Abstract
Research background:In theory, indebtedness of municipalities is only ever associated with the acquisition of investments. It is advised that indebtedness should be regulated by the state, but there is a risk of limiting investment in local infrastructure.Purpose of the article:According to Act No. 23/2017 Coll., municipalities must regulate their own indebtedness and comply with the fiscal rule on pain of penalty. The aim of this text is to provide an analysis and examine the prospects of compliance with the fiscal rule in 205 municipalities with extended power. The analysis is carried out between 2017 and 2019, the risks of compliance in the following years mainly relate to the emerging economic crisis caused by the COVID-19 pandemic.Methods:Given the subject of the analysis, secondary data was used for the research. Data was taken from the Monitor database operated by the Ministry of Finance of the Czech Republic. The obtained data had been processed using standard statistical methods.Findings & Value added:To date, the indebtedness of municipalities with extended power is not excessive: the mean and median values are still well below the legal limit. Still, there are some municipalities where the legal limit has been exceeded, or whose indebtedness is nearing the limit. In the event of reduced tax revenue, which is to be expected in the coming years, these municipalities will struggle to comply with the fiscal rule. The consequences will include halting or limiting local investment, and/or reducing the quality of local public goods.
Highlights
Municipalities in the Czech Republic are considered to be basic territorial selfgoverning units [1] with their basic status, rights, and obligations regulated by Act No 128/2000 Coll., on Municipalities (Municipal Establishment) [2], and the framework of their management regulated by Act No 250/2000 Coll., on Budgetary Rules of Territorial Budgets [3]
It can be read that municipalities with extended power differed significantly in the value of the budget responsibility indicator: on the one hand, there are municipalities where this value is zero, on the other hand, there are municipalities that exceed the fiscal rule
The values of the coefficient of variation indicate that the set is quite inconsistent in terms of the value of the budget responsibility indicator, while the values of the standard deviation indicate the same – the absolute variability of municipalities with extended power in terms of the value of calculated budget responsibility is quite high
Summary
Municipalities in the Czech Republic are considered to be basic territorial selfgoverning units [1] with their basic status, rights, and obligations regulated by Act No 128/2000 Coll., on Municipalities (Municipal Establishment) [2], and the framework of their management regulated by Act No 250/2000 Coll., on Budgetary Rules of Territorial Budgets [3]. Municipalities operate based on their own budget and are fully responsible for their activities. With the adoption of Act No 23/2017 Coll., on the Rules of Budgetary Responsibility, were strict rules set for the regulation of indebtedness for municipalities and other territorial self-governing units, the non-compliance of which may lead to financial sanctions. Municipalities have adapted to these conditions in the years 2017-2019, and they had no significant problems complying with the legal rules. In the period of the onset of the economic downturn in connection with the global COVID-19 pandemic, the management of municipalities will become increasingly difficult, as their incomes will decrease significantly
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