FINANCE Minister Peter Kažimír’s draft budget hit a raw nerve with towns and villages - so much so that they threatened with a strike alert if the government does not become more generous to the local governments.
The municipalities objected to the government’s forecast in its plan for 2014 that local governments will be able to save money despite being required to cover salary increases for teachers. To smooth the edges, Prime Minister Robert Fico offered that next year the government will hike the share of the self-governments on the personal income tax from 65.4 to 67 percent and possibly more in the upcoming years.
The 2014 budget is particularly important for the municipalities since towns and villages will be electing their mayors next year. The Slovak Association of Towns and Villages (ZMOS) and the Union of Towns and Villages (ÚMS) originally demanded that the government hikes their share of income tax to 70.3 percent.
“Next year we want to seek and use all the tools so that we gradually get to this goal, which is 70.3 percent,” Fico said after a meeting with ZMOS representatives on October 23, as quoted by the SITA newswire.
Fico however added that his government does not carry responsibility for the decision of the previous government, which trimmed this share from 70.3 percent to 65.4 percent.
The ÚMS assesses Fico’s offer “as a compromise, minimally a forthcoming step in the right direction,” Marián Minarovič, general secretary of the ÚMS, told The Slovak Spectator on October 24.
Local government grievance
ZMOS Chairman Jozef Dvonč said on October 23 that the offered hike would bring a package of €30 million, which would help the self-governments cover the salaries of pedagogical and non-pedagogical employees of schools. Dvonč, as quoted by SITA, also went on to say that the self-governments would try to be responsible partners of the government and achieve a balanced budget.
Kažimír assured that the hike will in no way impact the budget for next year or the targeted deficit at €3.39 billion. His budget, which the cabinet has advanced to parliament, assumes revenues standing at €13.84 billion and spending planned at €17.22 billion.
One of the biggest thorns in the side of ZMOS and ÚMS has been that the government expects them to cover a salary increase for teachers and that the state expects local governments will do so by selling redundant property.
Vladimír Bajan, deputy chairman of ZMOS, told The Slovak Spectator on October 17 that his organisation rejected the draft budget for 2014-2016 because of what he called the Finance Ministry’s unrealistic expectations about surplus money in the budgets of towns and villages.
“The municipalities in past years saved the funds and plan to invest in the upcoming years in schools, kindergartens, roads, sidewalks and parking plots,” Bajan said.
Expenses on the rise
Minarovič of the ÚMS said on October 16 that the draft budget for 2014 presents what he called a great risk for Slovak towns, since the government “counts on the savings of the self-governments, despite the fact that their expenses will increase. The budget assumes that we will cover [higher] wages for teachers, which were already hiked in 2013 based on a promise from Dušan Čaplovič, from our own resources”.
Bajan noted that another weak point of the budget is the Finance Ministry’s expectations in the area of capital revenues, adding that towns and villages no longer have enough surplus property to obtain €120 million annually, as planned by the ministry.
“Freezing wages for three years will not be possible to carry out, since the government every year is coming up with new modifications, for example, the pay raise for teachers,” Bajan said, adding that this concerns all pedagogical and non-pedagogical employees of the municipalities.
According to Minarovič, another serious weakness of the budget is the expectation that the self-governments will sell more of their property than they are realistically able to.
“The interest in purchasing land or real estate offered by the self-governments is relatively small and if such deals are made, in most cases these are considered disadvantageous,” Minarovič told The Slovak Spectator October 16.
Minarovič agrees that the assumed budget surplus of the self-governments planned for the period between 2015 and 2016 is unrealistic, since the state projected this surplus at €29 million in 2014, but then one year later at €253 million and in 2016 at €146 million, while the government assumes a deficit exceeding €8 billion.
“The government painted higher salaries for public servants and teachers while for the self-governments, towns and villages it cut salaries in the budget by €10 million,” Minarovič said.
The budget assumes a total drop of spending of the local governments by 4.4 percent mainly due to a drop in spending on goods and services at 5.1 percent and capital expenditures by 6.4 percent, which according to Minarovič is unrealistic in an election year. ZMOS will insist on the 70.3 percent share from personal income taxes, “which the government of Mikuláš Dzurinda took away from us”, said Bajan on October 17.
Minarovič too stressed that hiking the share of personal income taxes for municipalities would contribute to fiscal consolidation in underfunded towns and villages.
Minarovič said that rather than cover the pay raise for teachers and pedagogical employees from the budgets of the self-governments, “the Ministries of Education and the Interior should solve this through their own budgets”.
Radka Minarechová contributed to this report
