2002年-世界发展银行全球_Lithuania___Issues_in_Municipal_Finance_65页_3mb

Summary of Report No. 23716-LT: Issues in Municipal Finance in Lithuania

Core Content

This report, prepared by the World Bank, evaluates the municipal financial system in Lithuania and outlines key challenges and recommendations for reform. It highlights the need for greater fiscal autonomy and improved financial management to enhance the efficiency and sustainability of local government operations.

Main Issues in Municipal Finance

1. Fiscal Straightjacket

• Central Control: Local governments have limited autonomy over their revenues and expenditures.
• Revenue Collection: Most revenues are collected and distributed by the central government.
• Expenditure Control: Major expenditures such as salaries and welfare payments are centrally controlled.
• Financial Vulnerability: Municipalities lack independent means to adjust to revenue downturns or cost increases.
• Arrears and Debt: Municipalities have accumulated arrears and short-term debt, with annual deficits averaging 3.5% of revenues.
• Reform Goal: The 2002 reforms aim to shift responsibility for major expenditures like education and welfare to the central government.

2. Mistargeting of Transfers

• Revenue Sharing: A system exists where higher-revenue municipalities share with lower-revenue ones.
• Effectiveness: It is unclear if the distribution mechanism effectively targets funds to areas with high needs.
• Reform Change: The 2002 reforms propose a shift to sector-specific indicators of need for funding distribution.

3. Financing Capital Investment

• Current Sources: Municipalities lack their own savings and rely heavily on the central government's Public Investment Program (PIP).
• EU Accession Impact: The PIP is being depleted, and EU structural and regional funds will become available after accession.
• Project Selection: Projects are often prioritized for EU accession, which may not align with local priorities.
• Private Sector Participation: Opportunities for private sector involvement in municipal utility companies are noted.

4. Financial Reporting and Management

• Accounting Issues: Current financial systems do not provide accurate information for decision-making.
• Recommendations:
  • Separate current and capital accounts.
  • Adopt accrual accounting for expenditures.
  • Consolidate fund and enterprise operations.
  • Improve municipal enterprise management and reporting.

Key Recommendations

• Increase Local Fiscal Autonomy: Allow municipalities to adjust local revenues through surcharges on personal income tax or expanded property tax.
• Improve Revenue Distribution: Use sector-specific indicators of need for funding allocation.
• Tighten Borrowing Controls: Prohibit borrowing in international bond markets and foreign currency, except for the Euro.
• Centralize Welfare Payments: The Government should make welfare payments directly to beneficiaries, using local governments as paymasters.
• Address Arrears and Debt: Cease extending new Treasury loans to municipalities in default and enforce prompt payment to the state tax inspectorate.
• Promote Financial Transparency: Enhance financial reporting systems to ensure accurate and timely information for policy and management decisions.

Background on Lithuania's Municipal Structure

• Two-Tier Government: Lithuania has a national and municipal level of government.
• Municipalities: There are 60 municipalities, with most having populations between 20,000 and 90,000.
• Functions: Municipalities are responsible for education, welfare, and public utilities (excluding electricity).
• Education: Accounts for 57% of municipal expenditure in 2000.
• Welfare: Accounts for 15% of municipal expenditure, with a mix of non-means-tested and means-tested support.
• Public Utilities: Include district heating, water supply, sewerage, and public transit, often managed as municipal enterprises.

Revenue Trends (2000)

• Total Revenue: Approximately LTL 3,195 million.
• Personal Income Tax (PIT): The main revenue source, accounting for 76% of municipal revenue in 2000.
• Corporate Income Tax: Minimal contribution, with no revenue in 2000.
• Property Taxes:
  • Building Tax: LTL 177.75 million, 5% of total revenue.
  • Leased Land Tax: LTL 50.9 million, sourced from property owners awaiting restitution.
  • Land Tax: LTL 16.7 million, 0.04% of GDP, with low yields due to depressed agricultural land prices and widespread exemptions.

Fiscal Autonomy and Reform Agenda

• Need for Autonomy: Municipalities must have more control over revenues and expenditures to manage their finances effectively.
• 2002 Reforms:
  • Transfer responsibility for major expenditures (e.g., education, welfare) to the central government.
  • Change the revenue distribution mechanism to better reflect local needs.
• Unresolved Issues:
  • Mismatches between actual costs of delegated functions and the amounts received from the central budget.
  • Excessive teaching staff in rural municipalities.
  • Need for stronger budget constraints and more control over wage rates and employment terms.

Conclusion

The report emphasizes that while the 2002 reforms are a positive step, they must be accompanied by structural changes in intergovernmental relations to ensure the long-term financial stability and efficiency of municipal governments. These changes include increasing local control over revenues and expenditures, improving financial transparency, and strengthening the budget constraint on local governments.