Report on the development of budgetary management of municipalities, voluntary associations of municipalities and regions as at 31 August 2023
Territorial self-governing units in August 2023 managed with a significant surplus. The very good financial condition of the territorial self-governing is not threatened by the current stagnation of the domestic economy or the ever-higher rate of inflation. This is also proved by the economic results, which in August reached the highest positive values since 2013i. This was mainly due to the management of municipalities (especially the capital city of Prague), which made up more than three quarters of the total balance. The historically highest balance of territorial budgets is mainly due to the enhanced collection of tax revenues and a higher volume of received transfers.
Inflation, which in August increased by 8.5% year-on-year and slowed down, contribute to a significant increase in tax revenues of the territorial self-governing, but at the same time it also increases the expenses of regions and municipalities (e.g. rising prices for construction works, higher energy prices). In the third quarter of this year, there is an expected slowdown in price growth and a gradual return to the limit of the inflation target of the Czech National Bank. As presented by the management results of regional budgets, regions and municipalities continue in a high level of investing, because they are aware of the negative effects of inflation, which, among others, devalues savings in current bank accounts. While inflation last year led to a decrease in the planned investment activities of the territorial self-governing, this year it seems that the impact on investments will not be so significant.
Management of Local Governments
In August 2023 municipalities, regions and voluntary associations of municipalities operated with a budget surplus of CZK 60.4 billion and thus achieved the historically highest positive budget balance. The economic result even doubled compared to last year (see chart no. 1). If we reduce the budget balance by the direct costs of education and subsidies for private schools1, the economic surplus reached CZK 60 billion and increased by 51.4% year-on-year, i.e. by CZK 20.4 billion. The territorial budgets thus confirm that the current stagflation has only a marginal negative impact on their economic results.
The total revenues of local budgets reached CZK 559.7 billion in August 2023 and increased by 15.7%, i.e. by CZK 75.8 billion. Adjusted total revenues1 amounted to CZK 428.7 billion. Their own revenues amounted to CZK 345.1 billion and increased by 15.5% in comparison with last year, i.e. by CZK 46.3 billion. The independence of territorial budgets from the state budget, which represents the share of own revenues in total adjusted revenues, was 80.5% and increased year-on-year. This growth was caused by a rise in tax revenues, which reached CZK 296 billion and increased by 16.3%, i.e. by CZK 41.6 billion. Transfers received by territorial budgets increased year-on-year by 15.9%, i.e. by CZK 29.5 billion, to CZK 214.7 billion. This was mainly due to received non-investment transfers, which increased by 15.7% year-on-year, i.e. by CZK 26.4 billion, to CZK 195.1 billion. Investment received transfers reach CZK 19.6 billion and year-on-year increased by 18.7%, i.e. by CZK 3.1 billion. On the contrary, the year-on-year decrease occurred only on the side of capital income, which fell by 35.4%, i.e. by CZK 2.5 billion, to CZK 4.5 billion.
The total consolidated expenditures of local budgets in August 2023 amounted to CZK 499.3 billion and increased by 12.5% in comparison with last year, i.e. by CZK 55.4 billion. Adjusted total expenditures1 amounted to CZK 368.7 billion. There is year-on-year growth in current expenses, which at the end of August recorded an increase of 12.5%, i.e. by CZK 45.5 billion, and reached CZK 410.6 billion. In terms of sectors, current expenditures were directed mainly to the education sector (due to direct costs of education and subsidies to private schools). The capital expenditures in the middle of this year increased by 12.6%, i.e. by CZK 9.9 billion, to CZK 88.7 billion. In 2023 local governments realized consolidated expenditures for aid to Ukraine in the amount of CZK 5.7 billion (mainly the capital city of Prague).
Management of regions
In August 2023 the regions reported an economic surplus of CZK 8.1 billion. Their budget balance thus increased year-on-year by 45.2%, i.e. by CZK 2.5 billion (see chart no. 2). If we reduce the budget balance by the direct costs of education and subsidies for private schools1, the economic surplus reached CZK 7.8 billion and increased by 47.2%, i.e. by CZK 2.5 billion.
The total revenues of the regions in August amounted to CZK 239.9 billion and increased by 17.1%, i.e. by CZK 35 billion. Adjusted total revenues1 reached CZK 125.2 billion. Their own income reached CZK 76.6 billion (year-on-year increase by 16.3%, i.e. by CZK 10.7 billion) and represent most of total adjusted revenues. Improvement of region´s own income was caused by the growth of tax revenues, which increased by 17.3%, i.e. by CZK 10.2 billion, to CZK 69.4 billion.
The total expenditures of the regions in August 2023 amounted to CZK 231.7 billion and increased by 16.3% compared to last year, i.e. by CZK 32.5 billion. Adjusted total expenditures1 reached CZK 117.5 billion. This growth was mainly caused by an increase in current expenses, which increased by 12% compared to last year, i.e.by CZK 21.8 billion, to CZK 202.8 billion. The major part of the total current expenses (specifically 73.7%) consists of transfers that the regions transferred to contributory and similar organizations, in the amount of CZK 149.4 billion. Most of these funds were intended for direct education costs. In August 2023 capital expenditures also increased by 58.5 %, i.e. by CZK 28.9 billion, to CZK 28.9 billion. The regions are therefore continuing the investment trend, which is, in view of the still high inflation that devalues savings in current bank accounts, right approach. In 2023 the regions realized expenditures for aid to Ukraine and its population in the amount of CZK 4.7 billion.
The balance on the bank accounts and the debt of the regions is available for June 20232 from: Report on the development of budgetary management of municipalities, voluntary associations of municipalities and regions as at 30 June 2023.
Management of Municipalities
At the end of August, municipalities operated with the highest budget balance surplus since 2013, amounting to CZK 51.7 billion. The economic result increased year-on-year by 50.9%, i.e. by CZK 17.4 billion (see chart no. 6). The budget of the city of Prague ended up with a surplus of CZK 21.2 billion and made up almost half of the total municipal surplus, with total revenues of CZK 92.6 billion and expenditures of CZK 71.4 billion. Without the capital city, the total consolidated revenues of the municipalities amounted to CZK 234.8 billion, expenses to CZK 204.3 billion, and the result of budget management ended in a surplus of CZK 30.5 billion.
The total revenues of municipalities in August 2023 reached CZK 327.4 billion and increased by 15%, i.e. by CZK 42.7 billion compared to 2022. Adjusted total revenues1 reached CZK 311 billion. Their own income amounted to CZK 267.6 billion (year-on-year growth of 15.3%, i.e. by CZK 35.4 billion) and represented the majority of total adjusted revenues. Increase in own income of municipalities was caused mainly by the growth of tax revenues, which increased by 16.1%, i.e. by CZK 31.4 billion to CZK 226.6 billion.
The total expenditures of municipalities in August 2023 amounted to CZK 275.7 billion and increased by 10.1 %, i.e.by CZK 25.2 billion compared to last year. Adjusted total expenditures1 reached CZK 259.3 billion. The year-on-year growth of total expenses was caused by an increase in current expenses, which increased by 13.3% compared to last year, i.e. by CZK 25.3 billion, to CZK 215.3 billion. On the contrary, the capital expenditures of municipalities in August this year decreased slightly year-on-year, namely by 0.1%, i.e. by CZK 0.08 billion, to CZK 60.4 billion. In 2023, the municipalities realized expenditures for aid to Ukraine and its population in the amount of CZK 0.9 billion.
The balance on the bank accounts and the debt of the municipalities is available for June 20232 from: Report on the development of budgetary management of municipalities, voluntary associations of municipalities and regions as at 30 June 2023.
Voluntary associations of municipalities
In August 2023, voluntary associations of municipalities reported total revenues of CZK 3.3 billion (year-on-year increase of 2.7%, i.e. CZK 0.1 billion) and total expenses of CZK 2.9 billion (year-on-year decrease of 7.5%, i.e. by CZK 0.2 billion). The budget balance ended in a surplus of CZK 0.4 billion (year-on-year growth of 275.4%, i.e. by CZK 0.3 billion).
1 The direct costs of education and subsidies for private schools represent funds from the state budget, which are distributed and directly allocated to the schools and school facilities by regions and Prague. It is therefore a non-investment flow transfer and the region and Prague cannot dispose of these funds in any way. For this reason, the total revenues and expenses of the regions and Prague are reduced so not to distort their results of management.
2 Bank account balances and debt are available from the financial statements, which are submitted to the Central State Accounting Information System on a quarterly basis.
i The comparison period is always August of the relevant year.