The Impact Of National Constitutional Regulations On The Financial Independence Of Municipalities

The Impact Of National Constitutional Regulations On The Financial Independence Of Municipalities: European Standards And A Glance At The V4 Countries Presented by: Dr. Pál Date: 15 February 2024 European Regulation of Local Financial Autonomy - Common European rules for local self-government exist - Not within the framework of the EU, but within the Council of Europe - European Charter of Local Self-Government European Charter of Local Self-Government - Article 2-Constitutional and legal foundation for local self-government • „The principle of local self-government shall be recognized in domestic legislation, and where practicable in the constitution." - Article 9- Financial resources of local authorities • Explanatory report: „The legal authority to perform certain functions is meaningless if local authorities are deprived of the financial resources to carry them out." - Explicit obligation to: • (YES) Enshrine the principle of LSG in written law (preferably in the constitution) • (YES) Ensure proper financial autonomy for LSG units • (No) explicit obligation to include elements of financial self-government in the constitutional framework Research Question - Does a better constitutional regulation of local financial autonomy improve its overall quality? • More detailed constitutional regulation (of local financial self-government) • Better system of municipal financing What Steps Are Needed To Answer The Research Question? - Assess the quality of the studied constitutional regulations - Assess the quality of local government financing systems • Two indicators used:  Statistical data on the shares of own revenues  Conclusions of the international monitoring process according to the European Charter of Local Self Government - Rank the countries based on the above assessments - Compare the conclusions Assessing The Quality Of Constitutional Regulations Aspect of local financial autonomy (contained or not in the constitution) Right to local self-government Freedom to own and dispose of property Right to have own budgets Entitlement to own revenues Right to impose local taxes Entitlement to state transfers Entitlement to adequate financing Hungary Czech Republic Slovakia Poland NO YES YES YES YES YES YES YES YES YES YES YES NO NO YES YES YES NO ? YES YES NO YES YES NO NO NO YES - Based on this, Poland has the most thorough constitutional regulation of LFA (7/7) - Followed by Slovakia (5,5/7) - Then Hungary (4/7) - While the Czech Republic has the most deficient constitutional rules (3/7) Assessing The Quality Of Local Self-Government Financing Systems Based On Statistical Indicators - 2 indicators used: • Municipal own revenues compared to total municipal revenues  Recommended by Council of Europe's Steering Committee on Local and Regional Democracy • Local tax revenues compared to total municipal revenues  Recommended by Council of Europe's Congress of Local and Regional Authorities Quality Assessments Based On Statistical Indicators Statistical Hungary Indicator Own 42%* revenues / total revenues Local tax 28%* rev. / total revenues Data from: *2021 Czech Republic < 20%* Slovakia Poland Average 23%* 27,5%* 27,5% ~ 3-4%* 13%* 16%* 15% *2021 *2022 *2022 N/A - based on these statistical indicators, Hungary achieved the best results by far - followed by Poland - then Slovakia - while the Czech Republic has the worst figures Quality Assessment Based On Monitoring Reports Aspect Of Local Financial Autonomy (Contained Or Not In The Constitution) Para. 1 (overall adequacy of funds) Para. 2 (commensurability of funds) Para. 3 (local taxes) Para. 4 (diversity and buoyancy) Para. 5 (protection of weaker municipal.) Para. 6 (consultation mechanisms) Para. 7 (non/earmarking of grants) Para. 8. (access to the capital market) - Hungary Czech Republic Slovakia Poland NO YES ? YES YES NO YES ? YES NO not ratified NO NO ? YES not ratified ? NO not ratified ? NO NO YES ? YES YES YES ? YES NO NO * Slovakia: • Available Reports do not include paragraph-by-paragraph assessment, only „compliance with the basic requirements of Art. 9." was proclaimed. - Czech Republic was criticized the least in the respective monitoring reports - Slovakia is questionable, although not much criticism was so far formulated - Poland received considerable criticism - Hungary was arguably criticized the most Final step: Comparison and Conclusion - Results of the systemic quality assessment do not seem to correspond to the overall quality of constitutional regulation Ranking of countries Constitutional regulation Statistical indicators Monitoring process Average of the latter two - Hungary Slovakia Poland 3 Czech Republic 4 2 1 1 4 3 2 4 1 2 3 2,5 2,5 2,5 2,5 Hypothesis was not confirmed, a more detailed constitutional regulation does not automatically result in a better overall quality of local financial autonomy, at least according to the indicators used in the research - Question: Do the employed indicators provide a reliable picture?