Financial autonomy of local self-government: analysis and assessing

Размещено на http://www.allbest.ru/

Financial autonomy of local self-government: analysis and assessing

Liudmyla Riabushka, Candidate of Economic Sciences, Associate Professor, Associate Professor at the Department; Nadiia Dekhtiar, Candidate of Economic Sciences, Associate Professor, Associate Professor at the Department of Financial Technologies and Entrepreneurship, Vladyslav Fedchenko, Student of Higher Education, Sumy State University

The article considers issues related to ensuring the financial autonomy of local self-government. The purpose of this study is to systematize the theoretical foundations and develop practical recommendations for assessing the financial autonomy of local self-government and the directions of its strengthening in the current conditions of sustainable development. The study of the theoretical foundations of local self-government is deepened, namely, the role of the financial basis of local self-government in achieving the autonomy of local budgets is determined, the features of medium-term planning of local budgets are revealed.

A model for assessing the financial autonomy of local self-government is proposed, which takes into account the indicators of budgetary autonomy in terms of revenues, budgetary autonomy in terms of expenditures, budgetary autonomy in terms of transfers and tax autonomy. In fulfilling the goal of this study, we used various methods of scientific research: monographic method in the process of studying the essence of financial autonomy; analytical method in the analysis of revenues and expenditures of the Sumy region budget; statistical method for calculating the coefficients of financial autonomy. The article analyses and evaluates the indicators of financial autonomy on the example of the budget of Sumy region for the period of 2018-2022. The strengths and weaknesses of the financial autonomy of the budget of Sumy region are substantiated. Risks and opportunities in strengthening the financial autonomy of local self-government of the Sumy region budget are identified on the basis of SWOT analysis. Among the vectors for strengthening, the financial autonomy of local self-government is the intensification of the processes of interaction between local development stakeholders. Type of article is empirical.

Key words: financial autonomy; regional budget; local self-government; analysis; assessing; sustainable development.

Фінансова автономія місцевого самоврядування: аналіз та оцінка

Рябушка Л.Б., Кандидат економічних наук, доцент, доцент кафедри; Дехтяр Н.А., Кандидат економічних наук, доцент, доцент кафедри фінансових технологій і підприємництва, Федченко В.О., Здобувач вищої освіти, Сумський державний університет

У статті розглянуто питання, пов'язані із забезпеченням фінансової автономії місцевого самоврядування. Метою дослідження є систематизація теоретичних засад та розробка практичних рекомендацій щодо оцінки фінансової автономії місцевого самоврядування та напрямів її зміцнення в сучасних умовах сталого розвитку. Поглиблено дослідження теоретичних основ місцевого самоврядування, а саме: визначено роль фінансової основи місцевого самоврядування в досягненні автономії місцевих бюджетів, розкрито особливості середньострокового планування місцевих бюджетів. Запропоновано модель оцінки фінансової автономії місцевого самоврядування, яка враховує показники бюджетної автономії за доходами, бюджетної автономії за видатками, бюджетної автономії за трансфертами та податкової автономії. При виконанні поставленої мети дослідження використано різні методи наукового пошуку: монографічний метод у процесі вивчення сутності фінансової автономії; аналітичний метод при аналізі доходів та видатків бюджету Сумської області; статистичний метод для розрахунку коефіцієнтів фінансової автономії.

У статті проаналізовано та оцінено показники фінансової автономії на прикладі бюджету Сумської області за період 20182022 років. Обґрунтовано сильні та слабкі сторони фінансової автономії бюджету Сумської області. На основі SWOT-аналізу визначено ризики та можливості у зміцненні фінансової автономії місцевого самоврядування бюджету Сумської області. Серед векторів зміцнення фінансової автономії місцевого самоврядування визначено активізацію процесів взаємодії між суб'єктами місцевого розвитку. Тип статті - емпірична.

Ключові слова: фінансова автономія; регіональний бюджет; місцеве самоврядування; аналіз; оцінка; сталий розвиток.

Introduction

The effective operation of local self-government bodies is linked to the processes of financial decentralization, the current needs of society, and the priorities of state development. It is necessary to achieve a state where communities solve their own issues through their own financial autonomy, rather than through financial equalization from the central government. It is local self-government that is the basic element in the system of public administration between various authorities, the population, economic entities, legislative and executive institutions, and local development stakeholders. Therefore, strengthening the financial basis of local self-government in order to achieve financial autonomy of communities is a key to building a democratic country and a way to exercise the constitutional rights of citizens.

Literature review

The systematization of theories of the origin of local self-government is presented in study [1]. The author systematizes the main theories of the origin of local self-government: Anglo-Saxon, which is being developed in England, Australia, Ireland, the USA, Canada; Scandinavian, represented by Denmark, Sweden, Norway; Continental, which is being implemented in Hungary, France, Bulgaria, and Germany; Iberian, which is represented by the following countries: Latin America, Spain, Portugal; post-Soviet, which exists in China, Vietnam, and Cuba.

The study of the history of the formation of local self-government on the basis of the institutional concept of management was reflected in paper[2]. Scientists note that the term «institute» is interdisciplinary and unites such scientific fields as - jurisprudence (a set of sub-branches of law, legislative norms, institutions for regulating social relations); - political science (the essence, functions, forms, methods of functioning of the political system, society and government); - sociology (determination of sustainable social relations and organizational forms in society, regulation of social behavior of subjects, customs, traditions).

The development of local self-government on the basis of the fiscal decentralization was studied by scholars [3, 4]. The authors [3] systematized the types of decentralization, risks and opportunities for local self-government under the effect of decentralization. The authors [4] analyzed the essence, content and purpose of the decentralization reform in Ukraine, identify the main objectives of the reform and its advantages.

Practical aspects of financial support for local self-government institutions are presented in scientific studies [5]. The study proposes a scientific and methodological approach to assessing the financial support of local governments based on the construction of an integral indicator for assessing and analyzing the financial support of local governments. To form a model for assessing the financial autonomy of local self-government, it is necessary to take into account the indicators proposed in the paper. However, it is advisable to supplement the methodology with a SWOT analysis and not to calculate an integral indicator.

Manuela Soller-Winkler, as an expert on legal and practical issues of local self-government, focuses on the competence of communities to make autonomous decisions on the distribution of finances and take responsibility for it. [6], who have studied various aspects of financial autonomy of local development, deserve attention. The authoritative collection edited by Oates W. reveals the impact of taxes, government subsidies on income redistribution in the practical issues of fiscal decentralization in developing countries [7].

Fig. 1. Features of local self-government as an institution of power: [6, 8]

Taking into account existing scientific research, practical recommendations of experts, legislative innovations, and the current challenges faced by local authorities and communities in the context of martial law, scientific and practical approaches to identifying the financial basis of local selfgovernment, and assessing the indicators of financial autonomy of local budgets to meet the social needs of the population and economic development of communities need to be further developed.

Aims and objectives

The aim of this study is to systematize the theoretical foundations and develop practical recommendations for analyzing and assessing the financial autonomy of local self-government. Identification of directions for strengthening the financial autonomy of local self-government in the current conditions of sustainable development.

Data and methods

General methods of scientific cognition were used in writing the article: monographic method in the process of studying the essence of financial autonomy; analytical method in the analysis of revenues and expenditures of the Sumy region budget; statistical method for calculating the coefficients of financial autonomy; SWOT analysis to identify the strengths and weaknesses of the Sumy region's budget execution, risks and opportunities for ensuring the financial autonomy of local selfgovernment.

Results

The effectiveness of local self-government bodies is linked to the processes of decentralization of power, current challenges in society, and sustainable development priorities. Usually, in the specialized literature, the term «institution» is understood as a social structure that has forms of organization (formal/informal), traditions of interaction, and historical stages of development. In accordance with the general concept of management, the term «institution» is interdisciplinary and unites such scientific fields as [1, 2, 6]: jurisprudence (a set of sub-branches of law, legislative norms, institutions for regulating social relations); political science (essence, functions, forms, methods of functioning of the political system, society and government); sociology (determination of sustainable social relations and organizational forms in society, regulation of social behavior of subjects, customs, traditions). The analysis of the scientific literature allowed us to identify the main institutional features of local self-government bodies (Fig. 1).

Modern principles of community development are declared in the European Charter of Local SelfGovernment (ECLS). Ukraine ratified the ECLS in 1997, and in 2014 the government approved the Concept of Local Self-Government Reform.... The fact is that there are 30 approved principles of the ECLS, among which Ukraine has chosen those that more clearly identify its model of local self-government. The process of reforming local self-government bodies in terms of their functions, powers, areas of responsibility, and vectors of local self-government development continues to this day in Ukraine. Figure 2 shows the stages of the local government reform process that have taken place in Ukraine.

Fig. 2. The process of reforming local government in Ukraine: [8 -10]

It should be noted that in all regions of Ukraine, governance has been transferred to civil-military administrations. At the same time, it should be understood that the role of financial autonomy of local self-government bodies is not only to determine the areas of funding for programs and activities, but also «...in the competence of communities to make decisions independently, autonomously to exercise their own and delegated powers» [6]. It should be noted that there is no legislatively enshrined understanding of the term «financial autonomy» in the Ukrainian domestic legal field. However, taking into account the work of both domestic and foreign researchers, the concept of «financial autonomy» will be interpreted as the ability of local governments to independently ensure the exercise of their own and delegated powers in forming the necessary financial basis of the community sufficient to meet the social needs of its residents and economic entities in the context of sustainable local development.

The actual provision of financial autonomy requires: first, determining the priority areas of community development based on the strategy; second, ensuring a sufficient level of financial capacity of local budgets, which affects the socioeconomic development of the community; third, developing a unified methodology that will allow for comprehensive monitoring and evaluation of the real level of financial autonomy of local self-government in ensuring social standards of citizens in the context of sustainable local development. Unfortunately, today, local selfgovernment bodies in Ukraine are affected by excessive corruption, which leads to inadequate conditions for the performance of their functions and powers on the basis of transparent use of economic, material, financial and social resources of the community. Based on the studies of foreign experts on medium-term budget frameworks in developed economies [11], the development of this process in Ukraine for community budget planning to ensure the financial autonomy of local self-government should have the following stages of implementation (Fig. 3).

Fig. 3. Features medium-term budget frameworks in community

Therefore, in view of the above, ensuring the financial autonomy of local self-government should have the following substantive components to form the author's methodology for assessing the financial autonomy of local self-government bodies (Fig. 4).

Fig. 4. Substantive characteristics of the financial autonomy of local governments

The system of budget planning of the community is implemented in accordance with the model of medium-term budget frameworks. Therefore, important areas of harmonization, economic programming and result-oriented budgeting include consideration of the following factors: - personal income tax, horizontal equalization of local budget revenues, and the distribution of educational subventions.

To test the proposed model for assessing the financial autonomy of the local budget, the performance indicators of the regional budgetin the formation of region budget revenues, own revenues are equal to the amount of assigned revenues. Social expenditures include funding for healthcare, spiritual and physical development, education, social protection and social security. We took these and other indicators into account when assessing the financial autonomy of the budget in Sumy region.

Thus, the financial autonomy of the budget in Sumy region will be assessed by the calculated indicators in the context of budget autonomy in terms of revenues, budget autonomy in terms of expenditures, budget autonomy in terms of transfers, and tax autonomy.

Based on the results of the calculation of the indicators, the strengths and weaknesses of the financial autonomy of the Sumy Oblast budget were identified using the SWOT analysis. Table 2 summarises the strengths in ensuring the financial autonomy of Sumy Region. The values are presented as an arithmetic mean for 5 years or as temporal indicators.

Among the strengths of the regional budget of Sumy region in recent years, first of all, it should be noted the growth of tax autonomy, which increased 18 times, tax independence increased 4 times during the analysed period, local taxes also had a significant increase in the structure of revenues, which is confirmed by both calculated indicators and statistical data collected from the Transparent Budget web portal and Budgets of territorial communities of Ukraine [12, 13]. Among the weaknesses of the budget in Sumy region, it should be noted that the indicators of the group of budget autonomy in terms of revenues and budget autonomy in terms of expenditures (Table 3).

The budget should increase its potential own revenues from operations with non-tax revenues, capital transactions and other revenues that ensure the sustainable development of the of Sumy region for the period of 2018-2022 are considered as an example.

The initial statistical data are presented in Table 1.

The system of indicators for assessing the financial autonomy of local governments including: own budget revenues are tax and nontax revenues and capital transactions. Given that the Tax on personal income is a 15% share of the regional budget, it is proposed that only the actual statistical values of this tax in the regional budget revenues be taken into account when calculating the indicator «Local taxes and duties». In addition, region's communities. Unfortunately, budget performance, which reflects the ratio of total budget revenues to the population, decreased by 61.78%, and as a result, budget security (the ratio of total expenditures to the population of the region) also decreased by 67.55%. The indicator that ensures the autonomy of expenditures does not even reach the lower limit of 40%. In turn, weaknesses can cause additional threats and risks to community development, especially under martial law. On the other hand, strengths are the basis for the development and realization of community opportunities, even under martial law. Threats and opportunities in the development of strengthening the financial autonomy in Sumy Region are presented in Figure 5.

Table 1. Initial statistical data for calculating the indicators of financial autonomy in Sumy region: [12, 13]

Fig. 5. Systematization of threats and opportunities for the development of financial autonomy in Sumy region

Table 2. Strengths of the financial autonomy in the Sumy Region

Table 3. Weaknesses of the financial autonomy in the Sumy Region

Discussion and conclusions

Reducing the dependence on equalization grants in budget revenues directs local governments to take real actions to coordinate with stakeholders in local development. Therefore, we strongly believe that strengthening the financial autonomy of the community is linked to an effective process of interaction between local development stakeholders, especially in the context of martial law: community residents, local businesses, relocated businesses, internally displaced persons, regional authorities and local activists. Thus, strengthening the financial autonomy of local budgets is a multidimensional task, the successful implementation of which is possible with the participation of all stakeholders in sustainable local development and the priorities of the state.

self-government budget financial

References

1. Voloshyna Ya. (2018). Mistseve samovriaduvannia: teoriia pokhodzhennia ta yikh realizatsiia [Local SelfGovernment: Theory of Origin and Implementation]. Pidpryiemnytstvo, hospodarstvo i pravo - Entrepreneurship, economy and law, 3, 117-122. [in Ukrainian].

2. Borshch H.A. (2017). Resursne zabezpechennia obiednanoi terytorialnoi hromady ta yii marketynh [Resource provision of the united territorial community and its marketing]. In H.A. Borshch (Ed.), Resursne zabezpechennia obiednanoi terytorialnoi hromady ta yii marketynh -Resource provision of the united territorial community and its marketing (pp. 107). Kyiv: Instytut Hromadianskoho Suspilstva. [in Ukrainian].

3. Bondaruk T., Vinnytska O., Dubyna M. (2018). Teoretychni aspekty biudzhetnoi detsentralizatsii v konteksti reform derzhavnoho upravlinnia v Ukraini [Theoretical Aspects of Budget Decentralization in the Context of Public Administration Reforms in Ukraine]. Svit finansiv - World of finance, 2(55), 7-19. [in Ukrainian].

4. Pavlova E., Nahaichuk Yu. (2020). Reforma detsentralyzatsyy v Ukraini [Decentralization reform In Ukrajine]. Ekonomichnyi chasopys Skhidnoievropeiskoho natsionalnoho universytetu imeni Lesi Ukrainky - Economic Journal of Lesya Ukrainka Volyn National University, 3(23), 23-31. [in Ukrainian].

5. Riabushka L.B., Mershchii B.Ye. (2015). Finansove zabezpechennia instytutiv mistsevoho samovriaduvannia [Financial support for local government institutions]. Visnyk Sumskoho derzhavnoho universytetu - Visnyk of Sumy State University, 3, 29-38. [in Ukrainian].

6. Soller-Winkler M. (03.06.2021). Finansova avtonomiia - osnova mistsevoho samovriaduvannia [Financial autonomy: At the heart of local government]. decentralization.ua: vebsait. [in Ukrainian].

7. Oates, W. (2002). Assignment of Responsibilities and Fiscal Federalism. forumfed.org:

8. Pro mistseve samovriaduvannia v Ukraini: Zakon Ukrainy vid 21 trav. 1997 roku № 280Z97- VR [On Local Self-Government in Ukraine: Law of Ukraine from May 21 1997, № 280Z97-VR]. [in Ukrainian].

9. Pro viiskovo-tsyvilni administratsii: Zakon Ukrainy vid 3 liut. 2015 roku № 141-VIII [On civil-military administrations: Law of Ukraine of February 03 2015, No. 141-VIII]. [in Ukrainian].

10. Pro pravovyi rezhym voiennoho stanu: Zakonu Ukrainy vid 12 trav. 2015 roku № 389-VIII [On the legal regime of martial law: Law of Ukraine of May 12, 2015, No. 389-VIII]. [in Ukrainian].

11. Jason, H. (2013). Chapter 4: Medium-Term Budget Frameworks In Advanced Economies: Objectives, Design, And Performance. In Public Financial Management and Its Emerging Architecture. USA: International Monetary Fund.

12. «Dashbord «Biudzhety terytorialnykh hromad Ukrainy» [«Dashboard «Budgets of territorial communities of Ukraine»]. decentralization.ua: vebsait [in Ukrainian].

13. «Derzhavnyi veb-portal biudzhetu dlia hromadian» [«State budget web portal for citizens»]. openbudget. gov.ua: vebsait [in Ukrainian].

Размещено на Allbest.ru