General grants and development – a relationship without a future? The effects of the structure of general grants on the development of local government units in Poland

Abstract

The purpose of this paper is to attempt to identify the reasons for the lack of relationship between general grant revenue and investment expenditure of local government units. The author formulated the hypothesis that there is no link between general grants and investment expenditure and that the reason for this are the current spending on education, absorbing the entire amount of general grants received by local government units. The hypothesis was verified in a procedure consisting of several steps. The theoretical part contains a description of the revenue system of local government units in Poland with particular emphasis on transfers, including general grants. Although the local government in Poland is a three-tier system (communes, counties, provinces), the investigation presented in the analytical part was carried out for four groups of units, also identifying cities with county rights. On the basis of the results of statistical analysis and a comparison of revenues from the education component of the general grants and the overall amount of general grants with expenditure on education, the most likely explanation is the size of expenditure on education, which often exceeds the total revenue from the general grants.