Report on the development of budgetary management of municipalities, voluntary associations of municipalities and regions as at 30 September 2022
The prosperity of local governments still continue in September of this year, despite the threat of a deep recession.They are in good financial condition regardless of the war in Ukraine and the inflation, which gave rise to warnings about the strains these budgets would face as the actual situation cut short important sources of revenue while creating new spending and needs. In spite of these negative situations the balance of local budgets improved in comparison with September 2021, as a result of reduction of restrictive implementations against the epidemic and mostly strengthened tax revenue.
Municipalities, regions and voluntary associations of municipalities in September 2022 operate with a surplus budget balance of CZK 60.3 billion. The economic result increased against last year (by 34.8%, i.e. CZK 15.6 billion), but in comparison with year 2020 (the period of the first wave of the COVID-19 pandemic), the balance even improved by 143.7%, i.e. CZK 35.6 billion. Even in comparison with the results with the period before the pandemic, i.e. September 2019, the economic result increased by 43.6%, i.e. CZK 18.3 billion (see chart no. 1).
The total revenues of local budgets reached CZK 563 billion in September 2022 and increased by 9.6%, i.e. by CZK 49.1 billion. Their own revenues amounted to CZK 338.6 billion and increased by 17.7% in comparison with last year, i.e. by CZK 51 billion. This growth was caused by an increase in tax revenues, which reached CZK 288 billion and increased by 17%, i.e. by CZK 41.9 billion.
The total consolidated expenditures of local budgets in September 2022 amounted to CZK 502.7 billion and increased by 7.2% in comparison with last year, i.e. by CZK 33.6 billion. The current expenditures in September this year amounted to CZK 408.5 billion (CZK +18.7 billion) and the capital expenditures reached CZK 94.3 billion (CZK +14.8 billion). In September 2022 local governments realized consolidated expenditures for aid to Ukraine in the amount of CZK 3.1 billion (mainly the capital city of Prague).
Regions
As at 30 September 2022 the regions operate with a surplus budget of CZK 20.3 billion. The budget balance increased compared to last year, even exceeded the economic results from the period before the pandemic. How described in chart no. 2 the total revenues of the regions in September this year amounted to CZK 245.9 billion and increased by 6%, i.e. by CZK 14 billion. Their own income also reached CZK 75.2 billion (CZK +11.4 billion). Own revenues improved due to the growth of tax revenues, which increased by 16%, i.e. by CZK 9.3 billion, to CZK 67.5 billion.
The total expenditures of the regions as at 30 September 2022 amounted to CZK 225.5 billion and increased only marginally by 0.5% compared to last year, i.e. by CZK 1.1 billion. This growth was caused by an increase in current expenses, which increased by 0.5% compared to last year, i.e.by CZK 1 billion, to CZK 203.8 billion. The transfers that the regions transferred to contributory and similar organizations reached CZK 153.7 billion and represent 75.4% of total current expenses. Most of these funds were intended for direct education costs.
At the end of September, capital expenditure also increased by 0.6%, i.e. by CZK 0.1 billion, to CZK 21.7 billion, despite restrictions of investment transfers or a significant increase in the price of construction materials. The increased investment activity corresponds to the fact that regions mainly invest before the end of the budget year. The regions even invested more than before the outbreak of the pandemic, by 11.7%. The regions realized expenses for aid to Ukraine in the amount of CZK 2 billion.
The debt of the regions (including contributory organizations) as of September 2022 amounted to CZK 23.6 billion and in comparison with last year, it decreased by 5%, i.e. by CZK 1.2 billion. The increase in regional debt after 2019 corresponds to the drop in basic interest rates that central bank set in response to the COVID-19 pandemic in March 2020. In times of low interest rates, loans have become a valuable option to finance investments. The debt decreased slightly year-on-year in September of this year, probably due to the growth of the base interest rate.
The amount of regional deposits in bank accounts (including contributory organizations) amounted to CZK 86.3 billion. Year-on-year deposits at bank accounts increased by 34.6%, i.e. by CZK 22.2 billion. As can be seen from graph no. 3, the balances on the bank accounts of the regions are growing dynamically during the monitored period (except for the years 2015 and 2020). In general, the excessive accumulation of funds deposited in bank accounts is currently considered not totally desirable, as these deposits lose their value due to inflation, especially at the present time, when inflation is the highest in the last 30 years.
Bank accounts (including contributory organizations)
Debt (including contributory organizations)
Municipalities
As at 31 September 2022, the municipalities reported a positive budget balance of CZK 39.9 billion, which represents the second best economic result since 2013. The balance exceeded last year's balance by 8.1%, i.e. by CZK 3 billion and even by 53.9% compared to 2019, i.e. by CZK 9.4 billion (see chart no. 4). In September of this year, the capital city operate with a surplus of CZK 20 billion, with total revenues of CZK 90.3 billion and expenses in the amount of CZK 70.3 billion. Without the capital city, the total consolidated revenues of the municipalities at the end of September amounted to CZK 232.9 billion, expenses to CZK 212.9 billion, and the budget ended in a surplus of CZK 19.9 billion.
The total revenues of municipalities at the end of September this year reached CZK 323.1 billion and increased by 12.7%, i.e. by CZK 36.3 billion compared to September 2021. Their own income amounted to CZK 262.5 billion (growth of 18%, i.e. by CZK 40 billion) and represent the majority of total adjusted income. In comparison to the regions, the municipalities are relatively more self-sufficient and thus do not show significant dependence on received transfers. The own revenues improved due to the growth of tax revenues, which increased by 17.4%, i.e. by CZK 32.6 billion to CZK 220.5 billion and thus reached their highest level.
The total expenditures of municipalities in September 2022 amounted to CZK 283.3 billion and increased by 13.3%, i.e.by CZK 33.3 billion compared to last year. The growth was mainly caused by an increase in current expenses, which increased by 9.7% compared to last year, i.e. by CZK 18.7 billion, to CZK 210.8 billion. The capital expenditures by municipalities also increased against last year (specifically by 25.3%, i.e. by CZK 14.7 billion) and reached CZK 72.5 billion. Municipalities even invested more than before the outbreak of the pandemic, by 27.1%. The municipalities realized expenses for aid to Ukraine in the amount of CZK 1.1 billion.
Municipal debt as of September 2022 amounted to CZK 70.4 billion and slightly increased by 1.2% compared to last year, i.e. by CZK 0.9 billion. This increase fully corresponds to the development of the base interest rate, which has been increasing since 2021. On the contrary, the slight increase in municipal debt in 2020 does not fully correspond to the steady decrease in base interest rates, which made loans significantly cheaper.
The amount of deposits of municipalities in bank accounts (including contributory organizations) amounted to CZK 337.2 billion (+12.1%, i.e. by CZK 36.5 billion). As can be seen from graph No. 5, deposits have been growing dynamically in recent years.
Bank accounts (including contributory organizations)
Debt (including contributory organizations)