Reformulating the Budget Allocation Model in Decentralised Indonesia: A Performance-Based Framework Built through Stakeholder Deliberation

Imagine you are the captain of a massive ship with hundreds of smaller boats trailing behind you. For years, you've been handing out fuel to every single boat exactly the same amount, regardless of whether they were racing ahead or just drifting. The idea was "fairness": everyone gets an equal share. But recently, a new theory called Performance-Based Budgeting (PBB) started making waves. It suggests that instead of just handing out fuel equally, you should give more to the boats that are actually moving fast and doing a good job. This sounds great, right? It should encourage everyone to row harder.

However, there's a catch. In many places, especially in developing countries, the captains of these smaller boats don't have the fancy maps or the high-tech engines to measure exactly how well they are doing. If you try to force a complex, high-tech scoring system on them from the top down, it often fails. The boats might just pretend to row fast to get the fuel, or the system becomes so complicated that no one understands it. The big question this paper tackles is: How do you design a fair fuel system that actually rewards hard work, without breaking the boats that are already struggling? The answer lies not in a perfect computer formula, but in a messy, loud, and necessary conversation among everyone involved.

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The Pontianak Experiment: A Neighborhood Budget Game

This paper dives into a real-life experiment happening in Pontianak, a city in Indonesia that sits on a river delta and is dealing with some tricky environmental challenges like floods and waste management. The city wanted to change how it gave money to its 29 neighborhoods (called kelurahan). Instead of just splitting the money 50/50, they wanted to try something new called ALAKE (Ecology-Based Neighborhood Budget Allocation).

Think of the city budget like a giant pizza. In the old way, the city would slice the pizza into 29 equal pieces and hand them out. In the new ALAKE way, they decided to keep a few slices as a "safety floor" for everyone, but the rest of the pizza would be awarded based on a Performance Index. This index is like a report card that grades neighborhoods not just on how clean they are, but specifically on how well they handle their trash and keep their green spaces healthy (ecological performance), plus some other community services.

How They Built the Scorecard (The "Deliberation" Part)

Here is the most interesting part: The city didn't just hire a computer expert to write the rules. Instead, they held a series of meetings where different groups—people who manage waste, health workers, women's groups, and city planners—sat down and argued about what "good performance" actually looked like.

Imagine a group of friends trying to decide the rules for a video game. One friend says, "We should give points for jumping high!" Another says, "No, points should be for collecting coins!" If they just voted, the loudest voice might win. But in Pontianak, they had to explain why their idea mattered. The environmental group showed data proving that neighborhoods handle the city's trash, so they argued that trash management should count for a lot of points. The health group argued that feeding children was just as important.

Through this back-and-forth talking (which the paper calls deliberation), they agreed on a specific recipe:

• 75% of the score comes from Ecological Performance (like how much trash is recycled or how many trees are planted).
• 25% comes from Non-Ecological Performance (like health services and gender equality).

This wasn't a random number; it was a hard-fought agreement that reflected what the local people thought was most urgent.

What the Numbers Showed

The researchers took the data from all 29 neighborhoods and ran a simulation (a "what-if" test) to see how the new system would work compared to the old "equal split" system.

1. The Neighborhoods are Very Different: The simulation showed that the neighborhoods were not all the same. Their scores ranged from a low of 29.3 to a high of 74.4 on a scale of 0 to 100. This is a huge gap! The old system treated the neighborhood with a score of 29 exactly the same as the one with a score of 74. The new system would recognize that one is doing much better than the other.
2. It's Complicated: Being good at one thing didn't mean being good at everything. Some neighborhoods were amazing at recycling trash but struggled with health services. Others were great at health but had messy streets. The scores for these two areas were actually slightly negatively correlated (meaning if you were great at one, you tended to be average at the other). This proved that a single "good neighborhood" score is too simple; you need to look at the different parts separately.
3. The "Who Wins?" Question: The researchers tested two different ways to hand out the extra money:
   • The Proportional Rule: Everyone gets a slice of the extra pizza based exactly on their score. If you have a high score, you get a lot more. If you have a low score, you get less.
   • The Priority Rule: The top 5 neighborhoods get a huge chunk of the extra pizza, and everyone else splits the rest equally.

The results were dramatic. Under the Proportional Rule, the best-performing neighborhood could get an extra IDR 6,167,960, while the worst-performing one would lose about IDR 8,029,528 compared to the old equal split. That's a massive difference! The Priority Rule was even more extreme, giving a huge boost to just the top five.

The Big Takeaway

The paper concludes that you cannot just copy-paste a budget system from a textbook or a foreign country. If you try to force a complex system on a city without letting the local people help design it, it will likely fail or become just a boring paperwork exercise.

The Pontianak story shows that the secret to making a performance-based budget work is conversation. By letting the people who actually do the work (the waste managers, the health workers, the neighborhood leaders) argue and agree on the rules, the system becomes something they believe in. It turns the budget from a cold list of numbers into a shared agreement on what the city values.

The study doesn't claim this is a magic fix that solves all problems forever. It's a simulation based on a specific city's data. But it suggests that if other cities want to move from "giving everyone the same amount" to "rewarding good work," they should start by building a table where everyone can argue, negotiate, and agree on what "good" actually means before they ever write down a single formula.