Report on the development of budgetary management of municipalities, voluntary associations of municipalities and regions as at 31 October 2023
The economy of territorial self-governing units records record surpluses even at the beginning of the last quarter of 2023. This year, for the fourth time in a row, regions and municipalities reported the highest positive budget balance in history, thus confirm their excellent financial condition. Among the most important factors that contribute to the fact that the territorial self-governing units have reached historically high values of economic surpluses since the middle of the year, especially include strengthened collection of tax revenues and a higher volume of received transfers (primarily non-investment transfers).
Inflation, which accelerated to 8.5% year-on-year in October, still leads to the growth of local budgets' own income and thus also to increase of their self-sufficiency. This is mainly due to the growth in the collection of tax revenues, especially the collection of corporate tax due to the extraordinary and temporary taxation of energy companies in particular. At the beginning of the fourth quarter, the tax revenues of the territorial budgets thus develop according with the prediction of the Ministry of Finance, which expects their increasing trend this year.
Management of Local Governments
In October 2023 municipalities, regions and voluntary associations of municipalities operated with the highest budget surplus in history of CZK 63.4 billion. Even in October, territorial budgets continued the trend of generating record surpluses. As can be seen from Chart No. 1, the economic result almost doubled compared to October last year (year-on-year growth of 73.5%, i.e. by CZK 26.9 billion). If we reduce the budget balance by the direct costs of education and subsidies for private schools1, the economic surplus reached CZK 62.9 billion and increased by 73.9% year-on-year, i.e. by CZK 26.7 billion.
The total revenues of local budgets reached CZK 687.9 billion in October 2023 and increased by 14.4%, i.e. by CZK 86.8 billion. Adjusted total revenues1 amounted to CZK 526.3 billion. Their own revenues amounted to CZK 423.4 billion and increased by 15% in comparison with last year, i.e. by CZK 55.1 billion. The independence of territorial budgets from the state budget, which represents the share of own revenues in total adjusted revenues, was 80.4% and slightly decreased year-on-year. The growth of own income was caused by a rise in tax revenues, which reached CZK 361.2 billion and increased by 15.7%, i.e. by CZK 48.9 billion. Transfers received by territorial budgets also increased year-on-year, by 13.6%, i.e. by CZK 31.8 billion, to CZK 264.6 billion. In October of this year, the territorial budgets received non-investment transfers in the amount of CZK 233.5 billion (year-on-year growth of 12%, i.e. CZK 24.9 billion) and investment transfers in the amount of CZK 31.2 billion (year-on-year growth of 28 .2%, i.e. by CZK 6.8 billion). The year-on-year decrease occurred only on the side of capital income, which fell by 35.6%, i.e. by CZK 3.1 billion, to CZK 5.7 billion.
The total consolidated expenditures of local budgets in October 2023 amounted to CZK 624.5 billion and increased by 10.6% in comparison with last year, i.e. by CZK 59.9 billion. Adjusted total expenditures1 amounted to CZK 463.4 billion. Current expenditure in October reached CZK 502.7 billion (year-on-year growth of 10.8%, i.e. CZK 48.9 billion), while the dominant part of it was represented of transfers that regions and municipalities transfer to contributory organizations and similar organizations. Capital expenditure in October amounted to CZK 121.8 billion and increased by 10% year-on-year, i.e. by CZK 11 billion. In 2023 local governments realized consolidated expenditures for aid to Ukraine and its population in the amount of CZK 6.1 billion (mainly regions and the capital city of Prague). Almost all of these expenses are compensated from the state budget (e.g. accommodation of people from Ukraine, ensuring the operation of Regional Assistance Centers to help Ukraine, language courses and adaptation groups for children of people from Ukraine). This year, were compensated from the state budget related to aid to Ukraine of CZK 8.3 billion (including compensation of part of expenses from the end of 2022).
Management of regions
In October of this year, the regions managed a record budget surplus, amounting to CZK 15.4 billion. The surplus increased compared to last year by 79.4%, i.e. by CZK 6.8 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 14.9 billion and increased by 81.7%, i.e. by CZK 6.7 billion.
The total revenues of the regions in October amounted to CZK 297.5 billion and increased by 15.8%, i.e. by CZK 40.5 billion. Adjusted total revenues1 reached CZK 155.8 billion. Their own income reached CZK 96.2 billion (year-on-year increase by 17.2%, i.e. by CZK 14.1 billion) and represent 61.7% of total income adjusted for direct education costs. The regions' own revenues are repeatedly strengthening mainly due to the growth of tax revenues, which in October of this year increased by 16.5% year-on-year, i.e. by CZK 12.2 billion, to CZK 85.9 billion. In October 2023, the regions received transfers in the amount of CZK 201.3 billion, i.e. by 15.1%, i.e. by CZK 26.4 billion above last year. This was mainly due to the growth of non-investment transfers, which increased by 11.3% year-on-year, i.e. CZK 18.6 billion, to CZK 184 billion. Investment transfers received by the region also increased year-on-year, reaching CZK 17.3 billion in October and year-on-year growth of 82.7%, i.e. by CZK 7.8 billion.
The total expenditures of the regions in October 2023 amounted to CZK 282.1 billion and increased by 13.6% compared to last year, i.e. by CZK 33.7 billion. Adjusted total expenditures1reached CZK 140.9 billion. This growth was mainly caused by an increase in current expenses, which increased by 10.2% compared to last year, i.e.by CZK 22.6 billion, to CZK 244.4 billion. The major part of the total current expenses (specifically 75.3%) consists of transfers that the regions transferred to contributory and similar organizations, in the amount of CZK 183.9 billion. Most of these funds were intended for direct education costs. In October 2023 capital expenditures also increased by 41.8%, i.e. by CZK 11.1 billion, to CZK 37.7 billion. In 2023 the regions realized expenditures for aid to Ukraine and its population in the amount of CZK 5.1 billion.
The balance on the bank accounts and the debt of the regions is available for September 20232 from: Report on the development of budgetary management of municipalities, voluntary associations of municipalities and regions as at 30 September 2023.
Management of Municipalities
In October of this year, municipalities managed the historically highest budget balance surplus of CZK 47.4 billion. Year-on-year, the economic result increased by 71.3%, i.e. by CZK 19.7 billion (see Chart No. 3). Without the capital city, the total consolidated revenues of the municipalities in October amounted to CZK 284.3 billion, expenses to CZK 259.8 billion, and the result of budget management ended in a surplus of CZK 24.5 billion. Budget of the city of Prague ended up with a surplus of CZK 22.9 billion, with total revenues of CZK 114 billion and expenses of CZK 91.1 billion.
The total revenues of municipalities in October 2023 reached CZK 398.3 billion and increased by 13.6%, i.e. by CZK 47.6 billion compared to 2022. Adjusted total revenues1 reached CZK 378.4 billion. Their own income amounted to CZK 325.9 billion (year-on-year growth of 14.3%, i.e. by CZK 40.8 billion) and represented 86.1% of total adjusted income. Own revenues are repeatedly strengthening, especially due to the growth of tax revenues, which in October of this year increased by 15.4% year-on-year, i.e. by CZK 36.7 billion, to CZK 275.3 billion. At the end of October this year, municipalities received transfers in the total amount of CZK 72.4 billion and year-on-year they received them by 10.5%, i.e. by CZK 6.9 billion more. Non-investment transfers, which amounted to CZK 57.5 billion at the end of October, increased year-on-year by 15.4%, i.e. by CZK 7.7 billion. Investment transfers received by municipalities decreased year-on-year by 4.9%, i.e. by CZK 0.8 billion, to CZK 14.9 billion.
The total expenditures of municipalities in October 2023 amounted to CZK 350.9 billion and increased by 8.7 %, i.e.by CZK 27.9 billion compared to last year. Adjusted total expenditures1 reached CZK 331 billion. The year-on-year growth of total expenses was caused by an increase in current expenses, which increased by 14.2% compared to last year, i.e. by CZK 29.9 billion, to CZK 240.7 billion. The biggest part of current expenses is formed a non-investment transfers to contributory and similar organizations, which amounted to CZK 73 billion. Capital expenditures of municipalities increased slightly year-on-year by 0.5%, i.e. by CZK 0.5 billion and reached CZK 84.7 billion. In 2023, the municipalities realized expenditures for aid to Ukraine and its population in the amount of CZK 1 billion.
The balance on the bank accounts and the debt of the municipalities is available for September 20232 from: Report on the development of budgetary management of municipalities, voluntary associations of municipalities and regions as at 30 September 2023.
Voluntary associations of municipalities
In October 2023, voluntary associations of municipalities reported total revenues of CZK 4.4 billion (year-on-year increase of 2.1%, i.e. CZK 0.09 billion) and total expenses of CZK 3.9 billion (year-on-year decrease of 5.4%, i.e. by CZK 0.2 billion). The budget balance ended in a surplus of CZK 0.5 billion (year-on-year growth of 154.2%, i.e. by CZK 0.2 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 The balance on bank accounts and debt are available from the financial statements, which are submitted to the Central State Accounting Information System on a quarterly basis.