Latvian Association of Local Governments (LPS) detailed in a press statement that it invites the Saeima to listen and hear municipalities’ plight about the critical situation that could appear next year, especially in all of Latgale region’s municipalities.
The organisation notes: although the Cabinet of Ministers and LPS have sighed an agreement on the state budget for 2024 and the medium-term budget, there are still clashing opinions about the need for funding in municipalities to cover the growing costs and ensure uninterrupted provision of basic functions.
Although the tax revenue in municipalities’ base budgets is up 7.9%, it will not cover the additional functions assigned by the state with various laws and regulations. For example, in 2024 the costs of raising minimal wages will go up by 13%,
and the cost of raising pre-school teachers’ wages will go up by 42%.
On top of that, the de-deinstitutionalisation project was not provided with the much-needed EUR 25 million in the end. The cost of guaranteed minimum income benefit and housing benefit will also go up next year.
The government has called the next year’s state budget a budget of security and longevity. LPS chairman Gints Kaminskis stresses in the press statement – if the government’s priority is domestic and external security, then municipalities are a priority as well. The same applies to education, healthcare and other important sectors active in municipalities. Municipalities cannot be viewed as a separate sector in the context of the budget. However, the current situation still creates serious challenges for most municipalities because of a shortage of funding and general uncertainty, because only municipalities with a stable base financing are the future for the country’s continued development, security, longevity and public peace.
This is why it is necessary to ensure appropriate financing for municipal functions. Otherwise Latvian regions risk facing a number of challenges that will have a serious effect on residents. Additional EUR 7 million were found after discussions with the PM and Ministry of Finance, as well as EUR 5.5 million to finance de-institutionalisation services for children with disabilities. Unfortunately, this support will not be available because
municipalities’ overall revenue has become inadequate to match the level of expenditures.
And this problem can no longer be resolved by borrowing money.
Kaminskis stresses that the 5% reduction of personal income tax for municipalities in recent years has created a situation in which there is no funding left to afford even basic functions, to say nothing about development. This year the change of tax proportion has caused municipalities to lose EUR 130 million. In parallel to all this municipalities continue optimising costs, but this can only go so far, because reserves are already exhausted. On top of that, the state’s participation in equalising financing is down EUR 45 million when compared to the year prior.
An agreement was reached with the government to start improving the municipalities equalisation system.
If we want self-sufficient municipalities, stresses Kaminskis, then there has to be predictable and stable financing in all municipalities and all regions, which is related to the performance of statutory functions throughout the country, as well as to the proportion of personal income tax, so that municipalities could implement projects at their own expense and invest in development and welfare of residents.
Also read: Latvian Saeima receives state budget project for 2024
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