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Bureaucrats still defying state sector cuts plan

Just as last year's audit of Slovakia's bureaucratic corps begins to produce its first budgetary savings, several state ministries have made new demands for more taxpayer money, and have refused to enact the cost-cutting measures called for by the government.
The Labour Ministry, for example, has protested that the civil service employment bill it proposed - one that would have added a further 2 billion to bureaucrats' collective wages - was nipped in the bud in parliament this past July. The ministry has promised to try again this fall. Meanwhile, the Agriculture and Education Ministries, among others, are openly boycotting much of what the cabinet has asked them to do: to close down some organisations funded from the state budget, and slash the spending of others.

Just as last year's audit of Slovakia's bureaucratic corps begins to produce its first budgetary savings, several state ministries have made new demands for more taxpayer money, and have refused to enact the cost-cutting measures called for by the government.

The Labour Ministry, for example, has protested that the civil service employment bill it proposed - one that would have added a further 2 billion to bureaucrats' collective wages - was nipped in the bud in parliament this past July. The ministry has promised to try again this fall. Meanwhile, the Agriculture and Education Ministries, among others, are openly boycotting much of what the cabinet has asked them to do: to close down some organisations funded from the state budget, and slash the spending of others.

Original plan

Slimming the state administration, as the bureaucratic apparatus is known in Slovakia, was one of the most popular promises the current government parties made to voters in the 1998 election campaign. In 1999, the Dzurinda government set out to fulfill its pledge by carrying out an audit of central state administration bodies, covering 172 state organisations with almost 41,000 employees and a combined budget of 100 billion Slovak crowns ($2 billion) a year.

On August 30 last year the government adopted the audit's recommendations, as well as its prediction of 2-4 billion crowns in savings. Tasks included selling off dozens of state-financed entities, putting others on strict contract-based funding, using open tenders for public procurement, and reducing over-employment at central state ministries.

The results, 12 months later, are mixed. The Institute for Economic and Social Reform's (Ineko) Miroslav Beblavý, the head of the audit's oversight group, said he feared that only half of all state-funded organizations would be taken off their 'lump sum' annual financing by the start of the next year, and be distributed funds according to each state contract they received.

On the other hand, much has been achieved, said Beblavý, with five state organisations - including the Media Information Center, the House of Slovak Expatriates, and the Respiration Disease Research Centre - scheduled for closure by the end of 2001, with others taking substantial cuts to their budgets. Overall, Beblavý's group expects annual savings of around 225 million crowns due to these changes.

IVES, the Košice-based organisation providing the state bureaucracy with software backup and computer skills training, is a case in point. Until September 2000, IVES had a fixed budget administered by the Interior Ministry. Since then it has been given funds on the basis of specific contracts only. Edmund Galgócy, IVES's deputy director, says that while its budget was cut by a third in this way, IVES managed to keep all its jobs and provide the same range of services as before by signing new agreements, as well as renting out unused capacities to the public. "We still need to be better managers," Galgócy said, "but at least now it's always clear who pays for what."

Not everyone, of course, believes cuts to state bureaucracy are a good idea. Looking at the results so far, Beblavý says the Economy and Transport ministries have been the fastest to adopt the change, while the Agriculture and Education ministries have largely held back.

Jozef Kovačovský, head of the organisation department at the Agriculture Ministry, said that the audit had been carried out in haste based on theoretical concepts suitable for the West rather than shaped by local realities.

"I don't know any case of state provided services being cheaper after privatisation. Bosses of state organisations may drive Octavias [a model of car produced by automaker Škoda], while in private companies they would immediately want a BMW," Kovačovský said. The Agriculture Ministry did not intend to fulfill its audit-related tasks approved by the government, he added firmly. Much reorganisation has already been done, but making ruthless cuts to the 11 research institutes that belong to the ministry was inappropriate, Kovačovský said.

But perhaps the loudest disapproval from bureaucratic ranks was occasioned by newly adopted laws on state and public servants. The law, passed in July and in force from April 2002, will make the pay of state and civil servants closely related to their performance, and hence make the civil service more attractive for young and able people, said Ineko's Beblavý.

The law, which overruled a far more generous Labour Ministry draft, cut salary bonuses for bureaucrats, eliminated the possibility of working shorter hours and made firing bureaucrats easier. All in all, the nation stands to save almost 2 billion crowns on state administration per year, calculated Beblavý.

But the Labour Ministry has fought back, claiming that 90% of state organisations to be affected by the new law disagree with its provisions. Vlasta Husáriková, the head of legislation section at the Labor Ministry, told the daily paper Sme that the ministry would rush a new draft to the government eliminating the cuts passed in July.

Some savings recorded

In the end, the clearest monetary result of the state administration audit may come from new rules for public procurement. While some of the related laws are not in place yet, Beblavý's group argues that making public procurement more transparent and tenders more widespread should save 2-5 billion crowns in taxpayer money every year, with the savings beginning as early as 2003.

On balance, Beblavý remains upbeat about the audit's impact on state administration.

"The best things [in putting the audit results into practice] are invisible to the public," he says. "It's not really our aim to cut expenditures for the public sector - for that one needs to reform both health care and social security. Rather, we want to make the decision-making process more effective and transparent."

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