October's fierce election battles for seats in local government were partly driven by the expectation that decentralization in Ukraine will deliver more powers to lower tiers of government in the country.
But those taking up seats in city and oblast councils or as municipal mayors may find that those newfound powers don’t amount to much, not for constitutional reasons but simply for a practical one: lack of cash.
Impoverished cities and villages have been totally dependent on financing from the state budget.
The European Commission in 2013 called Ukraine one of the most centralized countries in Europe, with the regional and local authorities being under control of either the central government or its local representatives – the state administrations.
Even though the central government has taken steps over the last year to redistribute local finances, the changes may not be as dramatic as some had hoped, according to experts.
It all comes down to money, which is chronically in short supply for the Ukrainian government.
City and village councils are responsible for taking care of the basic needs of residents, including managing schools, gardens, community services or collecting garbage. But whether they can actually fulfill these responsibilities depends largely on their financing.
“We have some 11,500 local communities in Ukraine. But only some 180 big cities have the real means for governance now,” Ivan Lukerya, an expert of Ukrainian Independent Center for Political Research, told the Kyiv Post.
When it comes to local government in Ukraine, bigger is better.
The councils of big cities like Kyiv, Lviv or Odesa have budget autonomy, and they can also receive subsidies directly from the state budget if they lack money for some expenses.
Moreover, the changes made to the tax code on Dec. 28 allowed big cities to additionally keep some 60 percent of individuals’ income taxes for municipal needs.
Kyiv, the capital city, which has a special status, may keep only 40 percent of this tax. Even so, as a result of the changes to the tax code, Kyiv has already increased its budget by Hr 1.4 billion this year, while Lviv has seen its budget rise by Hr 800 million, Lukerya said.
But for the smaller cities, and towns and villages, state subsidies are redistributed via the district in which they are located. The 480 districts of Ukraine each have their own councils. They collect 60 percent of the income taxes paid by residents in their areas and decide how much money each community receives from these taxes, and also from state subsidies.
Thus, the district government ultimately decides on how much money get allocated for fixing a village road or the roof of a rural school.
Under decentralization, local communities can now slip out of the funding chokehold of the district councils by opting to unite into what are called “merged communities.” Some have already done this, fusing villages and towns into administrative unions.
The first 159 of these merged communities, which are piloting the decentralization reform, elected their heads and councils on Oct. 25. The new administrative structures received the same powers as the big cities to collect local taxes and obtain direct subsidies from the state budget.
That looks good on the surface, but experts still doubt if some of the communities, which might be made up only of villages, will be able to sustain themselves with locally collected taxes alone.
“It would be an overestimation to say that the merged communities have real self-governance now,” Valentyna Romanova, an expert from the New Ukraine think tank, told the Kyiv Post. “There’s a big difference in the (amount of) money raised from taxes in a big city and in a small village.”
But for the proponents of decentralization the merged communities are the centerpiece of the changes. Prime Minister Arseniy Yatsenyuk said that, following the reforms, people wouldn’t even need to remember the names of the prime minister or the Cabinet of Ministers.
“The only last names they have to know are those of their mayor, the head of their (local) executive body, and their local deputy, who, after gaining power, will (also) gain responsibilities,” Yatsenyuk said at a government meeting in July.
Parliament took the first step to divest more functions and powers to regional and local governments on Aug. 31 when it passed amendments to the Ukrainian Constitution in the first of two readings. If the law is passed at second reading, the rest of the country’s small communities should be merged into larger administrative units by Oct. 25, 2017 – the day when they elect their representatives.
“This is one of the most important reforms, because it will release the economic potential of local communities,” Lukerya said of this stage of decentralization.
The newly elected councils of these local communities will have significantly broader powers and will replace the current government administrations, experts say.
Kateryna Davydenko, expert of the Center of Policy and Legal Reforms, said the responsibilities of the councils of the newly merged communities would include health care and transport systems operating within their borders.
Lukerya added that the merged community councils would be able to decide what kind of buildings are constructed on their territory, without having to seek agreement from state bodies. The communities will have complete control over what they do with their land and other property belonging to them, with the only exceptions being strategically important objects.
Still, experts are unsure whether the new local governments will be able to raise enough money to carry out all of their new responsibilities. “They will definitely receive more money, but their expenses will also be incomparably different,” Romanova said.
Lukerya said it was “hard for the local governments to become poorer, as they are extremely poor already.” But he said some of them would definitely face hard choices. For example, if a community has 400 children and receives say Hr 40 million per year from the state for their education, but the upkeep of existing schools cost Hr 60 million, then the community executives will have to close some schools and buy school buses.
“Everything will depend on the quality of their management,” Lukerya said.
Kyiv Post staff writer Oksana Grytsenko can be reached at [email protected]
