FM: High local government consolidated budget surplus

In the first half of 2019, the consolidated local government budget posted a surplus of EUR 116.2 million, an increase of EUR 58.4 million compared to the same period last year. The surplus was provided by rapidly growing state transfers, including for the realization of European Union (EU) fund projects, as well as increased tax revenues. Although there is a surplus in the consolidated local government budget in the first half of 2019, overall, the local government consolidated budget is expected to be in deficit in 2019, taking into account the increase in expenditure in the second half of the year.

Consolidated municipal budget revenue in the first half of this year amounted to EUR 1452.3 million, which is EUR 155.6 million or 12% more than in the same period last year. The largest increase was achieved by state transfers, which increased by EUR 103.5 million or 24.9%. State transfers for the implementation of projects co-financed by EU funds and other foreign financial assistance increased by EUR 50.4 million. The increase in state transfers was also supported by an increase in teachers' pay as of September 1, 2018, as well as a special grant to municipalities to offset income tax losses (PIT), which shows a slower rate of growth as a result of the tax reform. The special grant for 2019 is set at EUR 86.5 million, an increase of EUR 64.6 million compared to 2018.

Tax revenue increased by EUR 45.2 million or 5.8% in the first half of this year to EUR 828.6 million. The increase was due to all taxes collected in the municipal budget - PIT, real estate tax, lottery and gambling tax and natural resources tax. The largest increase in tax revenue was provided by PIT and real estate tax revenue. Income from PIT in the first half of this year showed an increase of 41.3 million euros or 6.5%, which was positively influenced by 0.6% increase in the number of employed in economy and 7.8% increase in gross wages and salaries in the first quarter of this year. management data.

The implementation of the PIT revenue was also affected by the tax reform adopted on 1 January 2018, which increased the differentiated non-taxable minimum to EUR 230, the pensionable pensioner's pension to EUR 270 and the dependency allowance to EUR 230 as of 1 January 2019. According to the operative data of the State Revenue Service, in the first half of this year citizens actively submitted annual income declarations, which resulted in overpayment of personal income tax in the amount of 121.4 million euros, which is 10.5 million euros or 9.5% more than in the same period last year. . On April 3 this year, the law “On the State Budget for 2019” was adopted, which, as before, established the guaranteed percentage distribution of PIT revenue, which was achieved in accordance with PIT execution in the first half of the year.

Consolidated municipal budget expenditure for the first half of the year amounted to EUR 1336.1 million, an increase of EUR 97.2 million or 7.8% over the same period last year. The largest increase was due to capital expenditure, which increased by EUR 47.8 million or 25.4% to EUR 236.3 million. Capital expenditures consist of expenses for basic functions and implementation of EU funds projects. While EU fund investment continued to grow by EUR 56 million following the successful implementation of EU fund projects, expenditure on core functions decreased by EUR 8.2 million as local governments were able to borrow EU and other foreign financial assistance in the first quarter of this year under temporary budget conditions implementation of co-financed projects. The Law on the State Budget for 2019, in its turn, established the conditions for borrowing by local governments, 

It should be noted that the annual municipal borrowing limit is affected not only by the borrowings granted in 2019, but also by the proportion of borrowings granted in previous years, for which disbursement is scheduled for 2019. As local government borrowing requests can only be covered within the 2019 local government borrowing facility, priority is given to projects co-financed by the EU and other foreign financial assistance with a borrowing amount that does not exceed the total eligible costs. In the first half of 2019, outstanding loan authorizations for the current year totaling EUR 135.4 million were issued, as well as the fulfillment of the obligations of the loan agreements concluded in previous years for the payment of medium-term loans worth EUR 85.7 million.

Expenditure on grants and grants increased by EUR 15.4 million or 16.8% to EUR 106.8 million. The growth was driven by subsidies to companies providing public transport services, which increased by EUR 15.1 million in Riga Municipality. Expenditure on goods and services increased by EUR 13.3 million or 4.6% to EUR 300.2 million. On the other hand, claims incurred increased by EUR 18.7 million, or 3.1%, to EUR 616.5 million. The increase in salary expenses was ensured by the increase of the teachers' salary as of 1 September 2018.

In the first half of this year, local government cash deposits reached EUR 444.9 million, an increase of EUR 109.7 million compared to the end of 2018.

 

 

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