At present, local governments concerned must shoulder a certain portion of the costs when the central government carries out public works projects such as construction of major highways and river improvements covering more than one prefecture in accordance with nationwide plans. But this system is unpopular with local governments since residents and local governments are not well informed about the content of such plans and the detailed breakdowns of expenditures.

Recently the National Governors’ Association started a project team to discuss the matter. The prefectural governors are expected to call on the central government to reduce the percentage of costs that prefectural governments must shoulder and to consult with them prior to working out the projects and determining their costs.

Relevant laws provide for cost sharing by local governments on the grounds that they and local residents benefit from such projects. Local governments shoulder a third of the costs of the construction of major highways and river improvements. They also have to shoulder 45 percent of the maintenance costs. In the fiscal 2007 budget, local governments bore ¥931 billion of the ¥3.424 trillion spent on the infrastructure and transport ministry’s projects.

Local governments’ reactions are understandable. The Koizumi administration cut grants in aid from tax money to local governments by ¥5.1 trillion. Moreover, a loss of tax revenue due to the economic downturn has forced local governments to slash their own public works projects. Despite this, the central government still bills them for public works projects.

As a short-term solution, local governments, upon being billed, should ask the central government to provide a detailed cost breakdown for the public projects and verify whether the costs are justified. In the long term, however, most of the central government’s public works projects and related financial sources should be transferred to local governments. In return, local governments should be prepared to shoulder much more responsibility in carrying out such projects.

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