Report on the development of budgetary management of municipalities, voluntary associations of municipalities and regions as at 31 May 2024
In May 2024, the territorial budgets achieved the second highest budget surplus ever, amounting to CZK 27.8 billion. This result is a significant improvement compared to 2023, when the regional budgets even ended in deficit. The improvement in the financial condition of territorial budgets mainly reflects the growing own revenues of regions and municipalities. The most significant year-on-year growth was recorded on the non-tax revenue side, which contributed more to the increase in total revenue than tax revenue.
The economic situation and the current inflation rate have a significant impact on the performance of territorial budgets. Annual inflation reached 2.6% in May 2024, representing a slight slowdown in price increases compared to the previous month. While stable inflation reduces operating and investment spending and thus does not burden the spending side of municipal budgets, the growth of the domestic economy is positively reflected on their revenue side in the form of higher tax revenues. As a result of wage growth and the changes adopted under the adjustment package, the collection of personal income tax increased significantly year-on-year, while the collection of corporate income tax increased due to tax filing deadlines. Higher household consumption and tax increases on selected goods and services also slightly increased VAT collections. Non-investment transfers received decreased year-on-year, while investment transfers increased significantly, allowing for the implementation of necessary investment projects that further strengthen economic growth and improve the quality of life in the regions. In spite of this, investment activity in the regions declined year-on-year.
Management of Local Governments
In May 2024 regions, municipalities and voluntary associations of municipalities operated with a budget surplus of CZK 27.8 billion (year-on-year growth of 65.9%, i.e. CZK 11.1 billion). This was the second highest economic result since 2013 (see Chart 1). If the budget balance is adjusted for direct expenditure on education and subsidies to private schools1, the surplus reached CZK 27.5 billion and increased by 67.7%, i.e. CZK 11.1 billion year-on-year.
Total revenues of territorial budgets in May 2024 amounted to CZK 341.8 billion and increased by 4.6% year-on-year, i.e. by CZK 15.2 billion. After adjusting the revenues of regions and municipalities (in the case of the capital city of Prague) for direct expenditure on education and subsidies to private schools1, revenues amount to CZK 241.7 billion. Own revenues of territorial budgets reached CZK 200.3 billion and increased by 9.6% year-on-year, i.e. by CZK 17.5 billion. The self-sustainability of territorial budgets, which represents the share of own revenue in total adjusted revenue2, continues to grow and stood at 82.9% in May. The year-on-year increase in own revenue is mainly due to non-tax revenue, which increased by 41.3%, i.e. by CZK 11 billion, to CZK 37.7 billion. Furthermore, tax revenues recorded a year-on-year increase of 3.7%, i.e. CZK 5.7 billion, to CZK 159.5 billion. Transfers received by territorial budgets in May 2024 fell by 1.6% year-on-year, i.e. by CZK 2.3 billion, to CZK 141.5 billion. This was due to a decrease in non-investment transfers (down by 4.9%, i.e. by CZK 6.7 billion), which reached CZK 128.8 billion in May. In contrast, investment transfers continued to grow significantly year-on-year (up by 52.2%, i.e. by CZK 4.4 billion) and reached CZK 12.7 billion in May.
The total expenditure of territorial budgets in May 2024 amounted to CZK 314 billion and increased by 1.3% year-on-year, i.e. by CZK 4.1 billion. After adjusting the expenditure of regions and municipalities (in the case of the capital city of Prague) for direct expenditure on education and subsidies to private schools1, expenditure amounts to CZK 214.1 billion. Current expenditure in May amounted to CZK 272.6 billion (year-on-year growth of 1.3%, i.e. CZK 3.4 billion), with the dominant part of this current expenditure being made up of transfers that regions and municipalities transfer to contributory organizations and similar organizations. Capital expenditure amounted to CZK 41.3 billion in May and increased slightly year-on-year (up by 1.8%, i.e. by CZK 0.7 billion), due to an increase in transfers to their contributory organizations for inpatient care in hospitals.
Management of regions
In May 2024, the regions reported a positive budget balance of CZK 9.1 billion and achieved the second highest budget surplus since 2013. The financial situation of the regions has improved significantly year-on-year, whereas in the previous year the regions managed with deficit. If the budget balance of the regions is adjusted for direct expenditure on education and subsidies to private schools1, the result reached CZK 8.8 billion.
The total revenues of the regions in May 2024 amounted to CZK 160.4 billion and increased by 5.2%, i.e. by CZK 7.9 billion. Adjusted total revenues1 reached CZK 72.7 billion. During the year, the regions' own revenues have been growing systematically, reaching CZK 49 billion in May (year-on-year growth of 19.9%, i.e. CZK 8.1 billion) and accounting for 67.5% of total adjusted revenues2. The regions' own revenues increased in March mainly due to the growth of non-tax revenues, by 129% year-on-year, i.e. by CZK 5.6billion, to CZK 10 billion. In May 2024, the tax revenues increased by 6.8%, i.e. CZK 2.5 billion, to CZK 38.8 billion. Regions received transfers in the amount of CZK 111.3 billion, i.e. by 0.2%, i.e. by CZK 0.3 billion less against last year. This was mainly due to the decline of non-investment transfers, which decreased by 2.1% year-on-year, i.e. CZK 2.3 billion, to CZK 105.9 billion. Investment transfers received by the region increased year-on-year, reaching CZK 5.4 billion in May and year-on-year rose of 57.9%, i.e. by CZK 2 billion.
The total expenditure of the regions in May 2024 amounted to CZK 151.3 billion and decreased by 0.9% year-on-year, i.e. by CZK 1.4 billion. Adjusted total expenditures1 reached CZK 63.9 billion. Capital expenditure decreased by 12.4%, i.e. by CZK 1.4 billion, to CZK 10.1 billion, despite an increase in investment transfers. The year-on-year decrease in capital expenditure was mainly due to a reduction in expenditure on the acquisition of railway vehicles and a fall in investment transfers to non-entrepreneurs for changes in heating technology. Current expenditure increased marginally by 0.03% year-on-year, i.e. by CZK 0.05 billion, to CZK 141.2 billion. Transfers by regions to contributory and similar organizations amounted to CZK 35.9 billion and accounted for 76.4% of total current expenditure. Most of these funds were earmarked for direct expenditure on education and subsidies to private schools.
The balances on bank accounts and the debt of regions are only available for March 20243 from: Report on the development of budgetary management of municipalities, voluntary associations of municipalities and regions as at 31 March 2024.
Management of Municipalities
In May 2024, municipalities reported a positive budget balance of CZK 17.5 billion and achieved the second highest budget surplus since 2013. The budget balance increased by 7.2% year-on-year, i.e. by CZK 1.2 billion (see Chart 6). In May, the capital city, which accounts for almost half of the total municipal surplus, ended in a surplus of CZK 7.2 billion with total revenues of CZK 51.9 billion and expenditures of CZK 44.7 billion. Excluding the capital city, the total revenues of municipalities amounted to CZK 132.9 billion, expenditures to CZK 122.6 billion and the budget result ended in a surplus of CZK 10.3 billion.
Total municipal revenues in May 2024 amounted to CZK 184.8 billion and increased by 3.9% year-on-year, i.e. by CZK 6.9 billion. Adjusted total revenues1 reached CZK 172.3 billion. During the year, there has been a systematic increase in own revenue of municipalities, which in May amounted to CZK 150.6 billion (year-on-year growth of 6.5%, i.e. CZK 9.2 billion) and accounted for 87.4% of total adjusted revenue2.
Own revenues strengthened year-on-year due to the growth of non-tax revenues, which increased by 24.2%, i.e. by CZK 5.3 billion, to CZK 27.1 billion. This was due to an increase in other non-tax revenue and transfer refunds received. It was also due to the growth in tax revenue, which increased by 2.8% year-on-year, i.e. by CZK 3.3 billion, to CZK 120.6 billion. At the end of May this year, municipalities received transfers in the total amount of CZK 34.1 billion, the volume of which decreased by 6.3% year-on-year, i.e. by CZK 2.3 billion. This was caused by a decrease in non-investment transfers, which amounted to CZK 27.1 billion at the end of May, down by 13.9% year-on-year, i.e. by CZK 4.3 billion. Investment transfers received by municipalities increased year-on-year by 40.6%, i.e. by CZK 2 billion, to CZK 7.1 billion.
Total municipal expenditure in May 2024 amounted to CZK 167.3 billion and increased by 3.6% year-on-year, i.e. by CZK 5.8 billion. Adjusted total expenditures1 reached CZK 154.8 billion. The year-on-year growth was mainly due to an increase in current expenditure, which increased by 2.6%, i.e. by CZK 3.4 billion, to CZK 135.8 billion compared to the previous year. The volume of current expenditure was driven by expenditure on roads and non-investment transfers to associations for other sporting activities. Capital expenditure of municipalities reached CZK 31.5 billion and increased by 8% year-on-year, i.e. by CZK 2.3 billion. The year-on-year increase in capital expenditure was mainly due to an increase in expenditure on construction in the area of municipal services and territorial development and on the purchase of shares in sporting activities.
The balances on bank accounts and the debt of regions are only available for March 20243 from: Report on the development of budgetary management of municipalities, voluntary associations of municipalities and regions as at 31 March 2024.
Voluntary associations of municipalities
In May 2024, the voluntary associations of municipalities managed total revenues of CZK 3 billion (year-on-year growth of 43.9%, i.e. CZK 0.9 billion) and total expenditures of CZK 1.8 billion (year-on-year growth of 14.2%, i.e. CZK 0.2 billion). The budget balance ended in a surplus of CZK 1.2 billion (year-on-year growth of CZK 0.7 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 Total revenue net of revenue from transfers for direct expenditure on education and from subsidies to private schools.
1 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.