{"id":9680,"date":"2022-01-12T16:31:42","date_gmt":"2022-01-12T14:31:42","guid":{"rendered":"https:\/\/centreua.org\/?p=9680"},"modified":"2023-02-13T16:32:28","modified_gmt":"2023-02-13T14:32:28","slug":"you-can-t-ignore-money-financial-capacity-of-oblast-centers","status":"publish","type":"post","link":"https:\/\/centreua.org\/en\/involvement-of-citizens-in-the-decision-making-process\/you-can-t-ignore-money-financial-capacity-of-oblast-centers\/","title":{"rendered":"You can\u2019t ignore money: financial capacity of oblast centers"},"content":{"rendered":"

Imagine that you had the opportunity to leave your native community and move to another one within Ukraine. At the new place, you will have the same living space, salary, and living conditions. But who can guarantee that roads, hospitals, schools, and kindergartens are maintained in this new place as properly as at your current home? Or maybe even better?<\/span>\u00a0<\/span><\/p>\n

\u201cPeople look, first of all, at the infrastructure. Are there good quality roads in the community, is it safe to walk on a sidewalk there? Are there many businesses? Maintenance and development of the community infrastructure is the primary duty of local self-government. The same is true about businesses. If a local government creates a comfortable environment for doing business, the residents of the community will have where to spend their hard-earned money. And a share of the money, via taxes, will once again be spent on the development of the community,\u201d explains Kostiantyn Shokalo, an analyst of the Centre of United Actions.<\/span><\/i>\u00a0<\/span><\/p>\n

No one can guarantee that the new place will be better. But after access to <\/span>information on the activities<\/span><\/span><\/a> of government bodies was opened and after the decentralization reform, we have a large amount of information at our disposal. You can assess the state of affairs both in the whole country and in particular communities from home. For several years, the Ministry of Finance of Ukraine has been developing the <\/span>OpenBudget<\/a><\/span> portal with data on state and local budgets. And thanks to the <\/span>Spending<\/a><\/span> and <\/span>Prozorro<\/a><\/span> sites, you can monitor how the budget money is spent.<\/span>\u00a0<\/span><\/p>\n

After the disclosure of data, many people became willing to use or check it. In 2017,<\/span> the Transparent Cities<\/a><\/span> rating was introduced. It allows us to compare the largest cities in terms of openness of information about their activities. Around the same time, an <\/span>index comparing business environments<\/a><\/span> in the regions was launched. This index allows us to compare communities by how easy it is to open a business, obtain all the necessary permits, and procedures there. This index was developed taking the Doing Business international rating as an example. This year, though, the World Bank stopped updating its index after the scandal about <\/span>manipulations with data<\/a><\/span> in favor of China.<\/span>\u00a0<\/span><\/p>\n

The expert of the Institute of Political Education, Taras Sluchyk, highlights the fact that these indices give only the average values, valid for an oblast, but they are not fitted to help with the understanding of the state of affairs in particular communities.<\/span>\u00a0<\/span><\/p>\n

\u201cThere may be several industrial centers in the oblast which will strongly influence its rating. This information will only distort your perception of a specific community,\u201d explains Taras Sluchyk.<\/span><\/i>\u00a0<\/span><\/p>\n

As if taking into account this remark, other ratings arise. For example, the rating <\/span>evaluating business environment<\/a><\/span> i<\/span>n the largest cities of Ukraine by the Ukrainian Forbes. It takes into account the data provided by <\/span>local statistics offices<\/a><\/span> and the place of a community in the ratings prepared by other organizations.<\/span>\u00a0<\/span><\/p>\n

Counting money<\/b>\u00a0<\/span><\/h2>\n

The analytical and advocacy Centre of United Actions proposed another approach to the evaluation and comparison of communities. It is based on data about revenues of local budgets and information about how these funds are spent. Using these data, the analysts of the Centre developed a <\/span>rating<\/a><\/span> of the financial capacity of oblast centers.<\/span>\u00a0<\/span><\/p>\n

Within the scope of this work, community budgets for 2018-2020 and from January to September 2021 were analyzed. They were evaluated using ten indicators. In particular, capital expenditures were taken into account (how much money is allocated for road repairs, how many school buses are procured, how many localities get gas pipelines for private households laid, and other needs important for the development of the community); funding spent on the work of local councilors; the share of the budget allocated for salaries, etc. The full list of indicators can be found <\/span>via this link<\/a><\/span>.<\/span>\u00a0<\/span><\/p>\n

For each of the indicators, a community received 0, 5, or 10 points (low, medium, or high level, respectively).<\/span>\u00a0<\/span><\/p>\n

Since 2018, the leader of the rating has been the Dnipro community which consistently gets 100 points. Also in 2021, Kyiv and Lviv communities were in the top 3 of the most capable communities \u2014 87.5 and 85 points respectively. Kherson, Kramatorsk, Mykolaiv, and Severodonetsk were in the last places this year.<\/span>\u00a0<\/span><\/p>\n

<\/p>\n

“Financial capacity is the ability of a local self-government body to accumulate a sufficient amount of money to solve the most urgent problems of the community. Also, to spend these funds in accordance with the goals set by the local government. That is, to do it with maximum efficiency: to achieve the best results using as small funding as possible,” explains Kostiantyn Shokalo, an analyst of the Centre of United Actions.<\/span><\/i>\u00a0<\/span><\/p>\n

The rating solved the problem of how to compare communities that differ not only in terms of budgets but also in terms of population. It is useless to compare Kyiv with <\/span>a budget<\/a><\/span> of 68 billion hryvnias with some rural communities where several thousand people live and the budget barely reaches <\/span>several million hryvnias<\/a><\/span>. Because of this, the Centre of United Actions recommends dividing community incomes and expenses by the number of community residents or comparing the percentage ratios of expenses or revenue to the entire budget.<\/span>\u00a0<\/span><\/p>\n

“For the first case, the data demonstrates how much taxes are spent on each sector, and for the second case, the data demonstrates the priority of particular sectors in the structure of the community\u2019s budget,” Kostiantyn Shokalo explains.<\/span><\/i>\u00a0<\/span><\/p>\n

The budgets of large and small communities are self-sufficient, and they have to make do with the resources they have. The state, however, does not leave poor communities to their own devices. The Ministry of Finance has developed a reverse subsidy mechanism. It is activated when communities do not have enough of their own taxes to maintain communal establishments.<\/span>\u00a0<\/span><\/p>\n

\u201cIf the indicator of fiscal capacity in the community is lower than the average for Ukraine, this community needs help. Otherwise, it will not be able to maintain schools, hospitals, and cultural establishments in the community on its own. If the indicator is higher, it means that communities can help others. This is a completely normal situation. This is how the state ensures the equality and fairness of the budget system at the local level,\u201d explains Kostiantyn Shokalo.<\/span><\/i>\u00a0<\/span><\/p>\n

After all, the responsibilities of local councils after decentralization only increased and continue to increase. Accordingly, there is always a lack of funding. In addition, communities are not immune to the fact that the state will one day transfer more responsibilities to them. Take one of the latest innovations, for example, when communities were promised a 4% increase in personal income tax deductions in exchange for compensating a part of the cost of natural gas for all residents of their communities this heating season.<\/span>\u00a0<\/span><\/p>\n

\u201cSo let\u2019s say we have a general budget fund. Suddenly, though, during the heating season, the price of gas increases. You planned that the price of gas would stay the same, and now it has increased. And that\u2019s it: your budget for capital expenditures is over,” says Taras Sluchyk.<\/span><\/i>\u00a0<\/span><\/p>\n

Unfortunately, these are not theoretical concerns from experts. According to the Head of the Mass Media and Public Relations Department of the Kherson City Council, Haiane Oganesian, in 2022 we will have to spend twice as much on gas in comparison to 2021. In terms of money, this is additional 150 million hryvnias.<\/span>\u00a0<\/span><\/p>\n

Nevertheless, experts agree that despite all the technical difficulties, community finances can and should be compared. The main problem for such a comparison is that the same categories of income and expenses can be recorded differently in community budgets. The situation is further complicated by the fact that, in addition to income from taxes and fees and subsidies provided by the state, communities may also have loans. On the one hand, loans allow a community to develop faster. However, loan payments also put pressure on the development budgets: instead of building or repairing roads, kindergartens, and schools, a large share of the community\u2019s income could be used to pay off debts.<\/span>\u00a0<\/span><\/p>\n

Andrii Moskalenko, First Deputy City Head of Lviv, explains that loans are necessary for the community, because \u201cpeople demand results right now, today.\u201d And a good credit history is an opportunity to attract more profitable loans.<\/span>\u00a0<\/span><\/p>\n

\u201cIf we were to fail to pay on time even once, it would have a negative impact on the credit rating. In the future, we would lose the ability to attract credit funds,\u201d says Andrii Moskalenko.<\/span><\/i>\u00a0<\/span><\/p>\n

Calculating the invisible<\/b>\u00a0<\/span><\/h2>\n

There are several ways to check the state of affairs in communities through indirect indicators. For example, Taras Sluchyk recommends tracking how the population of a community changes.<\/span>\u00a0<\/span><\/p>\n

\u201cIf people go to one oblast center and leave another, it means that the former oblast center has better potential for development,\u201d assures the expert.<\/span><\/i>\u00a0<\/span><\/p>\n

Investment data can strengthen the impression of whether a community is attractive to its inhabitants and businesses. But, unfortunately, the State Statistics Office and its regional offices do not publish data for particular communities. Data is limited: only information about oblast centers and former cities of oblast importance is published. Accordingly, it is necessary to look for indirect ways how to check the investment potential of the community.<\/span>\u00a0<\/span><\/p>\n

\u201cIn theory, we can use data about how many square meters of accommodation were leased or how many square meters of office space per resident the community has. These indicators can confirm that a community receives investments,” says Taras Sluchyk.<\/span><\/i>\u00a0<\/span><\/p>\n

Also, according to the expert, it is possible to go one step further from finances and material indicators and try to look at surveys on how satisfied are community members with the work of their officials. Such surveys are published from time to time by sociological agencies at the request of Ukrainian or <\/span>international organizations<\/a><\/span>.<\/span> But these data, as a rule, have the same drawback as official statistics: the information covers only the largest communities.<\/span>\u00a0<\/span><\/p>\n

Experts also agree that it is important to investigate the priorities of each community. These are illustrated by local special-purpose programs adopted by the councils. In most cases, you can find them on the official websites of the communities. True, these programs can have different titles and look different because there is no standard for how to design them or report on their implementation. But they are a valuable source of information about local strategies and policies.<\/span>\u00a0<\/span><\/p>\n

\u201cSpecial-purpose programs demonstrate the approaches to spending money \u2014 whether a local council is focused on small particular improvements to win elections or strategic development. Sharp shifts from the latter to the former devalue the results of the previous development,\u201d emphasizes Kostiantyn Shokalo.<\/span><\/i>\u00a0<\/span><\/p>\n

In addition, all parties working in local councils have their own political platforms. These documents demonstrate how politicians see the development of their communities and their country. These platforms are usually found on the websites of local party offices. But usually, voters pay attention to party platforms only on the eve of elections. Political parties submit them together with lists of candidates to election commissions. There they are <\/span>stored<\/a><\/span> for years. In an ideal world, community voters should vote for parties and candidates whose priorities align with their views.<\/span>\u00a0<\/span><\/p>\n

To sum up, we now have access to a large amount of data. Based on public information, it is possible to evaluate the states of affairs in particular communities and compare them. Ratings and evaluations based on open data make it possible to look for trends in how the situation is changing in different communities. In general, thanks to decentralization, community revenues increase. Paradoxically, however, expenditures do not increase. On the other hand, expenditures on capital construction are growing. And this may indicate that communities are using the additional revenue to improve community infrastructure. Accordingly, there is a significant chance that over time each community will become more and more prosperous and respectable. There is hope that when you move, armed with public information, to a new community of your choice, things will be even better there than you imagine reading the available data.<\/span>\u00a0<\/span><\/p>\n

\u00a0<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

Imagine that you had the opportunity to leave your native community and move to another one within Ukraine. At the new place, you will have the same living space, salary, and living conditions. But who can guarantee that roads, hospitals, schools, and kindergartens are maintained in this new place as properly as at your current […]<\/p>\n","protected":false},"author":23,"featured_media":4134,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[268,265,279],"tags":[],"level":[],"area":[],"coauthors":[547],"class_list":["post-9680","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-control-over-the-use-of-public-finances","category-involvement-of-citizens-in-the-decision-making-process","category-public-consultations-in-regional-centers"],"acf":[],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t