DECENTRALIZATION OF PUBLIC SECTOR IN CROATIA

Transcription

1 Ministry of Finance State Treasury DECENTRALIZATION OF PUBLIC SECTOR IN CROATIA

2 DECENTRALIZATION Introduction about decentralization Functions and subjects Revenues for functions Conclusion

3 De centralization state citizens+

4 INTRODUCTION DEFINITION Decentralization is proces of transfering decisions and actions from state to local level SUBJECT Following functions are decentralized: elementary and secondary education, social care and health

5 ASSUMPTIONS AND CONDITIONS OF THE PUBLC SECTOR DECENTRALISATION PROCESS Basis and assumptions of decentralisation: The Programme of the Government of the Republic of Croatia /XII Statutory and bylaw regulations; Evolutionary processes of the drawing up the strategy as the result of its implemention in the systems og local government

6 The Programme of the Government of the R of C Sets out the necessity for the implementation of decentralisation; This is not imagined as a mere transfer of resources for given functions and expenditures provided in the national budget of the Rof C to the local and regional units of the self-governments. What is thought of primarily is the transfer of responsibility and decision making about the resources for the decentralised functions from the state level to local and regional self-government, as well as the obligation of the optimum performence of the functions for wich the resources are being transferred. No formal paper has been adopted in the sense of a strategy to define the objectives,principles,effects and procedure of d., all these elements are to some extend contained in the said programme, in the separate laws though wich the decentralised functions are transferred and the sources are provided, and in the bylaw regulations which their implementation is ensured.

7 The Programme of the Government of the RofC 2 It was concluded that the whole of the process of the decentralisation of the public functions of the state should be carried out gradually, in several phases, depending on the macroeconomic evaluations of the economic development of the country in the coming phase.

8 The initial phase of D. A start was made: from the exsisting territoral organisation of the municipalities,cities and counties (568 LGU) the limites resources and fiscal restrictions of LGU, ( from 1 mil.kn to 4 bil. kn - total 13 bil.kn) from the obligation to execute the achieved level of decentralised functions

9 The basic aim was By using the limited resources in an efficient way to encourage the democration of the decision-making process and the realisation of public needs and to make possible a more effective and rational public sector and economic development not only of the weakly developed areas but for the whole progress of the regions.

10 LGU-subjects of decentralisation From an analysis of the network of establishments schools,homes,centres,hospitals,of personnel resources for the implementation of the activities and the fiscal capaties of the municpalities, cities and countries, it was concluded that because of the uneven relations among them,the decentralised functions should be devolved on the counties or the 32 cities that had achieved a given capacity and that would be able to carry out the tasks transferred to them. It was concluded that all the functions, apart from elementary education, should be transfered,whit respect to their fiscal capaciry to the counties.according to estimates of the network of schools and their capacities, only elementary education could be decentralised down the level of the cities these are cities that have populations of over 10,000 and county towns that in 1999 had 400 kuna per capita revenue from income tax. The decentralised expenditures of elementary school that are not in the area of these cities was taken over by the counties.

11 The process of public sector decentralisation officially started on 1 July 2001 when the Croatian Parliament passed the laws though wich the financing of certain functions and costs of elementary and secondary education as well as of health care and welfare were transferred from the national budget to the budgets of cities and counties, also providing the resources for their implementation.

12 The legal presumptions for the provision of the resources for transferred functions were provided for in the Amendments to the Local and Regional Self-Government Units Financing Law Wich prescribrd: a) A new allocation of income tax and the operators involved in decentralisation; b) Vertical and horizontal equalisation from functional grants from the national Budget and bases of the obligationminimum standards and the manner of defining the grants

13 Decentralization functions and subjects Till 1st of July State budget elementary education secondary education social care health From 1st of July County budget elementary education secondary education social care Health Cities budget -32 cities elementary education

14 INTRODUCTION SUBJECTS OF DECENTRALIZATION 1) Counties and city of Zagreb for following functions: - elementary education, - secondary education, - social care and - health 2) cities (32 cities) for function: - elementary education

15 Cities that are decetralizing: Bjelovar, Crikvenica, Čakovec, Dubrovnik, Gospić, Karlovac, Koprivnica, Krapina, Kutina, Labin, Makarska, Opatija, Osijek, Rijeka, Požega, Pazin, Poreč, Pula, Rovinj, Samobor, Sisak, Slavonski Brod, Split, Šibenik, Umag, Varaždin, Velika Gorica, Vinkovci, Virovitica, Vrbovec, Zadar, Zaprešić Criteria: population higher than residents county center income tax in year higher than 400 HRK per capita

16 Possibilities of inclusion of subjects which finance decentralized functions Municipalities or cities with more than 8000 residents can finance elementary education Municipalities and cities that together have at least 8000 residents can decide to finance elementary education together

17 Sources of local Government revenues in Croatia Own sources (tax and non tax) Grants (From State and County budgets) Borrowing Participation in common sources (Tax and non tax) Local tax revenues Non tax revenue from property Personal income tax Company income tax Consumption tax Tax on vacation homes Rent for the use of LGU assets Fines Gambling tax Real estate transaction tax Tax on the use of public spaces Corporate title tax Administrative Fees Communal fees Surtax on the income tax Tax on vacant land (from 2001) Communal contributions Fees for the use of public spaces Tax on underutilized business property (from 2001) Tax on the underutilized farm land (from 2001)

18 Base for commitment calculation This commitment comes from goverment decisions about criteria and measures to maintain minimal financial standard in year 2002.

19 Revenue and expenditure planing REVENUES : Assesment of additional shares in personal income tax, The difference to specified commitment is planned from equalization fund in the state budget EXPENDITURES : Established commitments individualy by functional and economical classification of budget plan

20 Revenues for implementation of decentralization 1. Aditional share in personal income tax in % - elementary education 2,9 - secondary education 2,0 - social care centers 0,4 homes 1,6 - hospital investment maintenance 2,5 2. Equalization funds - Funds provided by State govermnent budget in year 2002.

21 Sharing of personal income tax To cities -for elementary education To counties and city of Zagreb - for decentralized functions To municipalities and cities on special state care areas To municipalities and cities located on islands for common capital projects To municipalities and cities for financing public fire department units

22 Special state care areas Municipalities and cities can recive up to 90 % of personal income tax and up to 90 % of corporate profit tax realized in their area to stimulate their development.

23 Equalization grants - Who has the right to use Equalization grants: Cities and counties that didn t realize enough revenue from additional share in personal income tax have the right on equalization grants to amount of expenditures established by the Decree of Croatian government Request for grants is issued to Ministry of Finance once a month

24 Financial commitments of cities and counties for period from January to December mil.kn Function Counties Cities Total Elementary education Secondary education Health investment maintenance Social care centers and homes Total commitments Funds provided by State budget 819 Annual estimate from aditional share in income tax 693

25 Decentralized functions in Elementary education Secondary education Social care Health services Total 0

26 godi šnj a pr ocj ena i z dodat ni h udj el a 673 Financial commitments for decentralized functiones in period from in year in mil.kn 566 Sveukupno 600 obveze Elementary education Secondary 385 education Hospital investment maintenance Social care - Centers and Homes Counties and city of Zagreb Cities (32) Total

27 0 MEĐIMURSKA DUBROVAČKO- NERETVANSKA ISTARSKA SPLITSKO- DALMATINSKA VUKOVARSKO- SRIJEMSKA ŠIBENSKO- KNINSKA OSIJEČKO- BARANJSKA ZADARSKA BRODSKO- POSAVSKA POŽEŠKO- SLAVONSKA VIROVITIČKO- PODRAVSKA LIČKO-SENJSKA PRIMORSKO- GORANSKA BJELOVARSKO- BILOGORSKA KOPRIVNIČKO- KRIŽEVAČKA VARAŽDINSKA KARLOVAČKA SISAČKO- MOSLAVAČKA KRAPINSKO- ZAGORSKA ZAGREBAČKA Grants that should be drawn from equalization grants Assesment of additional share in personal income tax 9,40% Expenditures transfered to the counties

28 Expenditure structure for functiones transfered to counties in year ISTARSKA 5% ŠIBENSKO-KNINSKA 4% OSIJEČKO-BARANJSKA 9% ZADARSKA 5% MEĐIMURSKA 3% BRODSKO-POSAVSKA 5% ZAGREBAČKAKRAPINSKO-ZAGORSKA 5% 4% SISAČKO-MOSLAVAČKA 5% KARLOVAČKA 4% PODRAVSKA 3% POŽEŠKO-SLAVONSKA 3% VARAŽDINSKA 5% 8% LIČKO-SENJSKA 2% BJELOVARSKO- BILOGORSKA 4% KOPRIVNIČKO- KRIŽEVAČKA 4% DUBROVAČKO- NERETVANSKA 5% SPLITSKO- DALMATINSKA 12% VUKOVARSKO- SRIJEMSKA 6% PRIMORSKO- GORANSKA VIROVITIČKO-

29 Expenditure coverage for functiones transfered to cities and counties in year and 2002.expressed in 000 kn Expenditures that are transfered to counties and cities Aditional share in income tax Equalization grants

30 Effects :tax and grants From additional share in income tax made available 48% of the obligations were covered, and from equalisation grants from the national Budget 52%.

31 The decision-making process and the democratisation of decentralisation In 2001 the allocation of resources to establishments and aplications for the transfer of equalisation grant resources from the national Budget were prescribed in detail by Decree and the Minimum Standards Decision in such a way that local areas could have no influence in the further reallocation of them to operators or institutions In 2002 this was essentially modifed pursuant to authorities concerning the making of independent decisions about min. Standards and the advance transfer of resources of equalisation grants, and the further reallocation of rhem within globally determined resources The calculation of the amounts of equalisation grants for dec.funct.in 2001 was made only after the delivery of the application from the monthly reports about liabilities due In 2002 this was dona automatically in advance,according to the criteria from Decision and up to the amount of the obligations established in the review of liabilities.

32 The decision-making process and the democratisation of decentralisation 2 In 2001 a given unit was bound to transfer funds obteined from the special share in income tax and from equalisation grants to each establishment in proportion to the preceding year, in line with the Minmum Standards Decision and according to information about execution received. For 2002, the LGU could allocate the funds realised from these revenues around the establishments within the groups of individual activity, but that the reallocation had to be founded on a plan published at least two month before its adoption, with the proviso that in the reallocation no individual establishment could have its funds reduced by more than 20% of the amount of the funds determined by Min. Stand. Decision for From 2004 reallocation will be able to carried out without any restrictions, except that the plan has to be announced two month before adoption.

33 Supervision of the lawfulness with wich the function is performed and the proper use of resources The counties and cities must supervise the lawfulness of the adminitrative bodies that carry out the matters of the decentralised functions and the work of the beneficiaries of the budgetary resources(establishments) that are financed from these resources. Control from the point of view of the lawfulness of procedures and the proper use of resources is carried out on special request by the line ministries.

34 Increase % LGU in GDP The first phase of decentralisation resulted in an increase in the share of LGU in the total consolidated revenue of general government and in GDP for 1.7 %.

35 Effects of decentralisationconclusions and recommendations Decentralisation is ongoing process.like every new departure, it requires a change in the mentality and behaviour of all those engaged-the cities, counties and government bodies. Some find it very hard to accept the responsability and ensure regular transfer of funds to the beneficiary establishments, with a consistent check on the spending of the funds. Others find it difficult to accept that now decisions are made at the lower lavel,at the same level where the spending of resources is controled.

36 Effects of decentralisationconclusions and recommendations 2 asymetrical decentralisation, the administration (obligatory reporting)& dependence on equalisation grants is less important than: democratisation in decision making carried out, wich means the reduction of the dominant influance of central authority.

37 Effects of decentralisationconclusions and recommendations 3 The unequal capacity of LGU and vice versa proportional distribution of the networks and obligations for the decentralised functions are the reasons that all the counties, the city of Zagreb and each of the 32 cities are the recipients of equalisation grants for the dec.functions from the national /state Budget. It is extremely important to point out that from extra share in income tax and from equalisation grants from national Budget, the decentralised functions are financed and that there is coverage 100%. The share in income tax of the state has been reduced and regular payment of equalisation grants from the state budget has been ensured. The decentralised funds can be used only for the purposes of dec. functions from these activities, but in the firs years a certain control mechanism of the use of these funds has been built in.

38 Effects of decentralisationconclusions and recommendations 4 In the restricted material and time conditions the first phase of decentralisation has shown certain weaknesses, as well as some positive movements in the better discernement of requirements, the additional provision of funds, and in the first signs of the rationalisation of funds in some local settings.

39 Conclusion Decentralization is a proces which is implemented step by step. As every change it requires change in the awareness of every participant in decentralization. It is hard to accept responsibility and provide funds to the users.

40 Future directions for the fiscal decentralisations of the public sector in the Republic of Croatia A working group composed of representatives of ministries, counties and cities and forein consultants who worked on the first phase of decentralisation as well have draw up the working material Future.. Since this document has not been considered by the working documents of the government of Republic of Croatia, we cannot give even basic adumbrations of the future trends in decentralisation at the moment. We can confirm only that according to the available data, in line with world experience, an analysis is being carried out of the possible tranformation of the communal charges into a property tax.