Local self governance in 2012
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1 LOCAL GOVERNANCE IN UKRAINE 2010-2012
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LOCAL GOVERNANCE IN UKRAINE
2010-2012
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Local Government Framework in UkraineLocal communities have the right to independent resolution of issues of local importance.To exercise this right, they elect city mayors and city councils. The latter establish their executive bodies.The local government ‘s own mandate includes, in particular, ensuring stable operation of life-sustaining systems in cities and their maintenance.In addition, under the law, national government may delegate some of its mandates to local governments in such areas as public education, culture, healthcare, and social safety net.Local governments use their local budget funds to implement these mandates.To exercise its own mandates, local budgets receive revenues from local taxes and fees.National government ensures implementation of delegated mandates by (i) designating certain revenues from national-level taxes to local budgets, and (ii) through transfers from the National (State) Budget.
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Key Achievements in Restoring Local Governance in Ukraine
Local governance in Ukraine has a 800-year long tradition. This tradition was interrupted by the communist regime, and was restored in 1990.Since then, the country has rebuilt the system of local government bodies, and developed its legal framework. The foundations of local governance are defined by the Constitution of Ukraine.In 1997, the Verkhovna Rada ratified the European Charter of Local Governance.Entities of local governance may organize themselves in local government associations, one of which is the Association of Ukrainian Cities. The status of local government associations is defined by a separate law.
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Key Problem Issues of Cities
For most entities of local governance, lack of resources to adequately perform their functions, as defined by the law, remains their main problem for the following reasons:1. Insufficient own resources in local budgets, which did not exceed 8.7% of the budgets’ total revenues.2. Persistent failure of the Government of Ukraine to fulfill its constitutional obligation of providing full amount of financial support to implementation of delegated mandates. Over the last three years, the national government covered about 80% of that obligation at best.
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Current Status and Future of Local Government Reform
Only the reform can ensure the adequate capacity of local governance. Almost all experts agree on the necessity of such reform. The reform implies optimization of budget expenditures through consolidation of the territorial foundation of local governance of villages, townships and cities, as well as by reducing the number of entities of local governance 8-10 times, and strengthening the financial foundations of local budgets by introducing a local-level comprehensive property tax.
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Territorial Consolidation of Local Governance: the Implications
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Share of local budgets (LBs) in the Consolidated Budget of Ukraine (CBU), %
44,645,550,346,2
32,532,739,536,2
20,721,725,624,6
3,33,53,23,30,0
10,0
20,0
30,0
40,0
50,0
60,0
2009 2010 2011 2012
Share of LBs in CBU
Share of LBs without subventions in CBU
Share of LBs without transfers in CBU
Share of LB own resources in CBU
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National Government’s Failure to Provide Financial Support to Implementation of Delegated Mandates, and
Its Impact on Local BudgetsFinancial support from national government to implementation of delegated mandates, %
Share of local budgets’ own funds channeled to implementation of delegated mandates, %
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Sources of Funds to Cover the Shortfall for Delegated Mandates
1147.5
6
5 1 7.8
27.3
Projected by the Ministry ofFinance 01.01.2012
Budget shortfall for delegatedauthority and sources to cover it:
Atditional transfer during the year
Funds from Basket Two
Non-repaid mid-term loans.December 01, 2012
Optimisation
Accounts payable, December 012012
Потреба на делеговані
A total of UAH 141.3 bln is needed to support implementation of the mandates delegated by the national government to local governments. The shortfall constitutes UAH 27.3 bln.
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Overall Structure of Local Budget Expenditures in Ukraine, Slovakia and Poland, 2010, %
8,7
31,6 26,6
84,652,9
55,5
6,715,5 17,9
0%
20%
40%
60%
80%
100%
Ukraine Slovakia Poland
Own authority Delegated authority Staffing expenditures
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How National Government Blocks Own Funds of Local Governance
Since the second half of 2012, in the context of severe National Budget deficit, the State Treasury resorted to unprecedented withholding of funds from the accounts of Local Councils (entities of local governance).As of end December 2012, about UAH 4 bln remained blocked, resulting in local governments’ inability to pay their contractors for works and services already rendered.Thus the national government succeeded in resolving its financial problems at the expense of local budgets.A significant portion of these funds has remained blocked until today.
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Key Problem Issues in the Housing and Utilities Sector
Local governments in cities are responsible for housing maintenance, solid waste management, centralized water and heat supply, and sewage disposal. The sector has deteriorated due to lack of resources.In 2004 the country approved a National Housing and Utilities Reform Program; however its implementation has been frustrated by the populist policy of the (national) government.As of today, the tariffs that are set at the national level cover only about 70 percent of the service cost. The government is obliged to reimburse to local budgets their losses from low tariff and service costs, however it has failed to do it in any regular manner. As a result, total arrears of utility companies (primarily for natural gas and electricity) are now in excess of UAH 17 bln .The compensation funds the Cabinet of Ministers does provide are distributed in a non-transparent manner, and with a considerable regional bias.
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Distribution of National Budget Subvention to Local Governments through Regions to Compensate Tariff Offsets, June 2012
(UAH per capita in urban areas)
0.100.130.150.160.170.190.190.220.230.230.240.250.250.280.290.310.320.340.360.380.40
0.480.53
0.560.60
0.681.76
0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40 1.60 1.80 2.00
Zakarpattya oblast
Ivan-Frankivsk oblast
Mykolaiv oblast
Kherson oblast
Zaporizzhya oblast
Ternopiol oblast
Sumy oblast
Odesa oblast
Chernihiv oblast
Rivne oblast
Lviv oblast
Cherkasy oblast
Chernivtsi oblast
Violyn oblast
Vinnytsya oblast
Khmelnytskyi oblast
Kyiv oblast
Zhytomyr oblast
Crimea
Poltava oblast
Kirovohrad oblast
Kharkiv oblast
Dnipropetrovsk oblast
city of Sevastopol
Luhansk oblast
Donetsk oblast
city of Kyiv
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Centralizing Instead of Decentralizing
Over the last 3 years, national government has taken steps towards centralization of public authority. This policy has primarily affected local governance, whose authority is being taken from the local level, and transferred to state administrations and ministries.Examples:1. The Law On Regulation of Urban Development Activities , as approved in 2010, whereby, despite AUC protests, local governments were stripped of their influence on development of populated areas.2. Reforms in the health system, whereby local governments are stripped of their influence on provision of in-patient care and emergency assistance.3. While local governments need to make inventories of real estate for purposes of its local taxation, the right to do so has been taken away from them.
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USAID DIALOGUE Project
A Ukraine-wide activity to provide a comprehensive support to local governments across the country through:
- working with local government practitioners (Task Forces, AUC Regional Offices),
- working with representatives of the central state executive,
- working with future local government lawyers, and
- working with the public at large.
Outcomes:- Think tank capacity for policy development,- Institutionalization of mechanisms for policy development and policy
dialogue,- Specific results of policy dialogue.
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Relationships between the state executive and local governments
The Tymoshenko Government introduced a practice for representatives of local government associations to take part in the Cabinet of Ministers sessions with the advisory vote. In 2010 this practice was suspended and was resumed in November of 2012.The Law of Ukraine “On Local Government Associations” envisions budget consultations between the Cabinet of Ministers and local government associations. In 2012, the Cabinet of Ministers violated this law and the State Budget for 2013 was prepared and approved in a non-transparent way.This law also envisions the concurrence of the associations with draft laws related to local governance. The purpose of this move is to prevent the approval of laws and regulatory documents harmful to local governments.
The trends in the number of documents submitted to AUC for its expert opinion is shown on the next slide.
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Selected Improvements and Successes in the Recent Years
At the national level , these include:1. Introduction of local real estate tax.2. Channeling 100 percent of land fee collections, and collections from the unified business tax to development part of local budgets.3. Simplified local borrowings.4. Approval of the law on delineation of boundaries between state-owned and communally-owned lands.5. More transparent mechanism to allocate funds for road network maintenance. 6. Legislation to streamline land sales.7. Law on administrative services.8. Law on access to public information.
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Selected Improvements and Successes in the Recent Years
At the local level , these include:• Launching the School Bus Program in the Vinnytsya oblast: private bus
companies take children from rural communities to schools,• Implementation of the Clean Potable Water Program in the Kirovohrad
oblast,• Sewerage network improvements in 3 cities in the Lviv oblast,• 110 km of rural roads laid in the Rivne oblast,• Implementation of the oblast level investment promotion program in the
Zaporizzhya oblast,• 1.2 million UAH added to the Together for the Future Program in the
Kharkiv oblast to finance small communities,• An Open Government Center opened in the Dnipropetrovsk oblast to
consolidate services of 35 licensing and permit offices in the oblast,• Financial support for the construction of 3 landfills in the Poltava oblast.
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Financial capacity of local governments in Ukraine
Expenditures for the implementation of the local government authority
proper, $ per capita, 2011
25
563 700
2200
0500
1000150020002500
Ukraine Lithuania Poland Sweden
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Immediate tasks to support local governance
1. Increasing the revenue part of local budgets to enable local governments implement their own mandate. 2. Calculation of transfers to local budgets for the implementation of the delegated mandate based on national standards. 3. Transparent distribution of subventions from the State Budget between regions and communities.4. Stop the practice of transferring the authority to resolve issues of local importance to state executive agencies. Give the authority taken from local governments back to them.5. Departing from the national populist tariff policy and steps towards real reforms in the housing and utilities sector.6. Real delineation of boundaries between lands owned by communities and by the state.
