Under legislation in force, the Cabinet of Ministers supposed is to submit to Verkhovna Rada the next year’s draft budget on September 15 at the latest. It is too early to analyze it in detail: what is known with certainly is that the 2001 state budget provides for a UAH 185-billion GDP (4% real growth), average annual hryvnia rate of UAH 6.7 to $1, and zero deficit. Fierce battles over the adoption of this most important document still lie ahead, but they seem to have already started. This is clear from Minister of Finance Ihor Mitiukov’s announcement that his ministry suggests in the 2001 draft budget that the state budget switch over to direct financial relations not only with oblast budgets but also with those of the oblast-subordinated cities and districts. “The main feature of interbudgetary relations next year is application of the objective standard-setting, so- called formula-related, approaches to identify both the solvency of local budgets and the necessity of financing them,” Mr. Mitiukov said. In his opinion, the changes to be made will not only increase local stimuli for collecting revenues for budgets at all levels but will also be more in compliance with the Constitution and local laws. However, representatives of regional authorities did not support the finance minister’s optimism. Last week, a session of the Union of Local and Regional Leaders of Ukraine advanced a “local” viewpoint to counter the governmental stand:
Viktor TYKHONOV, chairman, Luhansk Oblast Council:
“The main thing is that the 2001 budget should provide for at least 40% of revenues to remain behind in the regions. Unfortunately, this country’s budget has been designed year by year according to pattern of pulling everything to Kyiv and then redistributing it to regions. And, more often than not, distribution depends, figuratively speaking, on one regional leader or another’s big smile, i.e., it is absolutely unfair. We have tried to get a formula-based distribution of the budget. In that case it becomes immediately clear why one oblast was given UAH 500 million and another a billion. This seems realistic this year. But, unfortunately, the formula-based approach is being distorted from the very start. The whole point is that correction or leveling coefficients are being applied in an absolutely unfair way. For example, Zhytomyr oblast was assigned the coefficient of 23: this means it will receive 23% more funds than other oblasts. This gives rise to the question of why. On the one hand, it is very good that the Ministry of Finance has now come down to the level of cities. However, I’ve already told Mr. Mitiukov: now you will have 700 cities and districts. How are you going to deal with them? In the past, it was we who put out all the fires in the oblast, and now? A wise solution should be made, otherwise the regions and the center will continue to be at loggerheads.”
Volodymyr TIAHLO, chairman, Kharkiv Oblast Council:
“We would like to see each oblast’s budget self-sufficient to cater to all the existing items of budgetary funding. The next year’s draft budget provides UAH 784 million for Kharkiv oblast, out of which UAH 440 million should be utilized as public-sector wages and salaries, of all things. How on earth can we accept a budget like this? I am very often surprised that, while the budget is being drawn up, we can quite easily find a common language with the Cabinet of Ministers in general and the Ministry of Finance in particular. But when you get the final version of a draft budget put on the Verkhovna Rada agenda, you see that the tin lid has been put on all our agreements. How can we tolerate such an attitude toward regional authorities?
Today, Kharkiv oblast is contributing over UAH 2 billion in revenues but is allowed to retain only UAH 784 million, i.e., a third. And we are supposed to fund all public subsidies and grants with money alone. What the center should do is either abolish these subsidies or take this responsibility itself. The same applies to funding the public-sector organizations. Why not leave with us a certain percentage of local duty earnings to enable us to finance the public-sector organizations, with due account of the national deficit? Instead, we still remit money to Kyiv and then wait to see whether or not it will come back. Simultaneously, the regional ‘beggars’ (by no means empty-handed) go to Kyiv. Earlier, there were 27 budgets in Ukraine, now there will be 682. To what extent will the number of Kyiv-bound mendicants increase? So is there any sense in this, the more so that regional budgets will be programmed for a most acute deficit?”
