature on democratic transition, however, points to a wide range of potential problems associated with developing democratic norms and practices. These include the persistence of centralism, legal and administrative formalism, fiscal weaknesses, the uncertainty of electoral contestation and associated political conflict, and limited opportunities for citizen participation in local affairs. This study aims to redress this deficiency by examining Hungary and Mexico, two countries that have each negotiated a democratic transition in the past decade. Our two countries lend themselves well to exploring the challenges facing transitional democracies in decentralizing environmental protection. Both have a recent history of centralism and authoritarian rule. Both have instituted a process democratic transition entailing some degree of constitutional and statutory reform, and competitive elections. Both, too, have initiated political devolution aimed at strengthening sub-national government policy capacity, particularly with respect to environmental policy. Both are upper-middle industrializing nations (World Bank, 2000, p. 229). They are among the newest members of the OECD, a symbol of their economic achievement. While various historical, contextual, cultural, and socio-economic differences separate these two countries, they are sufficiently similar to warrant comparison. In the following pages we compare these two countries across three variables that influence their performance in decentralizing environmental policy. First, we examine their institutional

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framework for sub-national environmental policy for elements that may advance or hinder environmental decentralization. Second, we look at the fiscal mechanisms supporting environmental decentralization. Third, we consider how recent political changes may influence local capacity development. A careful look at these variables allows us to gauge how these countries are faring in promoting local environmental capacity, to consider how democratic transition has advanced the process, and to identify obstacles to decentralization that may well be relevant to the circumstances of other countries in democratic transition.

2. Institutional aspects of environmental decentralization in Hungary and Mexico Democratic transition entails reform of governing political institutions, though this does not guarantee democratic norms and practices will take hold. This fact is relevant to the two countries under review. Decentralization of government and policy is a cardinal element of the transition process in both Hungary and Mexico and environmental protection has received attention, though patterns vary as seen below (see Table 1). 2.1. Hungary Of the two countries, Hungary’s institutional transformation is most dramatic, entailing a shift from its highly centralized, anti-democratic communist past. Of the communist era Bohm (1994, p. 3) writes that “local authorities were thus the weakest components of the entire power structure,” their influence limited to “personal contacts.” After transition in 1988, Hungary began to decentralize. The new 1989 constitution maintained a unitary system but ushered in the Local Self-Government Act in 1990, based on the European Council’s Local Government Charter (OECD, 2000, pp. 44–45; O’Toole & Laurence, 1994, p. 292). By 1998, a total of 3,160 local governments were constituted (CDLR, 1994, p. 5), amounting to a devolution of political power. Under the Local Self-Government Act local governments are formally organized in a manner designed to maximize accountability. Municipalities are divided into villages, towns, towns with county rank, and the capital city (Budapest) and its 23 districts. Each is governed by a mayor–council system with mayors elected directly or indirectly depending on municipal size (CDLR, 1994, p. 9). Mayor and council are assisted by the chief administrator, appointed by the municipal council. Departments and council committees are directly responsible to the mayor and the council. Referenda are constitutionally allowed (CDLR, 1994, p.10). Constitutional provisions on local government may be amended only by a two-third majority of Parliament (Hajdu, 1993, p. 210). Constitution and statute thus provide many avenues for citizen input, ensuring local government’s accountability and responsiveness to the electorate. Counties and regions are the two remaining levels of sub-national government but neither directly impinges on local authority. Counties, once strong under the communist regime, are now strictly limited to “non-mandatory tasks” (CDLR, 1994, p. 8) that cross-municipal boundaries and cover large territories; municipalities may perform these tasks where they are able. At the regional level, presidentially appointed Commissioners of the Republic are tasked with legal oversight of municipalities (CDLR, 1994, pp. 8, 15; Hajdu, 1993, p. 211). Commissioners

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Table 1 Institutional factors in environmental decentralization in Hungary and Mexico Hungary

Mexico

Constitutional or statutory change affecting decentralization

Abrupt (1989–1990). Self-Government Act provides for a general devolution of power to local governments allowing some policy authority in environmental area. Unitary system; parliamentary supremacy Mayor–council system. Each body independently elected with some real separation of powers between executive and legislative branches. Appointed city administrator. Environmental policy is centralized and binding on municipalities; environmental policy functions are restricted but local governments are responsible for water, sewage, garbage, and energy supply.

Incremental (Article 115 change in 1983 supplemented by statutory change to environmental law 1988/1996). Modest devolution of ecology authority to municipios. Federal presidential system; federal balance favors center Municipal president–council–Sindico system. Political slate system works against real separation of powers. No appointed professional city manager. Division of authority between center, states, and municipios but concurrencia system of administration provides for federal responsibility in the absence of state and municipal regulations. Under Article 115 of Mexican Constitution municipios responsible for: ecology policy, managing ecological emergencies, regulating low risk activities that affect environment, regulating air, noise, odor, light, and visual pollution, preventing water pollution, evaluating environmental impacts, regulating urban growth impacts, managing garbage disposal, and private–public sector cooperation for environmental improvement. Some functions, like hazardous waste management, reserved to central government. States and municipalities may establish environmental laws and administrative departments to implement environmental rules.

Federal arrangement Structure of local government

Environmental policy balance between center and sub-national governments

Institutions for local environmental governance

Inter-sectoral integration and other national administrative trends

Municipalities may enact local environmental regulations so long as they conform to national norms; may establish local environmental committees to oversee local environmental management. • Inter-sectoral environment policy integration is reinforcing central authority at expense of local governments. • Fidesz government promoting re-centralization.

International support for sub-national capacity building

European Union and other international initiatives provide little support for local capacity building or decentralization.

Agenda setting

Centrally dominated

• Inter-sectoral environment policy integration has yet to target municipalities. • New sub-national mixed-commissions aim to build state and local capacity but focus mostly on state-level management. • All 31 states have enacted environmental laws. • Few municipalities have enacted environmental laws and departments. NAFTA created new institutions that explicitly aim at building local environmental capacity in Mexico’s northern border zone. Centrally dominated

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may bring municipalities to court only for violations of Hungarian law. They have no additional oversight authority and function merely as a check on arbitrary and illegal administrative action. The scope of local authority in Hungary is restricted only by constitutional provision or parliamentary law (CDLR, 1994, pp. 5, 11). Local governments may decide to increase their functional competence, or Parliament may independently do so (CDLR, 1994, p. 11). Local governments are responsible for a wide range of functions, including housing, education, health care, cultural activities, and protection of minority rights (Davey, 1995, p. 65). The decentralizing trend is evident in environmental protection. Since the late 1980s more responsibilities have been passed to the municipalities, yet precedence remains with the central government. Hungarian central government is responsible for environmental policy except in the areas of “protection of the built and natural environment, . . . water management, . . . sewerage, . . . local mass transportation, garbage collection, . . . [and] cooperation in local energy supply . . . .” (Hajdu, 1993, p. 210). Most environmental regulations emanate from the Environmental Ministry, leaving localities little room to maneuver (Bartus, 1997). Thus, municipalities’ ability to establish their own environmental regime is circumscribed. Municipalities are empowered to establish local environmental committees, though few have done so (Bartus, 1997). Councils’ environmental committees are usually equally divided between council members and environmental specialists (Bartus, 1997). Local councils have the right to make environmental regulations, but these laws must conform to national laws or they are invalidated (Bartus, 1997). The Hungarian Ministry for the Environment (Környezetvédelmi Minisztérium) has responsibility for environmental policy, which is administered through the Main Environmental Inspectorate (Környezetvédelmi Fo" felügyelo" ség). The Inspectorate is divided into 12 regional offices that link to local governments. These offices rule on local environmental activities and investment, and administer environmental grants to localities. Central predominance is reinforced by the current national trend toward inter-sectoral integration. Under the National Environmental Programme (NEP) adopted by Parliament in 1997, central government ministries now incorporate environmental objectives into sectoral policies to promote national sustainable development (OECD, 2000, p. 138). In the short term, however, this practice has led to a reordering of ministry policy assignments and a reconcentration of authority at the national level that works against local level policy integration. In sum, while some policy devolution has occurred, decentralization in the environmental area is largely administrative, involving a limited deconcentration of policy authority. Central government still dominates agenda setting and policy formation, especially in the environmental arena (Szirmai, 1998). Local approval is only the first of many steps in the project proposal process, and localities cannot always block unwanted proposals (confidential interview 1997). Both the Environmental Ministry and local inhabitants have been able to overrule local authorities’ environmental objections. Until 1998, environmental regulation was driven by the Environmental Ministry; this centralization endures under the 1998 Fidesz (MPP) coalition, though coalition politics often marginalizes the Ministry in favor of the Prime Minister. Some Hungarian environmentalists argue a gradual but deliberate accretion of decisionmaking power and resources to the central government has occurred in recent years (Hajdu, 1993, pp. 221, 223; Szirmai, 1998). As O’Toole and Laurence (1994, p. 301) notes, “even the basic constitutional understandings regarding central-local relationships . . . are all in flux.”

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Overlapping mandates and the ministries’ reluctance to cede authority or expertise to new local authorities explain part of this re-centralization (Coulson, 1995, p. 12; Davey, 1995, p. 71). The Fidesz (MPP) coalition government brought its own understanding to this issue and in its first 6 months moved rapidly to reclaim decision-making authority in the environmental arena from non-governmental organizations. The impact of this at the local level has been limited, however, as Hungarian local governments never had significant power in environmental issues and regional environmental inspectorates did not lose their fundamental administrative authority. In part, this re-centralization is a consequence of economic constraints (discussed in the following sections) and the widespread shortage of personnel and expertise. There are simply not enough government personnel trained in environmental sciences and procedures to meet the needs of 3,100 Hungarian villages and towns (Bartus, 1997; Devas, 1995, p. 235). This crisis exists in nearly all areas of public administration in Hungary (O’Toole and Laurence, 1994). Consequently, local government personnel juggle many tasks for which they may not possess much expertise. In addition, there are “sizable incentives for bureaucrats in the public sector to moonlight, most often through second, private sector jobs that detract from performance of official tasks” (O’Toole and Laurence, 1994, p. 299). NGOs often serve to fill this personnel gap in many countries, but here again, this solution is problematical in Hungary. As late as 1996, “cooperation between local governments and NGOs . . . [was] virtually non-existent” (Foundation, 1996a, p. 3), though NGOs provided services in the absence of local government action in some communities (Foundation, 1996b, p. 1). This is due to mutual suspicion resulting from lack of knowledge and communication (Foundation, 1996b, p. 2). 2.2. Mexico Mexico, dominated till recently by a single political party, is highly centralized and has functioned in practice as a limited authoritarian political system ruled by a powerful presidency. The Constitution of 1917 establishes a presidential system with bicameral representative institutions and a federal system, currently comprised of 31 states and the Federal District (Mexico City). Compared to Hungary, Mexico’s transition to democracy has been more gradual, with antecedents in constitutional and statutory changes in the late 1970s. Institutional reforms are less comprehensive than Hungary’s, with little change in separation of powers and federal arrangements. Reforms have centered on the political process, aimed at insuring electoral fair play and leveling the field for political competition. These changes matured in the 1990s with the strengthening of the Mexican congress after 1994 and the triumph of Vicente Fox, an opposition candidate, in the year 2000 presidential race. As part of its gradual movement towards democracy Mexico began to decentralize federal functions in 1983, transferring to states and municipalities a broad range of official functions and powers (Rodriguez, 1997). Revisions to Article 115 of the Mexican Constitution gave Mexican municipalities (municipios) such functions as land use planning and ecological preservation. Their ability to implement this mandate remained circumscribed, however, owing to constitutional limits on municipal governance, political centralism, and the want of fiscal resources.

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Mexico’s federal system under the 1917 Constitution favors central government in the division of sovereignty. The constitution provides for two tiers of sub-national government, states, and municipalities. The structure and composition of state and municipal government may vary within constitutional limits but these limits are fairly restrictive, stipulating terms and conditions of office for state governors, municipal presidents, and municipal councilpersons, specifying minimum numbers of representatives for state legislatures, and establishing a nearly uniform system of municipal governance. Mexican states have latitude in framing their constitutions but these must comply with federal provisions. Under the federal constitution state governments may create or dissolve municipalities and must approve municipal charters. Municipio government, known as the Ayuntamiento, is comprised of a municipal president, one or two elected legal trustees, and a variable number of elected councilpersons that together constitute the municipal council. As both municipal presidents, trustees, and councilpersons are elected as a slate of officers usually chosen by the municipal president, separation of power is limited (Rodriguez, 1997). Municipal governance is also handicapped by constitutionally mandated municipal office terms of 3 years without immediate prospect of re-election. Municipal governments, subject to the limitations of federal and state constitutions and state statute law, may enact ordinances in policy areas within their jurisdiction. Municipalities lack plebiscite power and may not refer decisions to the voters. While muncipios gained greater powers in environmental protection with the 1983 constitutional reforms, it was not until the adoption of a new national environmental law in 1988 that they received significant authority. The 1988 Environmental Law (LGEEPA), entrusted municipalities to address all environmental problems within their municipal jurisdiction not expressly reserved to federal authorities or otherwise limited by state law. Following the federal practice of administrative concurrency, or concurrencia, the LGEEPA provided that in lieu of state and municipal adoption of environmental ordinances the national government would retain jurisdiction. By 1994, all Mexican states had an environmental law providing some delineation of authority between states and municipalities (Mumme, 2000). Under these laws municipio responsibilities are extensive, covering all environmental media and sanctions for violations. In addition to these statutory initiatives, Mexico’s national environmental ministry, the Secretariat of Environment and Natural Resources (SEMARNAT), acting on 1996 amendments to the LGEEPA, aims to transfer environmental responsibilities to states and municipalities in a manner commensurate with their abilities. Its strategy is to promote inter-governmental agreements on environmental protection, promote institutional development, and coordinate environmental decentralization with other regional development efforts (SEMARNAP, 2000, p. 5). As of 2000 SEMARNAT had signed general agreements with the 31 Mexican states and the Federal District (SEMARNAP, 2000, p. 8). Much of this initiative, however, entails transferring responsibilities to its own state-level offices rather than state agencies (OECD, 1998a, pp. 143–144). It has also begun to push the creation of “mixed commissions” to promote environmental decentralization at the state level comprised of federal, state, and private sector representatives, as well as “decentralized mixed” commissions at the sub-state level to support state-level initiatives. It also publishes guidelines to assist municipalities in developing their own regulations and help them coordinate with state and federal authorities (SEMARNAP, 2000, p. 6).

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With respect to inter-sectoral integration, consolidation of important policy sectors under SEMARNAT in 1994 represented a significant advance. The 1995–2000 National Development Plan and the 1996 amendments also sought to promote the process of inter-sectoral policy integration with notable improvements in inter-ministerial coordination (OECD, 1998a, p. 131). This integrated approach has been promoted by SEMARNAT’s state field delegations and in the cooperative policy agreements struck with state governments. Inter-sectoral policy integration is also incorporated at the level of the new decentralized mixed commissions that support state-level environmental initiatives. There is no evidence, however, that it has been adopted widely at the municipal level owing, in large measure, to state failure to provide regulatory guidance to local municipalities. Moreover, federal predominance in promoting policy integration has the effect of reinforcing perceptions that environmental policy is a federal and not a local function. The 1994 North American Free Trade Agreement (NAFTA) pushed Mexico to adopt a range of bilateral and trilateral policies that aim at decentralization of environmental protection and capacity development at the sub-national level. Environmental cooperation at the border was strengthened through the Border XXI Program, the Border Environment Cooperation Commission (BECC) and North American Development Bank (NADB), and the trinational Commission for Environmental Cooperation (CEC), all of which expressly commit to promoting sustainable development and environmental decentralization (Mumme, 2000; Raustiala, 1997). All these initiatives involve municipalities in delivering environmental policy within their jurisdictions. But Mexican municipalities continue to suffer limitations that impede progress and make most minor players in environmental protection. These include the lack of state and local policy authority, the persistence of corporatist and centralized decision-making practices that invite localities to evade their formal responsibilities and limit citizen participation, national domination of many policy processes affecting environmental protection, and lack of local expertise. The international programs are beneficial yet limited in geographic and institutional scope. Financial limitations are also severe. While all Mexican states now have environmental laws, few have passed regulatory ordinances that provide specific administrative authority in this area. The want of state regulation provides municipios with a basis for postponing adoption of local laws needed in policy areas authorized municipalities under federal and state law. In Sonora, for example, only 5 of 73 municipalities have adopted a municipal environmental ordinance (Martinez, 2000). Even Hermosillo, the capital, lags due to Sonora’s failure to enact environmental regulations. In some areas, water quality, for example, old corporatist practices that favor the center still prevail. While nominally regulated by federal environmental law, water quality decisions are heavily influenced by national and state water authorities. Water policy has been partly decentralized but remains dominated by the National Water Commission (CNA), an autonomous agency overseen by SEMARNAT, and state water agencies operating with CNA oversight and financing. The result is restricted citizen access to state and local water authorities favoring officially designated water users groups, leaving other groups on the sidelines. National domination of policy processes involving project investment, permitting, and financing, and federal reserved functions like hazardous waste management, weaken local capacity for environmental protection. Similar to the situation in Hungary, municipalities

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may be consulted but seldom have the last word in determining project development. This is particular true of hazardous waste projects where local objections are largely unheeded. The lack of local expertise is an endemic problem in Mexico. Few municipios, even the largest, are able to employ and retain qualified experts in environmental law and technical assessment. Most qualified personnel are political appointees that serve only 3 years due to the national system of municipal term limits. This systemic discontinuity and local inability to hire and retain qualified expertise severely limits municipalities’ ability to initiate policy action and implement existing environmental law at the municipal level. Bilateral initiatives, Border XXI and BECC/NADB, have targeted local capacity development with investment in environmental infrastructure and services in the form of training, information, and access to environmental protection resources, but these are limited in their geographic reach and functional scope. These border programs extend just 100 km south of the border, incorporating fewer than 200 of Mexico’s 35,000 municipios (BECC, 1998). Even in benefitted municipalities, most investments go to individual projects and don’t contribute comprehensively to capacity accrual. The trilateral CEC provides some support by fielding citizen initiated complaints of statutory non-compliance at the local, state, and national levels and providing data to municipalities, but these assets are modest at best (CEC, 1999).

3. Financial aspects of environmental decentralization in Hungary and Mexico In both Hungary and Mexico, environmental decentralization has suffered from weak financial support. Financial scarcity is a significant barrier to the participation of sub-national governments, particularly municipalities, in environmental protection (see Table 2). 3.1. Hungary Resource shortfalls in local budgets pose significant barriers to capacity enhancement for environmental protection in Hungary (Ben-Elia, 1993). Hungarian finance was highly centralized during the communist period; local governments primarily served as tax collectors for the state and received a central allocation in return to cover service provision (Devas, 1995, p. 214). With decentralization in 1990, local governments gained ownership of significant amounts of state property (primarily housing) and the right to levy their own taxes (CDLR, 1994, p. 5; Devas, 1995, p. 215), but local reliance on centrally derived funds is high (66% of local funds derived from the central government in 1996; see OECD, 2000, pp. 44–45). Revenues have not kept pace with the costs of social services mandated by the constitution and central statutes. Support to local governments is unreliable, varying by amount and source over time (Bartus, 1997; O’Toole & Laurence, 1994). Often little remains for environmental initiatives. Local governments are entitled to levy a property tax, a municipal tax, a corporate tax, and a tourism tax. Current statute prohibits local governments from levying more than one local government tax on a given taxpayer, i.e., a taxpayer may not be taxed in more than one of the aforementioned tax categories (CDLR, 1994, p. 14). To date, for most communities, the income received from these various categories of taxes has not been sufficient to meet local

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Table 2 Fiscal capacity in environmental decentralization in Hungary and Mexico Hungary

Mexico

Sub-national dependence on central revenues Fiscal authority of municipalities

High; municipalities heavily dependent on central revenue sharing. Municipalities may levy property, municipal, corporate, and tourism taxes. Only one of these may be levied on any individual or entity. • A proportion (30%) of environmental fines accrue to municipality if it has environmental fund. • Grant revenues relied upon, but principal source, the Central Environmental Fund, recently discontinued.

High; states and municipalities heavily dependent on central revenue sharing. Municipalities may collect local property taxes and service fees.

Off-budget revenue sources

National investment in environmental protection

OECD reports 1.7% of national GDP spent on environmental protection.

Municipal budget lines for environmental functions? National trends affecting sub-national spending on environmental functions

Only if municipality has environmental fund.

International funds for sub-national environmental protection

• Local dependence on corporate taxes reduces incentive for environmental regulation. • Tax revenues returned to local governments has steadily declined since 1992. • Fidesz government has eliminated Central Environmental Fund, an important source of grants to localities. A few grants through the Budapest based Central European Regional Environmental Centre

• Fine revenues accrue to central government, do not benefit municipalities. • Few grant funds for environmental improvement. A new federal initiative in this area woefully underfunded. OECD reports less than 1% of national revenue dedicated to environmental functions. Lowest in OECD. Municipality may budget for environmental expenditures but usually buried in other budget lines. • SEMARNAT in 2000 unveiled new program of dedicated grants for states and municipalities. Only 4 of 31 states participating in 2002. • New institutional development program also unveiled in 2000 by SEMARNAT. Impact unknown. • President Vicente Fox has promised more fiscal authority for Mexican states and municipalities but as of 2002 has not yet gained congressional approval. • Funds for developing municipal environmental infrastructure from BECC/NADB. • Small dedicated grants through Border XXI Program. • Small dedicated grants for NGO’s through CEC.

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needs (Bartus, 1997; O’Toole & Laurence, 1994, p. 294) and must be supplemented by funds from the central government. The central government levies income, commercial, and property taxes. Local governments have little voice in these decisions (Coulson, 1995; Foltanyi, 1997). Fiscal re-centralization exceeds that of political authority; the proportion of income tax revenues returned to municipalities has been declining since 1992, forcing local governments to scramble to cover their mandated costs. According to Szirmai (1998), 100% of personal income tax revenues were returned to the point of collection in 1990; by 1992, only 50% of this tax was remanded to the local governments, and this declined to 30% in 1993 (see also CDLR, 1994, p. 15). With personal income tax constituting a high percentage of total municipal revenues, this trend adversely impacts local capacity to make and enforce environmental policy. Other centrally assessed taxes and grants are distributed to local governments according to centrally determined ratios (usually derived from some combination of number of inhabitants, age structure, and number of users of public institutions; CDLR, 1994, p. 15). These “normative budgetary allocations” (CDLR, 1994, p. 15) began in 1990 and consist primarily of dedicated grants (Devas, 1995, p. 215). In general, local governments are given wide latitude to determine how these monies will be used (CDLR, 1994, p. 15). The Hungarian Central Environmental Fund was one of these normative grant sources and was widely perceived as a primary source of revenue supporting local environmental protection and mitigation. Environmental NGOs served on the Fund’s board. However, Fidesz reclaimed these monies for the central budget in mid-1998. It is unclear whether a comparable source of support will materialize in the near future. Another source of revenue for local environmental policy derives from environmental regulations themselves. Thirty percent of penalties levied for violations of environmental rules were intended to be returned to local government budgets, to be used at their discretion, and there were no rules which required that such monies be used for environmental amelioration. Only those municipalities with environment funds were permitted to receive these monies, however, but this rule was not implemented before Fidesz took office (Bartus, 1997). Beset by economic uncertainty, a sudden increase in local government functions, and the gradual trend toward fiscal re-centralization, Hungarian communities have been slow to embrace environmental policy as a high priority (Bartus, 1997; Pàl, 1997; Szirmai, 1998). Promotion of economic development takes precedence and environmental regulation is often sacrificed if it is perceived as a hindrance to possible expansion of the tax base (Bartus, 1997; Foltanyi, 1997; Szirmai, 1998; Vari, 1998). As the corporate tax is politically the safest tax to levy for a local government, it is easy to comprehend local governments’ hesitance to insist that brownfield investors, in particular, meet stringent environmental standards. Wide disparities in population size, investment potential, and environmental damage have contributed to the paucity of funds for environmental policy implementation. The distribution formula for normative grants favors smaller communities and those in the eastern part of the country where opportunities for greenfield investment are limited and environmental damage is most severe (Hajdu, 1993, pp. 215–216; Szirmai, 1998; Vari, 1998). Since environmental regulations do not discriminate by region or community size, Hungarian towns and villages are compelled to compete for new investment and scarce environmental funds (Coulson, 1995, p. 3). In one example, Tatabánya government’s willingness to waive pollution rules directly

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contributed to a foreign investor siting its new plant in that city rather than the more attractive Gyo" r (Szirmai, 1998). 3.2. Mexico Fiscal authority in Mexico is historically centralized, with states and municipalities heavily dependent on the federal government for revenues. Neither states nor municipalities have much fiscal autonomy. Mexico ranks lowest in this category among all OECD countries (OECD, 1998a, p. 144). This, coupled with poor integration of fiscal and environmental policies, shackles local initiative on environmental protection. Under federal fiscal practice, practically all tax revenues collected by states and municipalities flow directly to the federal government, a portion of which is disbursed to local authorities. Section IV of Article 115 as amended in 1983 does allow municipalities to derive revenues from three sources, two of which, fees for services and property taxes, are of local origin; the third source is from federal revenue sharing. Municipalities typically draw on what are called standard revenues, property taxes, fees for service, sales of patrimonial goods, benefit fees, federal revenue sharing, federal and state subsidies, citizen donations, federal and state dedicated funds for specified programs, and debt contracted from commercial banks, development banks, and federal and state government (Rodriguez, 1997, pp. 126–128). Nationally, federal taxes comprise 59% of state revenues and 47% of municipal revenues, with local taxes contributing just 3.3% and 17.6%, respectively (OECD, 1998b, p. 29). Within this matrix of revenue sources it is difficult to ascertain just how much revenue has been committed to state and municipal environmental protection, though the sum is thought to be very low. OECD data suggests that slightly less than 1% of GDP is committed to this purpose from all public and private sectors (OECD, 1998a, p. 128). SEMARNAT’s budget has increased slightly over earlier years and in 1997 stood at 10.7 million new pesos, about 1.4 million dollars. Most of this was committed to salaries and maintenance. Fully half that total was dedicated through the CNA, reflecting the general priority given to water quality and wastewater treatment. A total of 3.9 million new pesos was transferred to the states for environmental programs, roughly 450,000 dollars for the 31 states (OECD, 1998a, p. 128). Apart from federal and state revenues passed on to municipalities, there are practically no independent revenues dedicated to environmental protection. Municipalities may retain locally imposed fines, but revenue from local fines and fees such as environmental impact assessment is slight—it is worth noting that revenue from all types of municipal benefit fees, of which environmental fees are a small component, accounted for less than 10% of municipal revenues (Rodriguez, 1997, p. 130). Dedicated funds for environmental functions are new. In 2000, SEMARNAT unveiled two new programs that may benefit sub-national governments. The first, a system of state-level environmental funds, will provide a limited amount of dedicated funds for local environmental protection priorities identified by state environmental authorities. Four such state funds were established in 2000 with extension to other states in the near future. The second initiative, a new Institutional Development Program, created a $10 million dollar fund to strengthen state and local environmental management (SEMARNAP, 2000, p. 7).

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As for expenditures, the Federal District (Mexico City), with 20 million people and the center of government, leads the nation in urban environmental expenditures. In 1997, it dedicated 8% of its municipal revenues to environmental protection (OECD, 1998a, p. 129). Elsewhere expenditures are significantly lower but almost no study has been given to the subject. One of the few studies available, a study of Sonora, found that environmental expenditures were hidden in municipal budgets. Reasonable estimates of these expenditures showed that the major municipalities in the state spent less than 1% of their budgets on environmental protection, this dedicated mainly to salaries and maintenance (Mumme, 2000, p. 115). Thus, despite their mandate, municipalities had no budget for environmental protection. The contributions of international programs are amplified given this limited fiscal base for local environmental protection. Along the U.S.–Mexico border, municipalities can access infrastructure funds from BECC/NADB, enabling them undertake specific wastewater and water quality programs that fall beyond their local capacity (Spalding, 2000). These inputs, which include technical assistance for project planning as well as project finance, are tied to municipal performance criteria that emphasize public participation and local accountability. The Border XXI Program has funded the development of environmental data centers located within specific municipalities as well as providing training and technical assistance (Spalding, 2000). These programs build local capacity but their reach is restricted to the border area.

4. Political aspects of environmental decentralization in Hungary and Mexico In both countries democratization has introduced electoral contestation and new openings for political participation. While these political changes are felt at the local level, their contributions to environmental capacity accrual remain limited (see Table 3). 4.1. Hungary Post-socialist Hungarian politics has contributed to the inability of local governments to build environmental policy capacity. Davey (1995, p. 62) cites “political fragmentation” and the “atmosphere of political confrontation” between the central and local governments in Hungary as a major impediment to local capacity building. Hungary has experienced three national and three local election cycles between 1990 and 1998. In each case, a different party coalition captured the Parliament: the Democratic Forum (MDF) in 1990; the Socialists (MSzP) in 1994; and Fidesz in 1998. With each change in government, significant alterations were made in the Environment Ministry, including its mandate, its domain, its scope, and even its personnel at all levels. The politicization of the Ministry is well-illustrated by its treatment under the Fidesz administration. Within just 2 months of the election, the Ministry was allotted to the MPP’s minor coalition partner, the Independent Smallholder’s Party (FKGP), which promptly reallocated its planning functions to the Ministry of Agriculture. This dispersal of authority to numerous ministries and a regular shuffling of Environment Ministry personnel is a hallmark of the post-socialist period. At the local level, governments are never sure if procedures and funding sources will remain. Such uncertainty is frustrating even within the environmental inspectorates that interpret these changes to local authorities.

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Table 3 Political factors in environmental decentralization in Hungary and Mexico Hungary

Mexico

Political impact of electoral contestation

• Oscillation of governing party coalition with each parliamentary election. • Discontinuity between national ruling party and party coalition and opposition led municipal governments. • Greater political participation by citizenry. • Rapid turnover at national Environmental Ministry has produced policy disruptions and uncertainty affecting localities. • Poor policy linkage between national and local governments. • Little attention to improving mechanisms of political participation in local and national politics. • Perpetuating corporatist patterns of decision making.

• Breakdown of old system of executive dominant politics. • Emergence of opposition led state and municipal governments. • Greater political participation by citizenry. • National and state legislative gridlock.

Policy impact of electoral contestation and opposition led governments at state and municipal levels.

• Environmental policy agenda affecting municipalities tends to be set by central authorities. Non-governmental influence

Citizen participation

Proliferation of environmental NGO’s but almost all focus on central government. Few locally focused NGO’s. Democratization created opportunities for citizen participation, but little tradition of local participation.

• Slow progress in developing state and municipal environmental regulations. • Administrative turnover at national Environmental Ministry. • Opposition led state governments tend to innovate, promoting private sector and private–public environmental initiatives. • Environmental policy agenda continues to be set at national level, a pattern reinforced where state and municipio regulatory authority is lacking. Proliferation of NGO’s but many focus on central government. Local NGO growth greatest in Federal District and Northern Border region. Democratization created opportunities for citizen participation but little tradition of local participation.

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This situation is further complicated by the fact that elections for local governments in the post-socialist period have not paralleled national trends. No-party affiliation candidates prevailed in most small jurisdiction council seats in 1990 (Bohm, 1994, p. 5), and in larger jurisdictions, such as Budapest, opposition party candidates tended to win (O’Toole & Laurence, 1994, p. 293). While in 1990, local winners tended to be slightly left of the government, this trend reversed in 1994 when newly elected local candidates tended to be to the right of the new Socialist government (Bartus, 1997). This trend abated in 1988 when Fidesz (MPP) captured several local seats, but unaffiliated candidates still dominated local winners (Szirmai, 1998). Without a direct link to the Parliamentary parties, local officials must rely on their own lobbying skills and personal connections when trying to augment their resource base or influence the development and direction of environmental policy (Bartus, 1997). Unfortunately, the highly centralized nature of Hungarian national politics, with its focus on Parliament, encourages the major parties to virtually ignore local governments as a power base. In fact, relations between the national government and Budapest city government soured when Gabor Demszky (Free Democrats Federation) won the mayorship again in October 1998, resulting in postponement of a major mass transit project in Budapest intended, in part, to reduce air pollution. While electoral competition has complicated local policy initiative, it has strengthened political participation. This is less evident at the local level, however, as most citizens do not become directly engaged in local affairs despite numerous channels of doing so. Even organized groups tend to focus on national rather than local affairs. In part, this is due to limited access to government information and a corporatist approach to information dissemination that favors officially listed environmental NGOs. A contributing factor is what Ilonszki (1990) characterizes as the prevailing culture of cynicism regarding the prospects for citizen influence on government. The lack of formal procedures for involving the public in environmental problem definition and policy formulation reinforce these tendencies (OECD, 2000, p. 140). The result is a pattern of soliciting local public input after national leaders and technical experts have already set the agenda, transforming local governments into reactive fora (Vari, 1996). 4.2. Mexico Mexico has seen less real political devolution than Hungary. Despite official federalism, Mexico’s long domination by a single-party has contributed to state and municipal dependency. Traditionally, PRI associated governors behaved more like prefects than independent executives, supporting the center and promoting central policies and power in their state domains. This pattern changed as opposition parties captured state governorships and city governments after 1988. Initially, analysts worried that local opposition governments risked fiscal censure from PRI executives. This remained in check due to a divided national congress that made Mexican presidents more dependent on the opposition and international scrutiny of Mexico’s democratization process that improved accountability and limited punitive policies. Mexico’s new electoral competition and the advent of opposition government both limit and facilitate local capacity development. In some states, Sonora, for example, the introduction of an opposition presence in state legislatures led to legislative gridlock, preventing passage of environmental regulations. The failure to enact such state ordinances, as seen earlier, restricts municipal action for environmental protection. Such gridlock can also mean failure to set

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priorities and fund state environmental programs. On the other hand, opposition led governments have encouraged local capacity development, not by the traditional route of accessing federal funds for local environmental programs, but through actions that support greater devolution of practical authority to the municipalities. Governors and municipal presidents associated with the pro-business National Action Party (PAN), for instance, have shown greater willingness to seek out government–private sector partnerships, to use economic incentives— including privatization of municipal services—for environmental protection, to create more opportunities for citizen participation and consultation, to explore the limits of municipal jurisdiction, and to intercede with federal officials on local environmental matters (Pineda, 2001). Electoral competition is challenging older corporatist modes of policy development and has encouraged interest groups and social movements to view local government as an arena of municipal problem solving rather than turning to federal authorities for solutions. PAN governor Vicente Fox’s triumph in the 2000 presidential elections will push these devolutionary trends for the next 6 years. Fox made decentralization a major part of his campaign and has moved to further these commitments since assuming office. Fox has promised constitutional reforms that would allow the re-election of municipal presidents as well as legislation that would professionalize and protect Mexico’s civil service (RESM, 2001, p. 310). Such changes would bolster local environmental capacity. Electoral competition also means new opportunities for public participation. This is evident at the sub-national level as opposition governments gain control. As with Hungary, however, there is very little tradition of independent public participation in sub-national governance. Most public participation takes the form of public consultations (foros de consulta popular) where public input is solicited after the policy agenda has been set by national authorities. Knowledge of these events is poorly disseminated; during the PRI era attendance was typically dominated by government sponsored groups. In areas like water management, as seen previously, embedded corporatist administrative patterns still prevail, limiting citizen access. The absence of a tradition of local public participation is recognized by environmental agencies on the U.S.–Mexico border and is an acknowledged weakness challenging bilateral capacity building efforts in this region (USEPA, 1996, II, pp. 3–5.). The new rules support participation in local governance by establishing a citizen’s right to environmental information and encouraging greater responsiveness to local concerns (LGEEPA, 1997, pp. 98–100).

5. Environmental decentralization in democratizing countries: lessons learned Hungary and Mexico’s recent experience in decentralizing and building local capacity for environmental protection is telling of the obstacles facing newly democratic countries. Our review shows that while both countries have adopted decentralizing policies to build local capacity for environmental protection, progress is hindered by a mix of institutional, financial, and political practices now in play. By the OECD criteria for assessing government capacity, we can say that both countries have gained in strategic capability, particularly in creating or strengthening sub-national governmental institutions for environmental protection. In other areas of local capacity accrual, policy integration and citizen participation, local capacity remains weak. While the countries vary in how they have approached decentralization of

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environmental protection, certain problems in advancing the process seem to arise regardless. Understanding these problems is a key to strengthening the environmental capacity of local governments. At the institutional level, while sub-national governments have gained formal powers, a number of obstacles hinder their exercise. A common impediment found in both cases is the persistence of centralizing norms and policy practices despite constitutional and statutory reforms that devolve formal policy authority to lower levels of government. Such norms and practices are institutionally embedded and resistant to formal change. In Hungary, where devolution of policy authority is more advanced than in Mexico, municipalities’ formal power is limited by the reservation of policy primacy and regulatory standard making to central authorities as well the restricted policy domain available to local governments. Local objections to projects may be preempted by higher authority. Municipalities’ failure to establish environmental review committees further limits their ability to play a more independent and decisive role in environmental planning and implementation. The tendency of central authorities to reclaim policy authority in cases of overlapping jurisdiction further weakens municipal policy initiative. In the context of Mexico’s more limited devolution of administrative power to localities, we also see federal restrictions on municipal competence in environmental governance. And though municipalities enjoy a comparatively broad range of environmental functions, states have failed to provide essential regulatory authority in support. In Mexico, the persistence of corporatist modes of decision making in environmental protection favors central government dominance of the policy process. All these obstacles contribute to a pattern of administrative formalism that restricts sub-national capacity for strategic action in this issue-area. These impediments also hinder integrative action by sub-national governments. An important component of integrative capacity is seen in inter-sectoral planning—the incorporation of environmental concerns within other substantive policy issue-areas. While such inter-sectoral planning is now formally incorporated in both countries’ national and regional policy programs under central oversight, environmental planning at sub-national governments, particularly municipalities, remains largely ad-hoc, with little synchronization of policy agendas for purposes of environmental protection. In the short run, the national shift to integrated and inter-sectoral planning may well reinforce central regulation at the local expense. While it is logical that reforms should proceed from the center, in the presence of such strong centralizing tendencies as exist in these countries there are many impediments to extending their reach to local government. Lack of integrative capacity is reinforced by sub-national governments’ limited fiscal authority for environmental protection. In both countries, local governments are heavily dependent on their central government coffers. While specific instruments of revenue collection vary between the two systems, local governments have little input in framing the funding formulas that affect them. Because revenues are typically insufficient to meet the most basic needs, environmental needs necessarily takes a lower priority. In Hungary, where a system of dedicated federal grants enabled local governments to fund environmental initiatives, the contraction of such monies under the Fidesz government, particularly elimination of the Central Environmental Fund, is a significant handicap. In Mexico, though state environmental programs receive some funding through SEMARNAT, until recently there was no system of dedicated funds available to

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localities. This is changing, but it remains to be seen whether the new funds are sufficient and how they will make a difference, particularly at the municipal level. With respect to funding environmental infrastructure, only the northern border municipalities have access to dedicated funds though the BECC/NADB mechanism. Apart from Mexico City, which the central government has aided in accessing international grants and loans to address pollution problems, Mexican states and municipalities have limited access to foreign funds targeted at environmental protection—development bank financing of water, sewage, and solid waste projects with environmental benefits is an exception to this rule though such funds are scarce. In both countries, retention of regulatory revenues might help municipalities finance local environmental protection but in the absence of rules dedicating funds to this purpose, unfortunately the norm, such revenues contribute little to municipal environmental capacity. Democratic transition also affects local environmental capacity accrual by introducing electoral competition and opportunities for political participation. Electoral competitiveness, as seen, however, has both positive and negative effects. In both countries, government turnover is associated with bureaucratic fragmentation and a reshuffling of national policy rules that has often had the effect of amplifying policy uncertainty and delaying measures for environmental protection. Electoral competition has also introduced the potential for greater political disjunction between governing parties at the local and central levels. In Hungary, the election of unaffiliated candidates at the local level works against local leverage with governing national parties. In Mexico, sub-national opposition electoral success early in the transition period did not result in federal sanctions, as many expected, but did generate inter-governmental tension and did little to enhance local access to federal funds. The new PAN government, however, is strengthening federal ties with local PAN administrations that may result in greater resources for local environmental protection. PAN affiliated sub-national governments have also innovated in seeking market-based solutions to local environmental needs. Democratization has also opened new opportunities for local public participation in environmental decision making although there is much to be done in this regard. The transition to democracy in both countries has unleashed considerable growth in non-governmental organizations in the area of environmental protection. In Hungary, however, most NGO’s focus on national affairs and are not active in local government despite the fact that village mayors are often the source of environmental complaints, protests, and political alliances. In Mexico, centralization and a tradition of weak local government also cause NGO’s to look to the center though a skewed pattern has emerged in which NGO’s have greater incentives to be active in local affairs on the border and heavily populated Mexico City. In neither country is public participation in local environmental affairs well established. Numerous impediments confront local participation in environmental protection, including limited access information, inadequate administrative procedures, failure to establish local citizen boards and commissions, and a tendency to engage the local public in the policy process after higher authority has set the agenda. In sum, while democratic transition is arguably a necessary condition for environmental policy decentralization and local capacity accrual in countries with a recent history of authoritarian governance, it is clearly not a sufficient one. Both countries under review have experienced serious difficulties in achieving decentralization of environmental protection. Sub-national policy capacity remains weak. Understanding these institutional, fiscal, and political obstacles,

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however, points in the direction of policy improvements at the national and sub-national levels that can be made to strengthen the capacity of local governments in this policy area. These include harmonizing and refining administrative practices, establishing sub-national regulatory authority to support the exercise of local powers, integrating priorities in substantive policy streams, strengthening the fiscal powers and means of local governments, eliminating exclusionary corporatist modes of representation, and improving citizen access to officials and information at the local level to bolster citizen participation and enhance the accountability of local officials. These reforms are not easily achieved, but that is the policy challenge.

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Further reading Foundation, T. N. F. (1997). NGO news: A regional newsletter for non-governmental organizations (Vol. 2, pp. 3–22). Szabo, G. (1993). Administrative transition in a post-communist society: The case of Hungary. Public Administration—An International Quarterly, 71, 89–103.