Disparity by Design: The Portrait of The House of Representatives (DPR)’ Intervention for Specific Allocation Funds - Regional Priority (DAK-PD) Fiscal Year 2017-2018

Abstraksi

According to the Law No 34/2004, the goal of Specific Allocation Fund (DAK) is to reduce fiscal inequality between regions and narrowing the disparity. Since 2017, the planning process of DAK is shifting from top-down formula based to bottom-up proposal based approach. However, DPR’s budget right through allocating “Regional Priority (DAK-PD)” in several DAK sector potentially create a turmoil within the local officials, raise their distrust and reluctance. The aim of this study is exploring to what extent the “participatory” intervention from DPR narrowing or expanding fiscal gap between regions. First objective is capturing the disparity portrait using the DAK Allocation Data 2017-2018. Second, comparing the intervention with the local government fiscal (LGF) capacity. Third, measuring the effectiveness of the intervention in solving local development problems. The study shows there are a significant increase (+25.28%) of intervened region from 195 in 2017 to 332 localities in 2018, with 40.06% get a greater intervention from prior allocation. Also, 9 localities with above 20% fiscal independency degree (FID) get intervention in consecutive times, while 37 localities with above 20% FID, get allocation intervention in 2017 or 2018. Therefore, the DAK-PD is not only to region with weak fiscal capacity and carelessly allocated to localities which were not needed the most. By let this business-as-usual, DAK will be ineffective in reducing region disparity. Revoking the intervention from budget right which create disparity by design is not necessary, if there are data-driven decision from legislatures in intervening the allocation along with stronger law enforcement.