Fresh asphalt, reconstruction of old and some other buildings, new tram rails, construction of metro stations – all these changes in Kharkiv are directly connected with the financial decentralization, which was launched in our country as far back as January 1, 2015.
I think that it is the most successful reform in our country. Everyone can see it by the changes happening in everyday life: the roads, the schools are constructed and repaired, the infrastructure improves, and the representatives of local communities obtained new opportunities. While not so long ago, they were poor as a church mouse. Thus, one of village heads told me that during 15 years, they received ₴30,000 from the regional budget. And only during the first six months of the community’s existence, they managed to earn ₴9 million for development.
Thanks to financial decentralization, the budget of Kharkiv oblast increased fourfold. The local communities report about the repairing of roofs in apartment houses, porches, electric grids and sewerages.
One of the best events was the opening of the Regional Centre for Administrative Services in Kharkiv. In some communities, teachers started to receive 20% bonuses from the local budgets in addition to their wages. The new idea in the decentralization reform is the establishment of security centres in local communities aimed at the merger of an office of district police officer, fire and rescue unit and, if necessary, first aid and obstetric station.
The line, which more than 250 years ago our great fellow-citizen Hryhorii Savych Skovoroda started his verse with – “To each community – morals and rights” – obtains its embodiment in the process of decentralization.
It looks like everything is all right! Nevertheless, I, as well as my colleagues, the MP and the members of local councils from the Nash Krai party, cannot help worrying about the dangerous trend of termination of the decentralization processes.
Thus, the government planned to transfer the functions of utility benefits financing to local budgets in the upcoming year. However, after the discussions they decided to maintain the status quo, which means that the funding of benefits at the expense of subvention remains. The Ministry of Finances proposes the cities to finance benefits at their own expense. According to the estimates made by the Association of Ukrainian Cities, the amount involved is ₴7 billion. The transfer of these expenditures may unbalance local budgets and cause the situation when the citizens are not able to use benefits. When there are no means at the local level, there is no possibility to compensate the expenditures on benefits.
For several years, the government is trying to shift the funding of higher educational institutions of the I-II levels of accreditation to the balance of local budgets. The conflict is similar here: who will finance these institutions, as they are not controlled by the local authorities, and the graduates not always stay in these cities to work? Education is a national scale issue, or even a strategic one. If the state budget gives up this field, we should expect that at the local level the authorities would try to ‘optimize’ this item of expenses by all means. And after that, the official will complain openly that the country lacks specialists, and the youth chooses educational institutions in Poland.
Another important problem is the size of medical and educational subvention for the local budgets. It is known that not so long ago, the Parliament has passed medical and educational reforms. They fundamentally change the approaches to these branches funding.
According to the expert estimates, taking the reforms into account, the stipulated means are insufficient. The amount of educational subvention is planned at the rate of ₴61.2 billion (16.5% increase in comparison with this year), although it is planned to have a 25% increase in educators’ wages. As for medical subvention, the field experiences the 30% underfunding right now, and there are even arrears of wages.
Meanwhile, the government intends to kill (I cannot find another word) the medical scientific research institutes, in which the assistance to people is rendered at the highest level. It is planned to put them on a self-supporting basis. I think there is no need to explain what this means for the country with the low paying capacity of the population.
Nevertheless, I think that the most inexpert idea in the new budget bill is to increase the percent of withdrawal of means from local budgets through the reverse subvention from 50% to 80%. Reverse subvention is the means, which are transferred to the state budget from the local budgets. Its size depends on the tax capacity index of the cities. The latter is calculated according to the special formula considering the receipts from the taxation of natural persons and enterprises. This means that the city like Kharkiv with many functioning enterprises and many working people who earn quite decently (in comparison with other regions) will have to transfer “surplus” to the state.
And this means that the motivation of local communities to increase incomes will disappear. And this, in turn, will slow down the rates of general economic development.
It cannot be considered as something else but the infringement of decentralization. After two years of successful reform, it is scrapped.
I insist that it will only harm the state and the citizens.
Ukrainian MP
Oleksandr Feldman
