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Tag: local municipalities

Starved for funds from Orbán gov’t, local municipalities face bankruptcy

picture of Szeged City Hall

The Orbán government has bled Hungarian local municipalities dry over the past 12 years, writes Népszava. Some towns and cities run by the opposition are now facing bankruptcy, which would put them under government guardianship in financial and legal terms, if they do not get emergency financial aid from a new government in April.

But it is not just localities run by the political opposition that are in a tough spot. Mayors from Hungary’s ruling parties have also started to speak out against the Orbán cabinet’s measures that affect towns and cities.

The division of responsibilities between local governments and the state, as well as financing, need to be reconsidered, András Cser-Palkovics, the Fidesz Mayor of Székesfehérvár, told Index after representatives from local municipalities discussed supplemental funding requests with the Ministry of Finance at the beginning of January.

The budget law allocates a total of 3.181 trillion Ft. (US $10.0 billion) for local municipalities to spend in 2022, which is around 200 billion less than what municipal expenditures were in 2010. In other words, funding to local governments has decreased over the past 12 years in nominal terms alone, but after adjusting for the 30% inflation seen over this same period, their drop in revenue to municipalities has been even worse.

This can also be seen in the share of municipal expenses as a proportion of GDP. The 3.395 trillion Ft. ($10.7 billion) actually spent in 2010 accounted for 12.5% of the country’s GDP at the time. In contrast, the share for this year is only 5.6% of Hungary’s expected GDP, meaning that expenditures as a share of GDP have been cut in half over the past 12 years.

At the same time, the responsibilities given to mayoral offices have also changed. In 2012-2013, health care and educational institutions were taken away from them. But even in 2011, municipal expenditures as a proportion of the country’s GDP began to decrease. As a result, localities are no longer able to fund basic development projects on their own.

Citing the epidemic, the Hungarian government and Parliament lowered the local business tax to a maximum of 1% for small and medium-sized businesses in December, which by itself will lower municipal revenues by several tens of billions of forints and means a major blow to the budgets in Hungary’s larger cities.

However, at the request of local municipalities, the government has decided to reimburse their additional costs associated with the minimum wage hike that went into effect on January 1. While this alone will not save municipal budgets, the government decree at least provides them with some extra revenue to cover their added expenses.

[Magyar Hang][Photo: Szeged City Hall, Wikimedia Commons, GFDL, CC-by-SA 2.0-de]

Márki-Zay promises greater support for municipalities if elected

picture of Péter Márki-Zay, György Gémesi, Gergely Karácsony

More cuts in funding, a lack of information, and buck passing are what local municipalities have to face, according to the leaders of the Association of Hungarian Municipalities (MÖSZ). After hearing these grievances, Péter Márki-Zay, the joint opposition candidate for prime minister, promised to support all municipalities without political considerations if his side wins the elections next year.

At MÖSZ’s board meeting on Tuesday, attended by Márki-Zay as well as Budapest Mayor Gergely Karácsony, raising the minimum wage was one of main the topics discussed. Although local municipalities are the nation’s second largest employers, MÖSZ President György Gémesi criticized the fact that they have not been able to take part in any of the negotiations on the topic.

Although Karácsony supports reducing the tax burden on employers in connection with the minimum wage increase, he believes that “the problem is that they want to make local municipalities pay the cost of this.” According to Karácsony, there is a political motivation behind the decision. “Their real political intention is not to help businesses and employers in a proper way,” he said, “but to withdraw funding from the local municipality system so that municipalities are kept on a short leash.”

Discussing the coronavirus, opposition prime ministerial candidate Péter Márki-Zay criticized the government for passing the buck on the decision to order compulsory vaccination, even though he thinks it should be the government’s responsibility in “all cultured countries.”

“It’s a cowardly move on the part of the government,” the opposition leader said, noting that municipalities haven’t even received the information they need to make a responsible decision. He cited his own city as an example, where neither a representative of the local hospital nor the government office has a seat at the strategic management operational staff meeting, nor are they receiving data from them.

At the same time, Márki-Zay promised that if Viktor Orbán’s government is replaced next year, his government will support all local governments without political considerations.

[Magyar Hang]

Minimum wage increase puts a strain on local municipalities

picture of a town hall writes that while many may be pleased at the planned 20% increase in the minimum wage in January, it is sure to cause headaches for certain employers such as municipalities, who don’t have extra money to spend.

According to the president of the National Association of Local Governments, raising the minimum wage in the public sector could results in wage tensions, because those who earn more than the minimum wage could legitimately expect a salary increase.

Jenő Schmidt told Inforádió that local governments are in a tough economic situation even without increasing salaries and cannot raise wages without additional resources. He feels that wages should be raised due to higher prices, but local governments will also need extra resources for this.

Schmidt claimed that the issue of managing local governments is complicated by the fact that the government receives all tax money that enters state coffers, meaning that local municipalities’ room to maneuver “converges to zero.”

Hungarian municipalities employ about 100,000 people in total.