Report on the development of budgetary management of municipalities, voluntary associations of municipalities and regions as at 31 October 2022
The local governments in October 2022 are still in very good financial condition and continue to generate economic surpluses, despite the threat of a deep recession. The management of territorial budgets continues to exceed the results of the management from the period of the second wave of the COVID-19 pandemic, but in comparison with last year or the period before the pandemic, it reports a decline. The reason is the Russian invasion of Ukraine, which has serious economic consequences, and the current high inflation, which gave rise to warnings about the strains these budgets would face as the actual situation cut short important sources of revenue while creating new spending and needs.
Local Governments
Municipalities, regions and voluntary associations of municipalities in October 2022 operate with a surplus budget balance of CZK 36.6 billion. Adjusted budget balance1 amounted to CZK 23.8 billion. The economic result decreased against last year (by 8%, i.e. CZK 3.2 billion), but in comparison with year 2020 (the period of the first wave of the COVID-19 pandemic), the balance even improved by 139.7%, i.e. CZK 21.3 billion. Even in comparison with the results with the period before the pandemic, i.e. October 2019, the economic result decreased by 0.1%, i.e. CZK 40.6 billion (see chart no. 1).
The total revenues of local budgets reached CZK 601.1 billion in October 2022 and increased by 9.8%, i.e. by CZK 53.5 billion. Adjusted total revenues1 amounted to CZK 451.2 billion. Their own revenues amounted to CZK 368.3 billion and increased by 17.3% in comparison with last year, i.e. by CZK 54.3 billion. This growth was caused by an increase in tax revenues, which reached CZK 312.3 billion and increased by 16.5%, i.e. by CZK 44.1 billion.
The total consolidated expenditures of local budgets in October 2022 amounted to CZK 564.6 billion and increased by 11.2% in comparison with last year, i.e. by CZK 56.7 billion. Adjusted total expenditures1 amounted to CZK 427.4 billion. The current expenditures in October this year amounted to CZK 453.8 billion (CZK +37.6 billion) and the capital expenditures reached CZK 110.8 billion (CZK +19.1 billion). In October 2022 local governments realized consolidated expenditures for aid to Ukraine in the amount of CZK 3.5 billion (mainly the capital city of Prague).
Regions
As at 31 October 2022 the regions operate with a surplus budget of CZK 8.6 billion. Adjusted budget balance1 amounted to CZK 8.3 billion. The budget balance increased compared to last year, even exceeded the economic results from the period of the second wave of the pandemic. How described in chart no. 2 the total revenues of the regions in October this year amounted to CZK 257 billion and increased by 6.6%, i.e. by CZK 15.9 billion. Adjusted total revenues1 reached CZK 125.4 billion. Their own income reached CZK 82.1 billion (CZK +12 billion). Own revenues improved due to the growth of tax revenues, which increased by 16%, i.e. by CZK 9.9 billion, to CZK 73.8 billion.
The total expenditures of the regions as at 31 October 2022 amounted to CZK 248.4 billion and increased by 6.1% compared to last year, i.e. by CZK 14.3 billion. Adjusted total expenditures1 reached CZK 126.3 billion. This growth was caused by an increase in current expenses, which increased by 5.8% compared to last year, i.e.by CZK 12.2 billion, to CZK 221.8 billion. The transfers that the regions transferred to contributory and similar organizations reached CZK 167.5 billion and represent 75.6% of total current expenses. Most of these funds were intended for direct education costs.
At the end of October, capital expenditure also increased by 8.4%, i.e. by CZK 2.1 billion, to CZK 26.6 billion, despite restrictions of investment transfers or a significant increase in the price of construction materials. The increased investment activity corresponds to the fact that regions mainly invest before the end of the budget year. The regions even invested more than before the outbreak of the pandemic, by 16.4%. The regions realized expenses for aid to Ukraine in the amount of CZK 2.4 billion.
Municipalities
As at 31 October 2022, the municipalities reported a positive budget balance of CZK 27.7 billion. The balance fall in comparison with last year's balance by 14.2%, i.e. by CZK 4.6 billion. On the other side the balance exceed the economic results from the period before the pandemic by 39.6%, i.e. by CZK 1.2 billion (see chart no. 3). Adjusted budget balance1 amounted to CZK 24.4 billion. In October of this year, the capital city operate with a surplus of CZK 14.4 billion, with total revenues of CZK 96.3 billion and expenses in the amount of CZK 81.8 billion. Without the capital city, the total consolidated revenues of the municipalities at the end of October amounted to CZK 254.3 billion, expenses to CZK 241.2 billion, and the budget ended in a surplus of CZK 13.1 billion.
The total revenues of municipalities at the end of October this year reached CZK 350.6 billion and increased by 12.4%, i.e. by CZK 38.7 billion compared to October 2021. Adjusted total revenues1 reached CZK 332.3 billion. Their own income amounted to CZK 285.1 billion (growth of 17.4%, i.e. by CZK 42.2 billion) and represent the majority of total adjusted income. In comparison to the regions, the municipalities are relatively more self-sufficient and thus do not show significant dependence on received transfers. The own revenues improved due to the growth of tax revenues, which increased by 16.7%, i.e. by CZK 34.2 billion to CZK 238.6 billion and thus reached their highest level.
The total expenditures of municipalities in October 2022 amounted to CZK 323 billion and increased by 15.5%, i.e.by CZK 43.3 billion compared to last year. Adjusted total expenditures1 reached CZK 304.6 billion. The growth was mainly caused by an increase in current expenses, which increased by 12.3% compared to last year, i.e. by CZK 26.2 billion, to CZK 238.8 billion. The capital expenditures by municipalities also increased against last year (specifically by 25.5%, i.e. by CZK 17.1 billion) and reached CZK 84.2 billion. Municipalities even invested more than before the outbreak of the pandemic, by 25.9%. The municipalities realized expenses for aid to Ukraine in the amount of CZK 1.2 billion.
1 The total revenues and expenditures without direct education costs and subsidies for private schools, which regions and capital city of Prague directly allocated to the relevant schools and school facilities.