Report on the development of budgetary management of municipalities, voluntary associations of municipalities and regions as at 31 August 2024
In August 2024, territorial budgets reported a surplus of CZK 60.4 billion, the second highest surplus in history. This result reflects the very good financial situation of local governments, with the main contribution coming from rising own revenues. The most significant growth was recorded in non-tax revenue, which exceeded the year-on-year growth in tax revenue, due to the payment of creditors of Sberbank CZ. Investment activity of territorial budgets increased year-on-year, which is positive news for the development of regions. Along with this, the volume of received investment subsidies, which provide regions and municipalities with financial support for the implementation of key projects, also increased. These investments not only boost economic growth but also improve infrastructure and quality of life in the regions.
The financial health of territorial budgets is largely influenced by the current economic situation and inflation. Modest GDP growth in August 2024 brought higher economic activity, which led to an increase in county and municipal revenues. Growth in household consumption and rising wages supported higher tax collections, especially VAT and personal income tax revenues. In addition, other tax revenues grew year-on-year, for example, municipalities saw a significant increase in property tax revenues. On the other hand, revenues from the corporate income tax fell due to the high comparative base last year, when a one-off tax settlement for 2022 took place. The stabilised inflation rate, which approached the Czech National Bank's inflation target in August 2024, also had a positive impact on the performance of territorial budgets. Lower and stable inflation meant that municipalities' and regions' operating and investment expenditures were not overly burdened, which contributed to the overall better financial situation of territorial budgets.
Detailed information is provided in the Monitor system (data for territorial budgets can be obtained in the Analytical section under Local organisations).
Management of Local Governments
In August 2024, municipalities, regions and voluntary associations of municipalities (hereinafter referred to as DSOs) reported a positive budget balance of CZK 60.4 billion and managed the second highest budget surplus ever. As can be seen from Chart No. 1, the budget balance decreased slightly (by 0.1%) compared to the previous year. If the economic result is adjusted for direct expenditure on education and subsidies to private schools1, the budget balance reached CZK 60 billion and increased year-on-year, but only marginally.
The total revenues of local budgets reached CZK 570 billion in August 2024 and increased by 1.8%, i.e. by CZK 10.2 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 435.3 billion. Own revenues of territorial budgets reached CZK 361.7 billion and increased by 4.8% year-on-year, i.e. by CZK 16.6 billion. Self-sufficiency of territorial budgets, which represents the share of own revenue in total adjusted revenue2, increased year-on-year in August and amounted to 83.1%. The year-on-year increase in own revenue is mainly due to non-tax revenue, which increased by 24.8%, i.e. by CZK 11.1 billion, to CZK 55.7 billion. Furthermore, tax revenue grew by 1.6%, i.e. by CZK 4.8 billion, to CZK 300.7 billion this year. Transfers received by territorial budgets fell by 3% year-on-year, i.e. by CZK 6.4 billion, to CZK 208.2 billion. This was exclusively due to a decrease in non-investment transfers (down by 4.1%, i.e. by CZK 7.9 billion), which reached CZK 187.2 billion in August. In contrast, investment transfers continued to grow year-on-year (up by 7.5%, i.e. by CZK 1.5 billion) and reached CZK 21.1 billion in August.
The total expenditure of territorial budgets in August 2024 amounted to CZK 509.6 billion and increased slightly by 2.1% year-on-year, i.e. by CZK 10.3 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 375.3 billion. Current expenditures reached CZK 419.3 billion and increased by 2.1% year-on-year, i.e. by CZK 8.6 billion, with the dominant part of these current expenditures consisting of transfers transferred by regions and municipalities to contributory organisations and similar organisations and covered to a significant extent by transfers received from the Ministry of Education, Youth and Sports. Capital expenditure in August amounted to CZK 90.3 billion and increased by 1.9% year-on-year (i.e. by CZK 1.7 billion), due to an increase in the purchase of property shares of local governments.
Management of regions
At the end of August, the regions reported a positive budget balance of CZK 13.4 billion. The financial situation of the regions improved significantly year-on-year (up by 63.9%, i.e. by CZK 5.2 billion). As can be seen from Chart No. 2, this is the second-best financial result ever. If we adjust the balance of the regional budget for direct expenditure on education and subsidies to private schools1, the economic result then reached CZK 13 billion and increased by 67.6%, i.e. CZK 5.2 billion year-on-year.
The total revenues of the regions in August 2024 amounted to CZK 241.9 billion and increased by only 0.9%, i.e. by CZK 2 billion, compared to last year. Adjusted for direct expenditure on education and subsidies to private schools1, the revenue of the regions amounts to CZK 124.1 billion. Own revenue of the regions has been systematically growing over the year, reaching CZK 83.2 billion in August (up 8.5% year-on-year, i.e. CZK 6.5 billion) and accounting for 67% of total adjusted revenue2. The reason for the strengthening of own revenues was the growth of non-tax revenues (year-on-year growth by 77.7%, i.e. by CZK 5.4 billion), which reached CZK 12.3 billion in August. This was due to an increase in other non-tax revenue on account of the payment of Sberbank CZ creditors and other transfer refunds received. In addition, tax revenue increased year-on-year by 1.7%, i.e. by CZK 1.2 billion, to CZK 70.5 billion.
At the end of August 2024, the regions received transfers in the amount of CZK 158.7 billion, down by 2.8% year-on-year, i.e. by CZK 4.5 billion. Non-investment transfers received by the regions in August 2024 amounted to CZK 150.3 billion and decreased by 2.2% year-on-year, i.e. CZK 3.3 billion. Investment transfers received by the regions amounted to CZK 8.5 billion in August this year and decreased by 11.9%, i.e. by CZK 1.1 billion year-on-year.
The total expenditure of the regions in August 2024 amounted to CZK 228.5 billion and decreased by 1.4% year-on-year, i.e. by CZK 3.2 billion. Adjusted for direct expenditure on education and subsidies to private schools1, the expenditure of the regions amounts to CZK 111.1 billion. The year-on-year decline in total expenditure was driven exclusively by capital expenditure, which decreased by 23.7%, i.e. by CZK 6.8 billion, to CZK 22 billion. The significant year-on-year decline in investment activities of regions corresponds to the decrease in investment transfers. Current expenditure increased by 2% year-on-year, i.e. by CZK 3.7 billion, to CZK 206.5 billion. Transfers by regions to contributory and similar organisations amounted to CZK 151.3 billion and accounted for 73.2% of total current expenditure. Most of these funds were for direct expenditure on education and subsidies to private schools.
The balances on bank accounts and the debt of regions are only available for June 20243 from: Report on the development of budgetary management of municipalities, voluntary associations of municipalities and regions as at 30 June 2024.
Management of Municipalities
At the end of August, municipalities reported a positive budget balance of CZK 45.6 billion. As can be seen from Chart No. 3, the economic result decreased year-on-year (by 11.9%, i.e. by CZK 6.2 billion), but it still reached the second highest value ever. If we adjust the balance of the municipal budget (capital city of Prague) for direct expenditure on education and subsidies to private schools1, the economic result reached CZK 45.5 billion and even increased by 20.7%, i.e. CZK 7.8 billion, year-on-year. The budget of the Capital City of Prague ended in a surplus of CZK 16.8 billion in August (a year-on-year decrease of 20.7%, i.e. CZK 4.4 billion) with total revenues of CZK 94.1 billion and expenditures of CZK 77.3 billion. Excluding the capital city, total revenues amounted to CZK 241.2 billion, expenditures to CZK 212.4 billion and the budget result ended in a surplus of CZK 28.8 billion.
Total municipal revenues in August 2024 amounted to CZK 335.2 billion and increased year-on-year by 2.4%, i.e. by CZK 7.8 billion. Adjusted for direct expenditure on education and subsidies to private schools1, the revenue of the regions amounts to CZK 318.3 billion. Since the beginning of the year, there has been a systematic increase in municipalities' own revenue, which reached CZK 277.6 billion in August (year-on-year growth of 3.7%, i.e. CZK 10 billion) and accounted for 87.2% of total adjusted revenue2. Own revenues were strengthened year-on-year mainly due to the growth of non-tax revenue, which increased by 15.2%, i.e. by CZK 5.6 billion, to CZK 42.4 billion. This was due to an increase in other non-tax revenue on account of the repayment of Sberbank CZ creditors and transfer refunds received. Furthermore, tax revenues increased year-on-year (up by 1.6%, i.e. by CZK 3.6 billion), reaching CZK 230.2 billion in August.
At the end of August, municipalities received transfers amounted to CZK 57.7 billion and decreased by 3.7% year-on-year, i.e. by CZK 2.2 billion. Investment transfers received by municipalities increased year-on-year by 20.1%, i.e. by CZK 2.2 billion, to CZK 13.1 billion.
Total municipal expenditure in August 2024 amounted to CZK 289.7 billion and increased by 5.1% year-on-year, i.e. CZK 14 billion. Adjusted for direct expenditure on education and subsidies to private schools1, the expenditure of the regions amounts to CZK 272.8 billion. The year-on-year increase was mainly due to an increase in capital expenditure, which increased by 14.7%, i.e. by CZK 8.9 billion, to CZK 69.2 billion compared to the previous year. The current expenditure of municipalities reached CZK 220.4 billion and increased by 2.4% year-on-year, i.e. by CZK 5.1 billion.
The balances on bank accounts and the debt of municipalities are only available for June 20243 from: Report on the development of budgetary management of municipalities, voluntary associations of municipalities and regions as at 30 June 2024.
Voluntary associations of municipalities
In August 2024, the voluntary associations of municipalities managed total revenues of CZK 4.9 billion (year-on-year growth of 46.2%, i.e. by CZK 1.5 billion) and total expenditures of CZK 3.4 billion (year-on-year growth of 19.3%, i.e. CZK 0.6 billion). The budget balance ended in a surplus of CZK 1.4 billion (year-on-year growth of CZK 1 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.
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.