/ world today news/ The state is about to burden the taxpayers with another big bill for bad management – the debts of the municipalities. The Finance Ministry is proposing that troubled local governments could be bailed out with funds from the central treasury.
The money will be given on the condition that remedial measures are taken, but it can lead to both subjective interventions of the central government in the local government and further deterioration of financial discipline and uncontrolled spending by the municipalities. This is clear from the changes in the Law on Public Finances published for public discussion, writes Sega.
It is expected that the changes will be voted on in the parliament and the new regime will start to be implemented as early as March. According to the Ministry of Finance (MOF), the proposed changes in the law are necessary because of an analysis of the implementation of the municipalities’ budgets. He outlined a number of problems, but it is not clear from the reasons what exactly they are and how many municipalities they affect.
An indirect idea of the accumulated problems in the municipalities is provided by the amendments proposed by the Ministry of Finance in the limits for unpaid expenses and arrears that local governments may have at the end of the year. At the moment, the municipalities’ expenditure commitments should not exceed 30% of the average annual expenditure for the previous 4 years. The MoF proposes to raise this limit to 50%. Arrears will not be able to exceed 5% of the municipality’s expenses for the last year. There is no data on how many municipalities do not fit into the old restrictions and why their increase is necessary.
Municipalities that do not cover 3 out of a total of 5 restrictive conditions will be accepted as municipalities with financial difficulties. The evaluation will be carried out annually by the mayors by March 10, and they will be obliged to notify the municipal council in the event of non-compliance with indicators and to start a financial recovery procedure. The municipal council will adopt a financial recovery plan and will be able to instruct the mayor to request an interest-free loan from the central budget. The Finance Minister will decide whether to accept the loan request and under conditions that he himself will determine. He will be able to suspend loan tranches if the plan is not implemented. In case of permanent improvement, the minister will propose to the cabinet that the loan be transformed into a free subsidy.
At the moment, stuck municipalities can receive an interest-free loan from the budget, but they must return it by the end of next year at the latest. Grants are not awarded.
The new order for supporting municipalities carries risks. For example, individual municipalities can be tolerated at the expense of others. Responsibility will also be blurred – the budget will pay, no matter how the crisis situation was reached, and part of the debts may be due to financial corrections under the European funds and violations, experts commented. According to them, the question of what happens in the event of failure of recovery plans despite the pouring of interest-free loans also remains open. The law does not make it clear whether such municipalities will be closed or merged with others.
According to the economist Georgi Angelov from “Open Society”, the advantage of the project is the increase in transparency for public finances and the introduction of an obligation to periodically report on the implementation of budgets, but there is a risk of further loosening of budget discipline due to the possibility of covering losses from the central budget. According to experts, the planned implementation of the law starting this year and the possible commitment of a resource that was not planned are also controversial. The structural law on public finances is being amended. It would follow that the new fiscal rules and the new regime apply from 2017, MPs commented.
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