Key dates : 1990 Self-government act – reactivation of the self-government in Poland (March) First elections (June) Self-government revenue act (December) 1991 Establishment of regional audit chambers 1997 New Constitution – new guarantees for the LGE 1998 Establishment of poviats (counties) and self-governed voivodships (regions) 2003 New Self-government revenue act – still in force 2004 Poland becomes the member of EU – new opportunities for LGs 2007 Voivodships become the managing authorities for the regional operational programmes 2009 New public finance act – budget procedures – still in force

1. WOJCIECH MISIĄG *
REVENUE AND EXPENDITURE OF LOCAL GOVERNMENTS
IN POLAND – RECOMMENDATIONS AND WARNINGS
* INSTITUTE FOR FINANCIAL RESEARCH AND ANALYSIS – UNIVERSITY OF IT & MANAGEMENT IN RZESZOW
SUPREME AUDIT OFFICE

2. PLAN OF THE PRESENTATION
1. HISTORY – KEY DATES 1989−2015
2. ORGANISATION AND STRUCTURE OF LOCAL & REGIONAL SELF-GOVERNMENT
IN POLAND
3. REVENUE AND EXPENDITURE OF LOCAL GOVERNMENT ENTITIES (LGE)
4. FINANCIAL SITUATION OF LOCAL GOVERNMENTS
5. WHAT’S GOOD, WHAT’S WRONG – RECOMMENDATIONS AND WARNINGS

3. POLAND IN 1989
 Centrally-planned, socialist-type economy
 Small private sector outside agriculture
 Large foreign debt (49 billion $)
 Unbalanced state budget
 Leading position of the communist party stated in the Constitution
 Hierarchical system of state public administration
 Communes without legal personality and without ownership rights
 Non-democratic elections to the communes’ councils
 Territorial organisation of the state: 49 voivodships, almost 2,500 communes

4. KEY DATES 1989−2015
1990 Self-government act – reactivation of the self-government in Poland (March)
First elections (June)
Self-government revenue act (December)
1991 Establishment of regional audit chambers
1997 New Constitution – new guarantees for the LGE
1998 Establishment of poviats (counties) and self-governed voivodships (regions)
2003 New Self-government revenue act – still in force
2004 Poland becomes the member of EU – new opportunities for LGs
2007 Voivodships become the managing authorities for the regional operational
programmes
2009 New public finance act – budget procedures – still in force

5. LOCAL GOVERNMENT IN POLAND – CONSTITUTIONAL PROVISIONS (1997)
 Local government shall participate in the exercise of public power.
 Units of local government shall possess legal personality. They shall have rights of ownership and other
property rights.
 The self-governing nature of units of local government shall be protected by the courts.
 Public duties aimed at satisfying the needs of a self-governing community shall be performed by units of
local government as their direct responsibility.
 If the fundamental needs of the State shall so require, a statute may instruct units of local government to
perform other public duties. [commissioned/delegated duties]
 The administrative courts shall settle jurisdictional disputes between units of local government and units of
government administration.
 Units of local government shall be assured public funds adequate for the performance of the duties
assigned to them.
 The legality of actions by a local government shall be subject to review.

6. POLAND – TERRITORIAL BREAKDOWN
2,479 gminas (communes)
incl. 66 cities with poviat rights
2,314 poviats (counties)
2,416 voivodships (regions)

7. REVENUE OF LOCAL GOVERNMENT ENTITIES (1)
SIX TYPES OF REVENUE
1. LOCAL TAXES AND FEES
2. SHARES IN PERSONAL INCOME TAX (PIT) AND CORPORATE INCOME TAX (CIT)
3. GENERAL SUBSIDIES FROM THE STATE BUDGET
4. APPROPRIATED SUBSIDIES FROM THE STATE BUDGET (incl. EU FUNDS)
5. OTHER SUBSIDIES
6. OTHER OWN REVENUE

8. REVENUE OF LOCAL GOVERNMENT ENTITIES (1)
SIX TYPES OF REVENUE
1. LOCAL TAXES AND FEES
Tax on real estate ***
Agricultural and forest taxes
Tax on means of transport ONLY GMINAS HAVE THEIR LOCAL TAXES
Stamp duty
… and many others
2. SHARES IN PERSONAL INCOME TAX (PIT) AND CORPORATE INCOME TAX (CIT)
3. GENERAL SUBSIDIES FROM THE STATE BUDGET
4. APPROPRIATED SUBSIDIES FROM THE STATE BUDGET (incl. EU FUNDS)
5. OTHER SUBSIDIES
6. OTHER OWN REVENUE

9. REVENUE OF LOCAL GOVERNMENT ENTITIES (2)
SIX TYPES OF REVENUE
1. LOCAL TAXES AND FEES
2. SHARES IN PERSONAL INCOME TAX (PIT) AND CORPORATE INCOME TAX (CIT)
Gminas – 39.34% of PIT 6.71% of CIT
Poviats − 10.25% of PIT 1.40% of CIT
Voivodships − 1.60% of PIT 14.00% of CIT
Cities with poviat rights 49.59% of PIT 8.11% of CIT
3. GENERAL SUBSIDIES FROM THE STATE BUDGET
4. APPROPRIATED SUBSIDIES FROM THE STATE BUDGET (incl. EU FUNDS)
5. OTHER SUBSIDIES
6. OTHER OWN REVENUE

10. REVENUE OF LOCAL GOVERNMENT ENTITIES (3)
SIX TYPES OF REVENUE
1. LOCAL TAXES AND FEES
2. SHARES IN PERSONAL INCOME TAX (PIT) AND CORPORATE INCOME TAX (CIT)
3. GENERAL SUBSIDIES FROM THE STATE BUDGET
Calculated separately for each LGE according to the algorithm described in
the Local Governments’ Revenue Act from 2003
Education part (80%) – number of pupils, number of teachers
Equalisations part ( 15%)
Additional equalisation ( 4%)
MOF reserve ( 1%)
4. APPROPRIATED SUBSIDIES FROM THE STATE BUDGET (incl. EU FUNDS)
5. OTHER SUBSIDIES
6. OTHER OWN REVENUE

11. REVENUE OF LOCAL GOVERNMENT ENTITIES (4)
SIX TYPES OF REVENUE
1. LOCAL TAXES AND FEES
2. SHARES IN PERSONAL INCOME TAX (PIT) AND CORPORATE INCOME TAX (CIT)
3. GENERAL SUBSIDIES FROM THE STATE BUDGET
Calculated separately for each LGE according to the algorithm described in
the Local Governments’ Revenue Act from 2003
Education part (80%) – number of pupils, number of teachers
Equalisations part ( 15%)
Additional equalisation ( 4%)
MOF reserve ( 1%)
4. APPROPRIATED SUBSIDIES FROM THE STATE BUDGET (incl. EU FUNDS)
5. OTHER SUBSIDIES
6. OTHER OWN REVENUE

12. REVENUE OF LOCAL GOVERNMENT ENTITIES (5)
SIX TYPES OF REVENUE
1. LOCAL TAXES AND FEES
2. SHARES IN PERSONAL INCOME TAX (PIT) AND CORPORATE INCOME TAX (CIT)
3. GENERAL SUBSIDIES FROM THE STATE BUDGET
4. APPROPRIATED SUBSIDIES FROM THE STATE BUDGET (incl. EU FUNDS)
Calculated separately for each LGE and for each duty/task
Very unclear rules of calculation (allocations for the LGE should be equal to
the allocations for the similar duties in the state budget) the subsidies
financing the delegated duties
5. OTHER SUBSIDIES
6. OTHER OWN REVENUE

13. STRUCTURE OF THE LGE REVENUE (4)
LGE GM POV VOI
OWN REVENUE 28.3% 33.0% 13.7% 7.0%
GENERAL SUBSIDIES 27.9% 26.6% 44.5% 16.4%
OTHER SUBSIDIES 22.6% 19.6% 25.9% 44.9%
PIT 17.7% 19.3% 15.2% 6.5%
CIT 3.4% 1.4% 0.7% 25.2%
GMINAS 78.6%
POVIATS 12.6%
VOIVODSHIPS 8.8%

14. SHARE OF LGS’ EXPENDITURE IN GENERAL GOVERNMENT EXPENDITURE
BUDGETS OF LGE 22,7%
HEALTH CARE INSTITUTIONS OF LGE 3,9%
OTHER LGE INSTITUTIONS 1,8%
TOTAL SELF-GOVERNMENT SECTOR 28,4%
i.e. ALMOST 200 BILLION PLN (48.5 BILLION €)
SOCIAL AID 99.4%
EDUCATION 97.7%
MUNICIPAL ECONOMY 64.7%
SPORT 74.3%
TRANSPORT/COMMUNICATION 60.1%
HEALTH CARE 2.2%
SOCIAL INSURANCE 0.0%
NATIONAL DEFENCE – LESS THAN 0.1%

15. ASYMMETRIC DISTRIBUTION OF LGE REVENUE
LGE REVENUE PER CAPITA
(3764,8 zł, OF WHICH OWN REVENUE– 2015,0 zł)
LGE REVENUE BY VOIVODSHIPS
(2013, AVERAGE FOR POLAND =100)
CITIES WITH POVIAT RIGHTS 5067,1 zł
OTHER CITIES 2941,9 zł
URBAN-RURAL GMINAS – 3052,3 zł
RURAL GMINAS – 3223,0 zł
POVIATS – 893,5 ZŁ
DO 95% 95 – 100% 100 – 105% 105 – 110% PONAD 110%
ONLY 10% OF GMINAS HAVE THE REVENUES (PER CAPITA) HIGHER THEN AVERAGE FOR POLAND

16. DEBT
GMINAS’ DEBT BY CENTILE GROUPS
(109
zł)
LGE DEBT (END 2013) – 69,2 109
zł
Gminas – 56,7
Poviats – 5,9
Voivodships – 6,6
0,0
5.000,0
10.000,0
15.000,0
20.000,0
25.000,0
30.000,0
35.000,0
1 2 3 4 5 6 7 8 9 10

17. WHAT’S GOOD, WHAT’S WRONG – RECOMMENDATIONS AND WARNINGS
+ –
 FINANCIAL STABILITY
 RELATIVELY GOOD INVESTMENT POTENTIAL
 OWN BUDGET FOR EACH LGE
 EXCESSIVE INEQALITIES BETWEEN LGE
 WEAK OWN REVENUE OF POVIATS AND
VOIVODSHIPS
 PRECISE ALGORITHMS FOR CALCULATING
THE GENERAL SUBSIDIES
 EXCESSIVE SCOPE OF DELEGATED DUTIES
 BAD ALGORITHMS FOR CALCULATING
THE GENERAL SUBSIDIES
 TOO MUCH DELEGATED DUTIES
 LIMITED ACCESS TO FINANCIAL MARKETS

18. OUR PROPOSALS FOR POLAND
 NEW OWN REVENUE
 NEW ALGORITHM FOR THE GENERAL SUBSIDIES
 CANCELLATION OF DELEGATED DUTIES
 SIMPLIFICATION OF SUPERVISION PROCEDURES
 VERIFICATION OF LG ENTITIES’ DUTIES

19. EXTERNAL PROBLEMS
GDP growth rates in Poland (1998−2013)
 Macroeconomic situation
 Financial system for education duties
and social rights of teachers
 Taxes in agriculture
 Concentration of CIT and PIT in the
biggest cities
 Bad atmosphere for PPP
-6,0
-4,0
-2,0
0,0
2,0
4,0
6,0
8,0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
UE
POLSKA

20. INTERNAL WEAKNESSES OF LGE
 LACK OF „TRUE” MULTI-YEAR STRATEGIC PLANNING
 VERY TRADITIONSAL APPROACH TO BUDGET PLANNING
 LOW ADMINISTRATIVE POTENTIAL
 WEAK CONTACTS WITH INHABITANTS
 TOO HIGH EXPENDITURE FOR ADMINISTRATION
 LACK OF ACTIONS TOWARDS THE INCREASE OF OWN REVENUE

21. THANK YOU FOR YOUR ATTENTION