Report on the development of budgetary management of municipalities, voluntary associations of municipalities and regions as at 30 November 2022
The local governments in November 2022 achieved very good results despite facing the negative economic effects of the Russian invasion of Ukraine and high inflation. The management of territorial budgets recorded a slight year-on-year drop, but it exceeded the results of the management from the period of the second wave of the COVID-19 pandemic, as well as from the period before the pandemic. The Russian invasion of Ukraine increases the expenses of the local governments in connection with the conflict, mainly in the form of expenses for aid to Ukraine and its population, which are largely compensated from the state budget. The current high inflation increases the expenses of the local governments (e.g. increase in price of energy), but at the same time it contributes to the increase of the national collection of tax revenues (mainly due to the increase in the collection of value added tax), and therefore also the tax revenues of the local governments. Despite persistent inflation, investment activities of the local governments continue to grow in November.
Local Governments
Municipalities, regions and voluntary associations of municipalities in November 2022 operated with a surplus budget balance of CZK 46.3 billion. Adjusted budget balance amounted to CZK 38.6 billion. The economic result decreased against last year (by 21.1%, i.e. CZK 12.4 billion), but in comparison with year 2020 (the period of the second wave of the COVID-19 pandemic), the balance even improved by 49.4%, i.e. CZK 15.3 billion. Even in comparison with the results of the pre-pandemic period, i.e. November 2019, the economic result increased by 12.4%, i.e. CZK 5.1 billion (see chart no. 1).
The total revenues of local budgets reached CZK 669.5 billion in November 2022 and increased by 8%, i.e. by CZK 49.8 billion. Adjusted total revenues1 amounted to CZK 500.2 billion. Their own revenues amounted to CZK 406 billion and increased by 17% in comparison with last year, i.e. by CZK 59.1 billion. This growth was caused by a rise in tax revenues, which reached CZK 344.2 billion and increased by 16.7%, i.e. by CZK 49.3 billion.
The total consolidated expenditures of local budgets in November 2022 amounted to CZK 623.2 billion and increased by 11.1% in comparison with last year, i.e. by CZK 62.2 billion. Adjusted total expenditures1 amounted to CZK 461.6 billion. The current expenditures in November this year amounted to CZK 497 billion (CZK +42.4 billion) and the capital expenditures reached CZK 126.2 billion (CZK +19.8 billion). In November 2022 local governments realized consolidated expenditures for aid to Ukraine in the amount of CZK 4.1 billion (mainly the capital city of Prague).
Regions
The regions in November 2022 operated with a surplus budget of CZK 16.7 billion. The budget balance decreased compared to last year, but exceeded the economic results from the period of the second wave of the pandemic. Adjusted budget balance1 amounted to CZK 9 billion. How described in chart no. 2 the total revenues of the regions in November this year amounted to CZK 286.7 billion and increased by 2.9%, i.e. by CZK 8.2 billion. Adjusted total revenues1 reached CZK 138.4 billion. Their own income reached CZK 90.8 billion (CZK +13 billion). Own revenues accounted for 65.6% of total adjusted revenues. Regions are less self-sufficient than municipalities, as they show a relatively higher dependence on received transfers, which is essential due to their position and function. Improvement in own income of regions was caused the growth of tax revenues, which increased by 15.9%, i.e. by CZK 11.2 billion, to CZK 81.4 billion.
The total expenditures of the regions as at 30 November 2022 amounted to CZK 270 billion and increased by 6.5% compared to last year, i.e. by CZK 16.6 billion. Adjusted total expenditures1 reached CZK 129.5 billion. This growth was caused by an increase in current expenses, which increased by 6.7% compared to last year, i.e.by CZK 15 billion, to CZK 239.6 billion. The transfers that the regions transferred to contributory and similar organizations reached CZK 178.6 billion and represent 74.5% of total current expenses. Most of these funds were intended for direct education costs.
At the end of November, capital expenditure also increased by 5.6%, i.e. by CZK 1.6 billion, to CZK 30.4 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 14.3%. The regions realized expenses for aid to Ukraine in the amount of CZK 2.9 billion.
Municipalities
The municipalities in November 2022 reported a positive budget balance of CZK 29.6 billion. The balance fell in comparison with last year's balance by 11.3%, i.e. by CZK 3.8 billion. On the other side the balance exceeded the economic results from the period before the pandemic by 10.1%, i.e. by CZK 2.7 billion (see chart no. 3). Adjusted budget balance1 amounted to CZK 29.5 billion. In November of this year, the capital city operate with a surplus of CZK 17.2 billion, with total revenues of CZK 108 billion and expenses in the amount of CZK 90.7 billion. Without the capital city, the total consolidated revenues of the municipalities at the end of November amounted to CZK 282 billion, expenses to CZK 269.8 billion, and the budget ended in a surplus of CZK 12.4 billion.
The total revenues of municipalities at the end of November this year reached CZK 390 billion and increased by 12.6%, i.e. by CZK 43.6 billion compared to November 2021. Adjusted total revenues1 reached CZK 369 billion. Their own income amounted to CZK 314 billion (growth of 17.4%, i.e. by CZK 46.5 billion) and represented 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. Improvement in own income of regions was caused by the growth of tax revenues, which increased by 17%, i.e. by CZK 38.1 billion to CZK 262.7 billion and thus reached their highest level.
The total expenditures of municipalities in November 2022 amounted to CZK 360.5 billion and increased by 15.1%, i.e.by CZK 47.4 billion compared to last year. Adjusted total expenditures1 reached CZK 339.4 billion. The growth was mainly caused by an increase in current expenses, which increased by 12.4% compared to last year, i.e. by CZK 29.1 billion, to CZK 264.6 billion. The capital expenditures by municipalities also increased against last year (specifically by 23.6%, i.e. by CZK 18.3 billion) and reached CZK 95.9 billion. Municipalities even invested more than before the outbreak of the pandemic, by 25.5%. The municipalities realized expenses for aid to Ukraine in the amount of CZK 1.3 billion.
1 The total revenues and expenditures without direct education costs and subsidies for private schools, which regions and capital city of Prague directly allocated to the relevant schools and school facilities.