Four main types of grant provided to the State Government are Capitation Grant, State Road Grant, State Reserve Grant and Revenue Growth Grant. First is Capitation Grant. It’s under of Article 109 (1) (a) of the Federal Constitution. The aim of the grant is to help the state in their operating expenditure. Capitation grant is based on the population of the states. The highest population in the state, the highest grant they get for their operating expenditure. Section 1 part 1 of the Tenth Schedule explains how they calculate the grant as follows. 1) The capitation grant payable to each State in respect of Financial year shall be at the following rates. a) For the first 100000 persons at the rate of RM72 per person b) For the next 500000 persons at rate of RM10.20 per person c) For the next 500000 persons at rate of RM10.80 per person d) For the remainder at the rate of RM11.40 per person
And shall be calculated based last population census:
Provided that if the last census was taken one year before the beginning of the Financial Year, the grant for that particular year shall be based on the population as determined by that population census. The capitation grants can be changed in accordance to Article 109(2) of the Federal Constitution but if it reduce, that should not result in the state getting lesser 90% of the capitation grant that it received previous year. Second is State Road Grant. It’s given for maintaining the State road in the State under Article 109(1)(b) of the Federal Constitution. The calculation of the grant was stated in section 2, part 11 of the Tenth Schedule of the Federal Constitution. 2) The Road State Grant payable to each of the States of Malaya in respect of the financial year should be calculated by multiplying a) The average cost to a State of maintaining a mile of State Road, at the minimum standard determined for State Road in those State by the Federal Government after the consultation with the National Finance Council: by b) So much of the mileage of state roads in the states as qualifies for grant. According to Section 5, Part II of Tenth Schedule of the same act, State Road is any public road other than Federal Road and it also consist of maintenance that can be improved the state road. Third is State Reserve Fund is given to the States applying for the Grant. The purpose of the fund is to assist State Government that have deficits in their current accounts or for development purpose. It’s given based on economic development, infrastructure and well being of the respective States. The grant given by federal Government after consultation with the National Finance Council. The State Reserve Fund is allocated under the provision of Article 109(6) of the Federal Constitution c) In respect of every financial year such sum as the Federal Government may, after consultation with the National Finance Council, determine to be necessary
And the federation may from time to time, after consultation with the National Finance Council, make the grants out of the State Reserve Fund to any State for the purpose of development or generally to supplement its revenue. Lastly is Revenue Growth Grant. It’s given to the State Government whenever there is a growth or increase by more than 10% in the revenue of federation in any financial year compared to last year. This is because the states also make the contribution to the total of the growth of federal. This grant is according to the Revenue Growth Grant (Amendment) Act 1980. For example, for last year the financial year for the federal is 1 billion, so 10% of the 1 billion should be distributed to the State.
* State Reserve Fund
The State Reserve Fund is given to the States applying for the grant. The purpose of the fund is to assist State Governments that have deficits in their current accounts of for development purpose. This fund provides grants based on the economic development,...