MUNI ECON XXII. MEZINÁRODNÍ KOLOKVIUM O REGIONÁLNÍCH VĚDÁCH. SBORNÍK PŘÍSPĚVKU 22ND INTERNATIONAL COLLOQUIUM ON REGIONAL SCIENCES.CONFERENCE PROCEEDINGS Place: Velké Bílovice (Czech Republic) June 12-16, 2019 Publisher: Masarykova univerzita (Masaryk University Press), Brno Edited by: Viktorie KLÍMOVÁ Vladimír ZÍTEK (Masarykova univerzita / Masaryk University, Czech Republic) Vzor citace / Citation example: AUTOR, A. Název článku. In Klímová, V., Zítek, V. (eds.) XXII. mezinárodní kolokvium o regionálních vědách. Sborník příspěvků. Brno: Masarykova univerzita, 2019. s. 1-5. ISBN 978-80-210-9268-6. DOI. AUTHOR, A. Title of paper. In Klímová, V., Zítek, V. (eds.) 22nd International Colloquium on Regional Sciences. Conference Proceedings. Brno: Masaryk University Press, 2019. pp. 1-5. ISBN 978-80-210-9268-6. DOI. Publikace neprošla jazykovou úpravou. / Publication is not a subject of language check. Za správnost obsahu a originalitu výzkumu zodpovídají autoři. / Authors are fully responsible for the content and originality of the articles. © 2019 Masarykova univerzita ISBN 978-80-210-9268-6 (online : pdf) XXII. mezinárodní kolokvium o regionálních vědách Sborník příspěvků Velké Bílovice 12.-14. 6. 2019 doi: 10.5817/cz.muni.p210-9268-2019-46 THE EVALUATION OF THE RELATIONS BETWEEN THE STATE BUDGET AND THE LOCAL SELF-GOVERNMENT BUDGETS (CASE STUDY OF THE SLOVAK REPUBLIC) Hodnotenie vzťahov štátneho rozpočtu k rozpočtom miestnych samospráv (na príklade Slovenskej republiky) Viera PAPCUNOVÁ1 Eva BALÁŽOVÁ2 Peter ÁG H 2 1 Ústav ekonomiky a manažmentu Fakulta prírodných vied Univerzita Konštantína Filozofa v Nitre MTrA 'Institute of Economics and Management Faculty of Natural Sciences Constantine the Philosopher University in Nitra Hlinku 1, 949 74 Nitra, Slovak Republic E-mail: vpapcunova@ukf.sk 2Katedra verejnej správy Fakulta európskych štúdií a regionálneho rozvoja Slovenská poľnohospodárska univerzita v Nitre 2Department of Public Administration Faculty of Eur. Studies and Regional Development Slovak University of Agriculture in Nitra MTrA. Hlinku 2, 949 76 Nitra, Slovak Republic E-mail: eva.balazova@uniag.sk, agh@yahoo.com Annotation The reform of the public administration, which took place in the conditions of the Slovak Republic, aimed to reduce the dependence ofthe subjects of territorial self-government on the state. Despite changes in the local and regional funding system, this aim has not been met in full. The state contributes to municipalities not only to carry over the transferred competences, but also for their individual needs. The aim of the paper is to evaluate relations of state budget with the local self-government budgets in the condition of the Slovak Republic in the period 2001-2017. The basis for the analysis were cumulative data for municipalities in the Slovak Republic reported by the Ministry of Finance of the Slovak Republic as part of the results of budget management of cities and municipalities. The analysis revealed the fact that in the comparison of2001 and 2017, the volume of financial resources received by municipalities from the state budget in the form of special-purpose subsidies increased and they are primarily linked to the transferred competences of municipalities. Despite the fiscal decentralization, municipalities in the Slovak Republic depend on the state budget not only within the tax incomes but also for subsidies. Key words local self- government, state budget, budget of local self- government, transfers from state budget Anotácia Reforma verejnej správy, ktorá prebehla v podmienkach Slovenskej republiky mala za cieľ znížiť závislosť subjektov územnej samosprávy na štáte. Napriek zmenám v systéme financovania miestnej aj regionálnej samospráve sa tento cieľ nepodarilo naplniť v plnom rozsahu. Štát zo svojho rozpočtu prispieva obciam nielen na prenesený výkon štátnej správy, ale aj na ich individuálne potreby. Cieľom príspevku je hodnotenie vzťahov štátneho rozpočtu k rozpočtom miestnych samospráv v období rokov 2001 až 2017. Podkladmi pre analýzu boli kumulatívne údaje za obce v Slovenskej republike, ktoré vykazuje Ministerstvo financií SR v rámci výsledkov rozpočtového hospodárenie miest a obcí. Z analýzy vyplynula skutočnosť, že v porovnaní rokov 2001 a 2017 sa zvýšil objem finančných prostriedkov, ktoré získavajú obce od štátu vo forme účelových dotácií, ktoré sú viazané predovšetkým na prenesený výkon štátnej správy. Z uvedeného hodnotenia vyplýva, že napriek uskutočnenej fiškálnej decentralizácii sú obce v podmienkach Slovenskej republiky závislé na štátnom rozpočte nielen v rámci daňových príjmov, ale aj dotácií. 369 XXII. mezinárodní kolokvium o regionálních vědách Sborník příspěvků Velké Bílovice 12.-14. 6. 2019 Kľúčové slová miestna samospráva, štátny rozpočet, rozpočet miestnych samospráv, transfery zo štátneho rozpočtu JEL classification: H71, H72 1. Introduction The financing of local governments defines an important framework for their successful existention. Optimization public finance system in general, and more specifically the distribution of finances and competences between the central (national), regional and local levels are also discussed in the theory of public finance. Roubinek, et al. (2015) note that one of the basic theories of public finance is the theory of fiscal federalism. Especially in the context of the increasing role of local governments and of the process of the reform of public administration -decentralization and deconcentration. Partial decentralization of the public sector also helps to increase the intensity of public control over the spending of public funds (Hornyák Gregáňová et al., 2017). Also Sedláková (2012), Fiľa et al. (2015) note that the decision on the direction of the financial flows of municipalities, their priorities, and the mutual relations between the various financial resources in the municipality is the most important expressions of democratic decision-making at the level of municipalities. The relationship between financing at the level of local self-government and the state is also written by Portella and Teixeira (2016) who state that, despite the constitutional law, Brazilian municipalities are moving towards a situation of strictly administrative entities or satellites of the implementation of federal government options, with very little bit allowing them to implement local policy options. Political administrative autonomy, for the vast majority of Brazilian municipalities, is limited to normative support and the implementation of social policies. Klimovský (2004) notes that in the Slovak Republic until the implementation of fiscal decentralization, municipalities were funded in such a way that about 15% of their incomes was generated by local taxes and fees, and another 25% of their income was incomes from the share tax. After 2004, subsidies for the performance of self-government functions and subsidies for public transport were discontinued. This process has led that the differences between the smallest municipalities and the biggest municipalities and the other municipalities had stopped. The main argument in this case, however, was the fact that municipalities are required to finance the performance of their own competences from their own resources. The loss of subsidies they can be compensated for example, with the active use of local taxes. Urbaníková (2017), Adamišin and Tej (2012) note that local taxes and fees represent for municipalities economic instrument of territorial regulation, or social instrument for selected groups of population. Despite the fact Sedláková (2012), Kováč (2015) note that an increasing amount of finance is being transferred to local self - government, full financial self-sufficiency is not guaranteed. The performance of state administration in the local self-government is traditionally financed by a transfer system. In terms of financing the performance of the original competencies, we are confronted with the problem that smaller municipalities cannot satisfactorily finance these original competences from their own resources. Therefore, there must be important redistributive relations based on the principle of solidarity, fairness and decency in the structure of public budgets, which are, in particular, present the subsidies under vertical and horizontal financial equalization. According to Nižňanský and Valentovič (2004) subsidies for the performance of self-governments serve to offset the socio-economic disparities between municipalities. Balancing the disparities has several forms. Some of them are direct state intervention to facilities, state programs or specific projects, without any influence of self-government bodies (for example housing support, construction of industrial parks, social assistance, etc.). Others intervention present transfers to budgets of local self-governments, in which self-government bodies have an impact on their use. Extent of impact of self-government bodies depends on the transfer category. Grúň and Pauličková and Vydrová (2005), Dvořák (2017) note that formation of the income base of municipalities is considered to be a long-term process, which is characterized to the links and relations between the state budget and the budgets of self-government and among other types of public budgets. The income's base for self-government should be fairly robust, relatively stable, legally guaranteed and flexible to fulfil the tasks that will change during the budget year. Municipalities in the Slovak Republic according to Grajciarová, et al. (2009) have only limited possibilities autonomously to regulate the level of their revenues by their own financial and tax policy. Maximizing your own tax incomes and fee incomes can be achieved either increasing rates or extending the "tax base". The first procedure is very risky, because it can have major negative impacts - the problem of relation between tax rate and the tax yield is expressed by the Laffer curve, which indicates that if tax rates rise will can reduce tax yield. Expanding the "tax base" may mean for municipalities, for example, to increase the attractiveness of the municipality for new inhabitants, business entities, but also expanding or improving local services. Under the conditions of the Slovak Republic, the municipalities are well aware of this instrument and are building industrial parks, preparing zones for developers or individual construction, etc. Also Eslambolchi et al. (2018), Petrášová and Beresecká (2012), Vojtech and Levický (2016) note that the strategy of securing sustainable income 370 XXII. mezinárodní kolokvium o regionálních vědách Sborník příspěvků Velké Bílovice 12.-14. 6. 2019 and financing resources for municipalities pursues the enhancement of the performance of urban management on the basis of sustainability of municipalities' income and financing resources; and evaluates the former on the basis of factors such as sustainable economic growth, enhancement of the participation of private sector, amendment of the structure of municipalities' income system, amendment of the structure of municipalities' system of detection and collection of taxes, borrowing and grants and, strategic management of resources. 2. Objectives and methods The aim of the paper is to evaluate relations of state budget with the local self-government budgets in the condition of the Slovak Republic in the period 2001-2017. The object of the paper were cumulative data of municipalities in the Slovak Republic (2 890 municipalities) and data of state budget. The data sources for the individual indicators were obtained from the Ministry of Finance of the Slovak Republic. The conversion of SK into € (years 2001-2008) was made on the basis of the Slovak National Bank's exchange rate in the appropriate year. Analysis and results were processed in MS Excel. We analyse following relationship: Si = total funds from the state buget intended for municipalities (1) total funds of the municipalities 52 - total funds from state budget according to functional classification of municipalities (2) total funds from state budget intended for municipalities 53 = total funds from state budget according to budget chapters of municipalities (3) total funds from state budget intended for municipalities We analyse also the total general government expenditure as a share of GDP issued at local government level in selected EU member countries over the years 2006 - 2017. Expenditures of government institutions are defined in ESA 2010 in paragraph 8.100 and Chapter 20 with a reference to the list of items: intermediate consumption, gross capital formation, employee remuneration, other taxes on production, subsidies, property income, ordinary taxes on pensions, property and other benefits, social benefits other than social transfers in kind, transfers - purchased market output, other current transfers, changes in pension entitlements, capital transfers and net transactions in non-produced assets. The data sources for this indicator was obtained from Statistical Office of the Slovak Republic. 3. Results On the local level, we talk about financial sustainability when the local self-government bodies can do their financial obligations consistently in the long term. Financial sustainability also reflects the adequacy of available incomes to ensure the provision of the services which the public demands (Fisher, 2007, Vavrek, 2015). The level of financing of local government in the individual EU member countries depends on the model of public administration in the country. Government expenditures for local governments in selected EU-28 countries (V4 countries) is on average 10%. The share of expenditures declined slightly in 2017 compared to 2006 (11% in 2006, 10.6% in 2017). Within the V4 countries, Poland (13.6%) and Slovakia (6.5%) recorded the highest share of these expenditures in 2006. This trend can also be seen in 2017. During the analyzed period, in the V4 countries and also the average of the EU -28 increased significantly these expenditures in 2009, as a result of the economic crisis when individual states more to an increased extent subsidized the local governments due to a decline in their incomes. We also see this trend in the other V4 countries with the exception of Hungary, where this expenditure fell by 4.13% in 2009. Compared to 2006 and 2017, in the V4 countries, with the exception of the Slovak Republic, there was a decrease of these expenditures, with the most pronounced decreasing was in Hungary (50.39%). The Slovak Republic increased these expenditures by 6.15% in 2017 compared to 2006 (fig.l). 371 XXII. mezinárodní kolokvium o regionálních vědách Sborník příspěvků Velké Bílovice 12.-14. 6. 2019 Czscli Republic Hungary Poland ■■■Slovakia EU (23 countries) Source: owns processing on the base Statistical Office of The Slovak Republic Consumption of public administration in the Slovak Republic during the period 2001 - 2017 trade grew year-on-year, with the exception of 2011. Consumption of public administration, if we compare year 2001 (consumption of public administration was 6991.9 mill. €) and year 2017 (consumption of public administration was 19260.5 mill. €) was almost triple (fig.2). Consumption of public administration on average, is at level 20% of GDP, even in 2017 compared to 2001 has increased from 20.38% of GDP to 22.69% of GDP. Another analysed aspect was the deficit of public administration, which means that expenditures of public administration exceeded the incomes of public administration each year. The highest deficit was achieved by the public administration in 2009 (-7.8% of GDP) and the lowest in 2017 (-0.8%). Fig. 2: Development of the selectedfinancial characteristic of the public administration in Slovak Republic in 2001-2017 25 000.0 20 000.0 15 000.0 10 000.0 5 000.0 D.O -5 000.0 T1TTTTTT ssssssss t-\ r-1 l-\ r\ ÍJ 1 1 O ^ wM w~\ w~\ ri O O O MHU -10 000.0 ■■■ consumption of public adminislra Hon ■■■ deficit of public administration consumption of public administra tion % GDP deficit of public administration % GDP Source: owns processing on the base Ministry of Finance of Slovak Republic 25.00 20.00 15.CS - 10.00 5.00 0.00 -5.00 -10.00 372 XXII. mezinárodní kolokvium o regionálních vědách Sborník příspěvků Velké Bílovice 12.-14. 6. 2019 The negative impact of the economic crisis in 2009 was reflected not only in the excess of the budgeted deficit but also in the significant exceedance of the 3% Maastricht criterion for the deficit ratio to the gross domestic product. According to the Aggregate Annual Report of the Slovak Republic for 2017 within the European Union (28 countries) in 2017, 9 countries reached a higher deficit of public administration and 16 countries achieved also higher debt of public administration than the Slovak Republic. The average deficit of EU (28 countries) were 1.0% of GDP (Slovakia 0.8% of GDP) and the EU average debt of public administration of EU (28 countries) were 81.6% of GDP (Slovakia 50.9% of GDP) in 2017. The economic is involved in reducing of the deficit of public administration, both on the consolidation of public finances and on the improvement of accrual incomes of the taxes. Municipalities participated on this result with a deficit of 7.7 mill. € in 2017. The negative development of the balance of municipalities caused to increased capital expenditures, especially for the construction and reconstruction of infrastructure (for example construction of canalizations and sewage treatment plants). The deficit of municipalities also affected the increase of liabilities to suppliers, to decrease receivables from non-tax incomes of municipalities, which consist mainly of incomes from the rent of property, fines, administrative and other charges. Fig. 3: Development of the selectedfinancial characteristic of the municipalities' budget and state budget in Slovak Republic in 2001 - 2017 30.00 25.00 20.00 15.00 10.00 5.00 0.00 --