President of Ukraine Volodymyr Zelenskyi signed the Law of Ukraine “On the State Budget for 2023”, which the Verkhovna Rada approved in record time – on November 3. Therefore, local self-government bodies are actively working on the finalization and adoption of their decisions on local budgets. Yuriy Golynskyi, adviser on municipal finances and management of the Regional Office “U-LEAD with Europe” in the Lviv region, analyzed the indicators of the communities of the Lviv region.
Chervonograd City Council became the first community in Lviv Oblast to approve its main financial plan for the next year.
According to Yuriy Golynskyi, the 2023 budgets are being prepared in conditions of maximum uncertainty, but the annual innovations that financiers must take into account in their work are traditional. One of this year’s key innovations is a change in the approach to the horizontal equalization of the tax capacity of communities, which affects the nature and size of the relationship with the state budget.
“During the horizontal equalization of the tax capacity of local budgets, the number of the existing population at the beginning of 2022 was used and the number of registered internally displaced persons was not taken into account. It also takes into account the expected income of personal income tax in 2022, which is included in the budgets of territorial communities, and not the actual figures of the previous year, as was the case before. All this had a significant impact on the volume of basic and reverse subsidies,” the expert noted.
In 2023, for the first time in history, the Lviv region became a “reverse subsidy”, that is, according to the equalization of tax capacity, the local budgets will give the state budget a reverse subsidy more than they will receive the basic subsidy. The volume of the basic subsidy will increase by UAH 490 million, and the volume of the reverse subsidy by up to UAH 1.51 billion.
If in 2022 there are 9 territorial communities that are reverse (Solonkivska, Slavska, Kamianka-Buzka, Ivano-Frankivska, Lvivska, Obroshinska, Pustomytivska, Sokilnytska, Stryyska), then in the next year there will be as many as 17 such communities (to this category Novokalynivska, Velykomostivska, Brodivska, Dobrotvirska, Zolochivska, Novoyavorivska, Sambirska, Chervonogradska and Yavorivska communities, and Obroshinska will become subsidized).
The Lviv community will transfer more than UAH 1 billion (1.364 billion UAH) to the state budget, and the Slavska community, which is traditionally second on this list, will next year be the fourth in the region in terms of the amount of reversion, leaving Yavorivska and Novoyavorivska communities ahead, which, due to high expected revenues in the current year, 365.4 million UAH and 270.7 million UAH will be transferred to the state budget, respectively.
Subsidy-free communities, on the contrary, will become fewer – instead of seven, only three will remain – Obroshinska, Murovanska and Zhovtanetska.
“In any case, every community, when making decisions about local budgets, must take into account the key spending priorities of the next year, thereby bringing our victory closer to everyone in their own place,” summarizes Yurii Golynskyi.
The Ukraine Program for Local Empowerment, Accountability and Development “U-LEAD with Europe” is jointly funded by the EU and its member states Germany, Poland, Sweden, Denmark, Estonia and Slovenia to support Ukraine on its way to strengthen local municipality. U-LEAD promotes transparent, accountable and multi-level governance in Ukraine that meets the needs of citizens and empowers communities.