The crisis has reduced regional budgets

THE GLOBAL economic crisis and its impacts locally have created an inescapable operational backdrop for the presidents of all self-governing regions in Slovakia. As their budgets are funded primarily from income taxes paid by private individuals, rising unemployment and falling or stagnant wage levels have resulted in a 27-percent average drop in revenues from these taxes compared with last year and put the presidents in the unenviable position of deciding where to cut expenditures while trying to effectively perform their duties. These duties include administration of schools, social and health-care facilities as well as each region’s network of second and third-category roads.

Pavol FrešoPavol Frešo (Source: SITA)

THE GLOBAL economic crisis and its impacts locally have created an inescapable operational backdrop for the presidents of all self-governing regions in Slovakia. As their budgets are funded primarily from income taxes paid by private individuals, rising unemployment and falling or stagnant wage levels have resulted in a 27-percent average drop in revenues from these taxes compared with last year and put the presidents in the unenviable position of deciding where to cut expenditures while trying to effectively perform their duties. These duties include administration of schools, social and health-care facilities as well as each region’s network of second and third-category roads.

The Slovak Spectator spoke with Pavol Frešo, newly-elected president of the Bratislava Self-Governing Region, Pavol Sedláček, re-elected president of the Trenčín Self-Governing Region, Milan Belica, re-elected president of the Nitra Self-Governing Region, and Tibor Mikuš, re-elected president of the Trnava Self-Governing Region about their plans for this election term, the biggest problems in their regions, and the kinds of solutions they will put forth.

The Slovak Spectator (TSS): In November 2009 all of you were elected as the president of your self-governing region. What are your main plans for the next four years?

Pavol Frešo (PF): My main plan is to fairly represent citizens of Bratislava Region and to fulfil our programme in a way that it is understandable: what, why and for how much money. And in the end, out of those matters which worry the citizens to choose and solve those for which we have money in the coffers for solutions and about whose positive contributions we are convinced – but only after a mutual and comprehensible communications with citizens. I also certainly list among my other priorities transport and education which we have inherited in a very bad condition.

Pavol Sedláček (PS): We have started several EU projects which will significantly help the region develop. These include reconstruction of five stretches of second and third-category roads which are important from the viewpoint of a well-functioning transport system in our region. We are paying special attention to four stretches of roads on the Czech-Slovak border which, after separation of the former joint state, were not official border crossings. Also three of a total of nine projects for modernisation of social facilities under our auspices have been already approved. Another six projects cover renovation of secondary schools. Recently we submitted a project for modernisation of the Hospital and Polyclinic in Prievidza. It especially pleases me also that our project to renovate the military barracks on the premises of Trenčín Castle has received support from EU funds. We also plan to reconstruct and complete the observatory in Partizánske and we are preparing rebuilding of the Hornonitrianske (Upper Nitra) Museum in Prievidza, too.

Milan Belica (MB): I want to continue in proper management of the region and subsidising the reserve fund of the region as a tool for elimination of potentially unfavourable and unexpected events. In our efforts to use EU funds I want to orient them especially on energy savings that will bring long-term positive effects on management of facilities under the auspices of the Nitra Self-Governing Region (NSK). My other goals include improvement of the mobility of citizens, enabling safer and more comfortable travel to work as well as for entertainment. This includes development, reconstruction and maintenance of the local road infrastructure.

To enhance availability of services to citizens, NSK also applied for a €4.5-million subsidy for the Project for Electronisation of NSK Services. NSK will also continue in enhancing social and health-care facilities as well as seeking removal of micro-regional disparities. For all these we want to use not only our own funds, but especially EU Structural Funds.

In an effective cooperation between the state government and regional administration we want to create conditions for arrival of new investors and thus creation of new jobs, especially in districts hit most by the crisis and to keep unemployment below Slovakia’s average. This includes creation of about 6,000 new jobs by completion of the nuclear power station in Mochovce, construction of the R1 dual-carriage way from Nitra to Banská Bystrica and the arrival of new investors.

NSK continues to develop education as the most important pillar of the region’s development and create conditions for a better interconnection of praxis and academia so that our quality graduates draw further investments.

Tibor Mikuš (TM): Regional government is about approving and implementing good solutions for the benefit of citizens. When I took over the post of president of the Trnava Self-Governing Region (TTSK) for the first time in 2006, the first four months of it was about politics, but the next four years was only work for the citizens. TTSK deputies have shared the opinion that the interests of the citizens should be taken as the imperative and work in accordance with this. This has united us.

Often it is spoken about properties and finances. But first it is necessary to speak about the citizens so that they feel there is an institution which is helpful to him or her also beyond the duties set by law.

We introduced social scholarships; we supported exceptional talents and have built the feeling of togetherness. We have managed to launch the Central Crisis Fund which is clear proof of this feeling of fellowship and patriotism. We support activities for youth and building of sports infrastructure. Automotive and energy clusters were launched in our region through which we endeavour to contribute to development of employment in the region.

We also want to introduce our region as an interesting tourist destination. If we continue in the way we started four years ago, we can achieve prosperity. These amount to a great challenge, even bigger than that of four years ago.

TSS: What are the most urgent problems of your region? What solutions are you proposing?

PF: At the moment, preparation of the budget is the hottest problem. We have found some signed appendices to contracts and even some whole contracts which we did not know about before and which significantly burden our budget. We will debate them at the next session and decide which of them we will likely be unable to finance during the current term.

The office of the Bratislava Self-Governing Region itself, which consumes too much money for its operation, is a problem. Now we are trying to reduce this and at the heart of the question is restructuring. During a crisis period all institutions have to adapt to changed conditions and when we need to save, we must start with ourselves; otherwise, we will fail to push through saving measures.

PS: During the last few years we repaired and reconstructed hundreds of kilometres of backbone roads of the second and third category in Trenčín Region (TSK) but the dual-carriage way R2 from Drietoma to Nováky remains problematic.

Construction of this much needed road, which will interconnect Považie and the Upper Nitra historical regions, has been constantly postponed. This is a first-category road which falls under the auspices of the Slovak National Highway Company administered directly by the Transport Ministry. However, for us this problem is fundamental because this can influence the further development of the region.

MB: Even though the biggest problem of not only Nitra Region, but the whole of Slovakia is increasing unemployment, I can say that the Nitra Self-Governing Region, when existing economic conditions are taken into consideration, has been coping with it very well and my plan is to maintain this in the future. This means that when I contributed, in cooperation with the Slovak state government and local administration, to the arrival of 30 investors which created almost 20,000 new jobs in NSK during the last five years, that during the coming term I will in the same way create conditions for the creation of approximately 6,000 new jobs. The already created jobs have been keeping the NSK jobless rate below Slovakia’s average during the current world crisis, while its upward trend is the slowest for a longer period of time.

TM: As a consequence of the economic crisis there are two main problems which Trnava Region has to face – unemployment and the economic situation, meaning the drop in production by decisive producers in the region. These two problems significantly dominate over other problems. However, solutions to them are beyond the scope of possibilities and powers of self-governing regions.

TSS: What influence has the economic crisis had on your region and the office of the self-governing region itself? What measures are you proposing or have already implemented to soften the impact of the crisis?

PF: For Bratislava Region this means a need for much more effective management and seeking reserves in “its own lines”. I see a solution in allocating all of the revenue from income taxes of private individuals into the coffers of the regional self-governments. This is the only solution to get more money into the budgets of municipalities and self-governing regions. Currently 93.8 percent of the collected income taxes of private individuals go to municipalities and self-governing regions and the rest goes into the state coffers. I consider the subsidies through which the Slovak cabinet compensated regional self-governments for the drop in their revenues as unsystematic. I believe that for the future the whole system of redistribution of finances for self-governments should be re-assessed. This is because people living in the region know best where the shoe pinches, where investments are needed and what should be amended. This is why it is important that money gets from the state closer to people: from the state offices to self-governing regions and municipalities.

PS: As the financial and economic crisis has affected all segments of the economy, it has also affected the Trenčín Self-Governing Region. We are witnessing its impacts on employment and an unfavourable social situation among the population, on companies, and on self-administration and all these impacts are mirrored in our financial condition. The drop in taxes collected during the first three months of 2010 compared with the same period of 2009 amounts to €4.263 million. Based on this we estimate that our revenue from taxes this year will be as much as €14.413 million lower in 2010.

We have also registered an unfavourable development in revenue from taxes for motor vehicles. In this segment we are already reporting a decline of €266,000 for the first quarter of 2010 compared with the same quarter of 2009.

The Trenčín Self-Governing Region has already adopted rationalisation measures to cope with these impacts of the crisis. Within capital expenditures, we have temporarily halted all projects except projects financed from external resources. The need for each individual action is re-assessed while emergency situations get priority. For the current expenditure segment, we have frozen 10 percent of the budget. Usage of this money will depend on the financial situation of TSK. I consider our handling of TSK assets as responsible and our spending of budgetary funds as transparent. In the event of a further deep drop in tax revenues, it may actually endanger the possibility of drawing money from EU funds and may also affect the economic and social stability and further development of the region, including securing the operation of our social facilities.

MB: The crisis has hit NSK with a 15-percent drop in revenue from income taxes and now NSK has been forced by this to cut its expenditures. However, NSK has been adopting and carrying out anti-crisis measures continuously and its economic policy was responsible even before the crisis hit. As examples of our responsible policy I can point out the rationalisation of the network of secondary schools. While in 2002 there were 102 secondary schools under the auspices of NSK, they now number 74. This means that NSK has ‘saved’ the costs of 28 school managements, including their wages and other costs. Along with this, the mergers of schools have made their operations more effective. We have carried out a similar rationalisation within our social facilities. We have fused smaller facilities and we now have 26 instead of the original 29 facilities. NSK is supporting the mobility of its citizens by introducing an electronic system for commuting transport. We have also supported the purchase of 82 new buses in whose operation we financially participate. We see this support as especially important in regions hit the most by unemployment. Mobility is also supported by a NSK investment of almost €9 million into reconstruction of second and third-category roads in 2009. Apart from better mobility this also increases employment in the region. NSK is also pushing for effective use of EU funds, especially on energy-saving projects, which will bring a positive effect on better economic performance of facilities under its auspices. Regarding this, the NSK office will try through negotiations with government representatives to achieve facilitation and equalling of joint proceedings between NSK and related ministries when drawing EU funds.

In addition to this, the NSK office is carrying out other measures aimed at saving 15 percent of its budget. These include reduction of operating expenditures at individual departments and a saving regime in wages while keeping all minimum wage parameters guaranteed by the collective agreement. Capital expenditures of NSK represent an exception within its restrictive measures because investments into construction in this region will exactly support, if not growth, at least keeping the current level of employment.

TM: Compared with 2009, each of Slovakia’s self-governing regions lacks, on average, 27 percent of revenues from income taxes assessed on private individuals. The drop in our budget is so high that it endangers fulfilment of our original powers and duties. For that reason we will ask Prime Minister Robert Fico for help when solving our financial problems. But the operation of the TTSK office will be not endangered, nor will the financing of our original powers and duties, as well as those transferred onto our office.

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