Report on the development of budgetary management of municipalities, voluntary associations of municipalities and regions as at 30 November 2023
This year, the territorial budgets have a tendency not to use all their available funds, which is demonstrated by the fact that in November they reported the highest budget surplus in history. The territorial budgets have consistently operated with record economic surpluses since the middle of this year, which only confirms their excellent financial condition, which they achieve regardless of the decline of the domestic economy. The growth of tax revenue collection and the higher volume of received transfers (primarily non-investment transfers) repeatedly strengthen the revenue side of territorial budgets. However, the investment activity of regions and municipalities is also growing. In November, capital expenditure reached the highest level since 2013.
Inflation in November fell by 1.2 percentage points compared to the previous month and is still slowing down corresponding to the forecast of the Czech National Bank (year-on-year inflation increased by 7.3%). Inflation, which, despite its adverse effects on the economy, has a positive effect on the growth of local self-governing units' own incomes and thus leads to the strengthening of their financial self-sufficiency. This is mainly due to the growth in the collection of tax revenues, especially the collection of corporate tax.
Management of Local Governments
In November 2023 municipalities, regions and voluntary associations of municipalities operated with the highest budget surplus in history of CZK 74.5 billion. The territorial budgets thus still generate record surpluses. As can be seen from Chart No. 1, the economic result compared to November last year increased by 60.9% year-on-year, i.e. by CZK 28.2 billion. If we reduce the budget balance by the direct costs of education and subsidies for private schools1, the economic surplus reached CZK 65.1 billion and increased by 69.1% year-on-year, i.e. by CZK 26.6 billion.
The total revenues of local budgets reached CZK 760.6 billion in November 2023 and increased by 13.6%, i.e. by CZK 91.1 billion. Adjusted total revenues1 amounted to CZK 575.1 billion. Their own revenues1 amounted to CZK 463.5 billion and increased by 14.2% in comparison with last year, i.e. by CZK 57.5 billion. The independence of territorial budgets from the state budget, which represents the share of own revenues in total adjusted revenues, was 80.6% and slightly decreased year-on-year. The growth of own income was caused by a rise in tax revenues, which reached CZK 395.2 billion and increased by 14.8%, i.e. by CZK 51.1 billion. Transfers received by territorial budgets also increased year-on-year, by 12.7%, i.e. by CZK 33.5 billion, to CZK 297.1 billion. In November of this year, the territorial budgets received non-investment transfers in the amount of CZK 261 billion (year-on-year growth of 11.1%, i.e. CZK 26 billion) and investment transfers in the amount of CZK 36.2 billion (year-on-year growth of 26.3%, i.e. by CZK 7.5 billion). The year-on-year decrease occurred only on the side of capital income, which fell by 32.4%, i.e. by CZK 3.1 billion, to CZK 6.4 billion.
The total consolidated expenditures of local budgets in November 2023 amounted to CZK 686.1 billion and increased by 10.1% in comparison with last year, i.e. by CZK 62.9 billion. Adjusted total expenditures1 amounted to CZK 510 billion. Current expenditure in November reached CZK 546.9 billion (year-on-year growth of 10.1%, i.e. CZK 50 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 November amounted to CZK 139.2 billion and increased by 10.2% year-on-year, i.e. by CZK 12.9 billion. In 2023 local governments realized consolidated expenditures for aid to Ukraine and its population in the amount of CZK 6.4 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 8.7 billion (including compensation of part of expenses from the end of 2022).
Management of regions
In November 2023, the regions managed a positive budget balance of CZK 24.9 billion, and for the first time since the middle of this year, they did not show a record budget surplus. It was the second highest budget surplus in history2. The budget increased compared to last year by 49.6%, i.e. by CZK 8.3 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 15.6 billion and increased by 75%, i.e. by CZK 8.9 billion.
The total revenues of the regions in November amounted to CZK 331 billion and increased by 15.5%, i.e. by CZK 44.3 billion. Adjusted total revenues1 reached CZK 168.7 billion. Their own income reached CZK 105.7 billion (year-on-year increase by 16.4%, i.e. by CZK 14.9 billion) and represent 62.7% 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 November of this year increased by 15.6% year-on-year, i.e. by CZK 12.7 billion, to CZK 94.1 billion. In November 2023, the regions received transfers in the amount of CZK 225.3 billion, i.e. by 15%, i.e. by CZK 29.5 billion above last year. This was mainly due to the growth of non-investment transfers, which increased by 11.7% year-on-year, i.e. CZK 21.5 billion, to CZK 206.1 billion. Investment transfers received by the region also increased year-on-year, reaching CZK 19.2 billion in November and year-on-year growth of 70.8%, i.e. by CZK 8 billion.
The total expenditures of the regions in November 2023 amounted to CZK 306.1 billion and increased by 13.4% compared to last year, i.e. by CZK 36.1 billion. Adjusted total expenditures1 reached CZK 168.7 billion. This growth was mainly caused by an increase in current expenses, which increased by 9.8% compared to last year, i.e.by CZK 23.6 billion, to CZK 263.2 billion. The major part of the total current expenses (specifically 74.8%) consists of transfers that the regions transferred to contributory and similar organizations, in the amount of CZK 196.8 billion. Most of these funds were intended for direct education costs. In November 2023 capital expenditures also increased by 41.1%, i.e. by CZK 12.5 billion, to CZK 42.9 billion. In 2023 the regions realized expenditures for aid to Ukraine and its population in the amount of CZK 5.3 billion.
The balance on the bank accounts and the debt of the regions is available for September 20233 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 November of this year, municipalities managed the historically highest budget balance surplus of CZK 49.1 billion. Year-on-year, the economic result increased by 66.1%, i.e. by CZK 19.5 billion (see Chart No. 3). Without the capital city, the total consolidated revenues of the municipalities in November amounted to CZK 312.2 billion, expenses to CZK 288 billion, and the result of budget management ended in a surplus of CZK 24.2 billion. Budget of the city of Prague ended up with a surplus of CZK 25 billion, with total revenues of CZK 125.7 billion and expenses of CZK 100.8 billion.
The total revenues of municipalities in November 2023 reached CZK 437.9 billion and increased by 12.3%, i.e. by CZK 47.9 billion compared to 2022. Adjusted total revenues1 reached CZK 414.8 billion. Their own income amounted to CZK 356.4 billion (year-on-year growth of 13.5%, i.e. by CZK 42.4 billion) and represented 85.9% of total adjusted income. Own revenues are repeatedly strengthening, especially due to the growth of tax revenues, which in November of this year increased by 14.6% year-on-year, i.e. by CZK 38.4 billion, to CZK 301.1 billion. At the end of November this year, municipalities received transfers in the total amount of CZK 81.5 billion and year-on-year they received them by 7.3%, i.e. by CZK 5.5 billion more. Non-investment transfers, which amounted to CZK 63.2 billion at the end of November, increased year-on-year by 9.8%, i.e. by CZK 5.7 billion. Investment transfers received by municipalities slightly decreased year-on-year by 0.7%, i.e. by CZK 0.1 billion, to CZK 18.3 billion.
The total expenditures of municipalities in November 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 expenditures1reached CZK 331 billion. The year-on-year growth of total expenses was caused by an increase in current expenses, which increased by 11.5% compared to last year, i.e. by CZK 27.5 billion, to CZK 266.2 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 1.1 billion.
The balance on the bank accounts and the debt of the municipalities is available for September 20233 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 November 2023, voluntary associations of municipalities reported total revenues of CZK 4.9 billion (year-on-year increase of 4.3%, i.e. CZK 0.2 billion) and total expenses of CZK 4.5 billion (year-on-year decrease of 4%, i.e. by CZK 0.2 billion). The budget balance ended in a surplus of CZK 0.4 billion (year-on-year growth of 1 486%, i.e. by CZK 0.4 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 highest economic surplus was reported in November 2021, in the amount of CZK 25.1 billion.
3 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.