1. Ginka Tchavdarova, Executive Director of NAMRB
National Association of Municipalities in the Republic of Bulgaria
Financial Decentralization in Bulgaria
Innovative approaches for enhancing local development and self –government of the regions in Europe
30 June 2005, Sofia
Ginka Tchavdarova, Executive Director of NAMRB

2. 264 municipalities

3. Financial decentralization in Bulgaria
Local government development framework (1)
Constitution and Local Self-Government and Local Administration Act – independence of municipalities
15 years later the reform of decentralization is developing too slow
Political – YES
Administrative – YES
Financial – initial stage

4. Financial decentralization in Bulgaria
Local government development framework(2)
Main problem – discrepancy between rights and responsibilities; powers and resources
NAMRB’s priorities:
Support to the financial decentralization process
Building local capacity for EU funds management and absorption
Cooperation agreement between the Government and NAMRB – 2001
Concept and Program for financial decentralization

5. Financial decentralization in Bulgaria
First steps of the local finance system reform
Division of functions into local and mandated
Expenditure standards adopted
New mechanism of determining and allocating subsidies
MoF works jointly with NAMRB

6. Financial decentralization in Bulgaria
Positive results from the changes
Better transparency in the budget relations between the state and municipalities
Powers given to municipalities to determine local fees rates
Over 60% of municipalities assumed functions for local tax collection

7. Financial decentralization in Bulgaria
Disturbing facts (1)
Centralization of the public services – municipal budgets share in GDP and consolidated state budget is decreasing
Share (%) from
2002
2003
2004
2005
GDP
7.1
6.3
6.1
5.7
CSB
18.0
15.5
15.4
14.4

8. Financial decentralization in Bulgaria
Disturbing facts (2)
Own-revenue sources of municipalities are cut off
Local tax revenue share is decreasing
Local tax share in
Average for Europe
Bulgaria
Total state tax revenues
11%
1.7%
Municipal revenues
36%
8.4%

9. Financial decentralization in Bulgaria
Disturbing facts (3)
Investments share in municipal budgets is too small – 11%.
“General subsidies” turned into “targeted” – municipalities manage at their discretion just about 7% of the subsidies
Structural deficit exists – overdue liabilities of municipalities

10. Financial decentralization in Bulgaria
What are the most important conclusions?
Local finance system is in contradiction with free-market economy principles
Financial decentralization is “cemented”
The specialized legislation “devours” local resources
The ECLSG principles are not applied in practice
The possibilities for local finance reform have been depleted within the current Financial Decentralization Concept

11. Financial decentralization in Bulgaria
What are the expectations of Bulgarian municipalities? (1)
Revenues reform
Constitution amendment – taxation powers to municipalities
Providing “space” for local taxes – reordering the tax system
Expanding the scope of local taxes
Expenditures reform
Extended powers of municipal councils
Delegated budgets

12. Financial decentralization in Bulgaria
What are the expectations of Bulgarian municipalities? (2)
Local Finance Act
Administrative capacity development
For assuming taxation powers
Own municipal tax administrations
For efficient financial management
Conditions provided for EU funds absorption
Enhanced public pressure for implementing changes