Local Government Financial Condition – Small Towns Versus Large Cities in Poland

  • Mariusz Czupich Nicolaus Copernicus University in Toruń, Faculty of Economic Sciences and Management
Keywords: financial condition, local government, budget policy, towns, Poland

Abstract

The development of local government units is determined by many factors. The most important is the financial condition, which determines the possibilities of the effective implementation of tasks, both current and as an investment. In the face of an unstable macroeconomic environment, as well as growing expectations of residents regarding the improvement of living standards, local government finance management takes place under conditions of strong pressure and great uncertainty. Therefore, a rational budget policy is a prerequisite for achieving the approved development goals. It should be based on greater control of the performance and discipline in the use of budget funds. The purpose of this article is to assess and compare the financial situation of small towns and large cities in Poland in 2012-2018. The study used budget indicators in the areas of revenues, operating surplus and indebtedness. The study made it possible to draw conclusions regarding the development opportunities of Polish cities.

References

Aikins, S. K. (2011) An Examination of Government Internal Audits' Role in Improving Financial Performance, Public Finance and Management, 11(4), pp. 306–337.

Alam, A. B. M. M., Alam, M. & Hoque, A. (2017) Measuring Financial Condition of Urban Local Government: a Study of Municipaities in Bangladesh, The Journal of Developing Areas, 51(2), pp. 71-84, https://doi.org/10.1353/jda.2017.0032.

Allers, M. A., de Greef, J. A. (2018) Intermunicipal Cooperation, Public Spending and Service Levels, Local Government Studies, 44(1), pp. 127–150, https://doi.org/10.1080/03003930.2017.1380630.

Babczuk, A. (2010) Zadłużenie a zagrożenie sytuacji finansowej miast na prawach powiatów, Prace Naukowe Uniwersytetu Ekonomicznego we Wrocławiu, 112, pp. 31-49.

Banaszewska, M. (2018) Side Effects of Fiscal Rules: A Case of Polish Local Self-Government, Economics and Business Review, 4(18)1, pp: 86­106, https://doi.org/10.18559/ebr.2018.1.6.

Borodo, A. (2011) System finansowy samorządu terytorialnego w Polsce (Toruń: Dom Organizatora).

Brown, K.W. (1993) The 10-Point Test of Financial Condition: Toward an Esay-to-Use Assessment Tool for Smaller Cities, Government Finance Review, 9(6), pp. 21-26.

Brusca, I., Rossi, F. M. & Aversano, N. (2015) Drivers for the Financial Condition of Local Government: A Comparative Study Between Italy and Spain, Lex Localis - Journal of Local Self-Government, 13(2), pp. 161-184, https://doi.org/10.4335/13.2.161-184(2015).

Brzozowska, K. & Kogut-Jaworska, M. (2016) Tax Control in Evaluation of Financial Autonomy of Communes in Poland, Annales Universitatis Mariae Curie-Skłodowska Lublin - Polonia, Sectio H, L(1), pp. 327-337, https://doi.org/10.17951/h.2016.50.1.327.

Bury, A. & Bury, P. (2008) Local Finance in Poland in View of the European Charter of Local Self-Government, Economics & Sociology, 1(1), pp. 66-71, https://doi.org/10.14254/2071-789x.2008/1-1/11.

Cabaleiro Casal, R. & Buch Gómez, E. (2018) Adjustments in Municipal Fiscal Crises. Are They Different According to the Gender of the Mayor?, Local Government Studies, 44(2), pp. 255–274, https://doi.org/10.1080/03003930.2017.1387538.

Central Statistical Office of Poland (2020) available at: https://stat.gov.pl/obszary-tematyczne/rynek-pracy/bezrobocie-rejestrowane/wyrownania-sezonowe-bezrobotni-zarejestrowani-i-stopa-bezrobocia-w-latach-2011-2020,5,1.html (February 14, 2020).

Chaney, B. A., Mead, D. M. & Sherman, K.R. (2002) The New Governmental Financial Reporting Model: What it Means for Analysing Governmental Financial Condition, Journal of Governmental Financial Management, 51(1), pp. 26–31.

Cuadrado-Ballesteros, B. & Bisogno, M. (2019) Efficiency as a Determinant of Financial Condition: An Assessment of Italian and Spanish Local Governments, International Public Management Journal, 22(5), pp. 743-774, https://doi.org/10.1080/10967494.2018.1476426.

Czarny, A. (2015) Limity zadłużenia jednostek samorządu terytorialnego na przykładzie powiatów województwa zachodniopomorskiego, Folia Pomeranae Universitatis Technologiae Stetinensis. Oeconomica, 321(80), pp. 27-36.

Dylewski M., Filipiak B. & Gorzałczyńska-Koczkodaj M. (2010) Metody analityczne w działalności jednostek podsektora samorządowego (Warszawa: Difin).

Działo, J. (2019) Institutional Borrowing Restrictions: Evidence from Polish Local Governments, Studies in Law & Economics, 77, pp. 225–239, https://doi.org/10.26485/SPE/2019/112/13.

Elling, R., Krawczyk, K. & Carr, J. (2014) What Should We Do? Public Attitudes About How Local Government Officials Should Confront Fiscal Stress, Local Government Studies, 40(3), pp. 380–402, https://doi.org/10.1080/03003930.2013.823408.

Felis P. (2014) The Impact of Local Governments on Their Own Revenue Source Efficiency. Review of Communes in Poland, Business and Economic Horizons, 10(3), pp. 191-201, https://doi.org/10.15208/beh.2014.16.

Felis, P., Rosłaniec, H. (2019) Local Authority Tax Policy in Poland. Evidence from the Union of Polish Metropolises, Contemporary Economics, 13(1), pp. 49-62, https://doi.org/10.5709/ce.1897-9254.298.

Fernandez deHeredia, M., Esters, C. & Talving, K. (2005) Public Finance Evaluation of Six Polish Cities, Doing Business with Poland, In: Reuvid, J. & Terterov, M. (eds) Doing Business with Poland. Vol. 4th ed. (London: Blue Ibex, LTD), pp. 384-393.

Filipiak, B. Z. (2015) Polityka podatkowa gmin czy realizacja władztwa podatkowego?, Zeszyty Naukowe Uniwersytetu Szczecińskiego. Finanse, Rynki Finansowe, Ubezpieczenia, 76(1), pp. 221-230, https://doi.org/10.18276/frfu.2015.76/1-19.

Florea, B. (2017) The Efficiency of Using Public Funds or the Balance Between The Resources Used and the Public Service Provided, Review of Juridical Sciences, 2, p. 22-33.

Garcia-Sanchez, I. M., Mordan, N. & Prado-Lorenzo, J. M. (2012) Effect of the Political System on Local Financial Condition: Empirical Evidence for Spain’s Largest Municipalities, Public Budgeting & Finance, 32(2), pp. 40-68, https://doi.org/10.1111/j.1540-5850.2011.00986.x.

Groves, S. M. & Valente, M. G. (1994) Evaluating Financial Condition: A Handbook for Local Government (Washington, D.C.: International County/City Management Association).

Hendrick, R. (2004) Assessing and Measuring the Fiscal Health of Local Government: Focus on Chicago Suburban Municipalities, Urban Affairs Review, 40(1), pp. 78-114, https://doi.org/10.1177/1078087404268076.

Hendrick, R. M. (2011) Managing the Fiscal Metropolis: The Financial Policies, Practices, and Health of Suburban Municipalities (Washington, DC: Georgetown University Press).

Hudáková Stašová, L. (2019) The Scope of Control of the Supreme Audit Office in the Slovak Republic and in the Other Visegrad Four Countries, Society and Economy, 41(2), pp. 245‒262, https://doi.org/10.1556/204.2019.006.

Jastrzębska, M. (2012) Finanse jednostek samorządu terytorialnego (Warszawa: Wolters Kluwer Polska).

Kamnikar, J. A., Kamnikar, E. G. & Deal, K. H. (2006) Assessing a State’s Financial Condition, Journal of Government Financial Management, 55(3), pp. 30-36.

Kargol-Wasiluk, A. & Wildowicz-Giegiel, A. (2018) The Quality of Public Finance in the Light of Fiscal Governance Concept: Implications for the European Union Countries, Equilibrium. Quarterly Journal of Economics and Economic Policy, 13(3), pp. 411–426, https://doi.org/10.24136/eq.2018.020.

Kavahagh, S. C. (2007) Financing the Future: Long-Term Financial Planning for Local Government (Chicago: Government Finance Officers Association).

Kioko, S. N. (2013) Reporting on the Financial Condition of the States 2002-2010, Journal of Public Budgeting, Accounting, and Financial Management, 25(1), pp. 165-198.

Kluza, K. (2017) Changes in the Credit Risk Profile of Polish Local Governments. An Assessment of Unsystematic Risk, Argumenta Oeconomica, 2(39), pp. 167-192, https://doi.org/10.15611/aoe.2017.2.07.

Kogut-Jaworska, M. (2007) Instrumenty stymulowania lokalnego rozwoju gospodarczego, In: Patrzałek L. (ed) Stan i kierunki rozwoju finansów samorządu terytorialnego (Poznań: Wydawnictwo WSB w Poznaniu), pp. 329-341.

Kotarba, B. (2018) Draft Amendment to the Act on Regional Accounting Chambers in the Light of the Constitutional Principle of Autonomy of Territorial Self-Government Units, Horizons of Politics, 9(26), pp. 149-163, https://doi.org/10.17399/HP.2018.092609.

Levitas, A. (2017) Local Government Reform as State Building: What the Polish Case Says About ‘’Decentralization’’, Studies in Comparative International Development, 52, pp. 23–44, https://doi.org/10.1007/s12116-015-9203-5.

Liscow, Z. D. (2017) The Efficiency of Equity in Local Government Finance, New York University Law Review, 92, pp. 1828-1908.

Local Data Bank of the Central Statistical Office (2020), available at: https://bdl.stat.gov.pl/BDL/start (February 18, 2020).

Łukomska, J. & Neneman, J. (2018) Local Taxes and Fees as a Source of Revenue for Polish Municipalities: Substitutes or Complements?, Financial Internet Quarterly „e-Finanse”, 14(3), pp. 49-59, https://doi.org/10.2478/fiqf-2018-0019.

Maciejasz-Świątkiewicz, M. & Ćwieląg, K. (2016) Ratio Analysis as a Method of Evaluating The Effectiveness of Internal Audit in Rationalizing The Financial Management of Local Government Units, Financial Sciences, 1(26), pp. 54-80, https://doi.org/10.15611/nof.2016.1.05.

Malinowska-Misiąg, E. (2016) Diversity of the Local Government Units’ Debt, Economic Problems of Services, 125, pp. 249–262, https://doi.org/10.18276/epu.2016.125-20.

Mikesell, J. L. (2007) Fiscal Administration: Analysis and Applications for the Public Sector (Belmont, CA: Thomson Wadsworth).

Motek, P. (2009) Dochody gmin i miast na prawach powiatu z podatków lokalnych, Prace Naukowe Uniwersytetu Ekonomicznego we Wrocławiu, 39(2), pp. 208-215.

Natrini, N. D. & Ritonga, I. T. (2017) Design and Analysis of Financial Condition Local Government Java and Bali (2013-2014), SHS Web of Conferences, 34(03003), pp.1-9, https://doi.org/10.1051/shsconf/20173403003.

Nollenberger, K., Groves, S. M. & Valente, M.G. (2003) Evaluating Financial Condition: A Handbook for Local Government (Washington, DC: International City/County Managers Association).

Ofiarska, M. (2017) Opinions of the Regional Accounting Chambers Regarding the Documents on the Financial Activity of the Metropolitan Union, Central European Review of Economics & Finance, 19(3), pp. 57–75, https://doi.org/10.24136/ceref.2017.013.

Overmans, J. F. A. (Tom), Noordegraaf, M. (2014) Managing Austerity: Rhetorical and Real Responses to Fiscal Stress in Local Government, Public Money & Management, 34(2), p. 99-106, https://doi.org/10.1080/09540962.2014.887517.

Rada Ministrów (2019) Sprawozdanie z wykonania budżetu państwa za okres od 1 stycznia do 31 grudnia 2018 r. Informacja o wykonaniu budżetów jednostek samorządu terytorialnego, Warszawa, available at: https://www.gov.pl/web/finanse/sprawozdanie-roczne-za-2018 (January 23, 2020).

Ritonga, I. T., Clark, C. & Wickremasinghe, G. (2019) Factors Affecting Financial Condition of Local Government in Indonesia, Journal of Accounting and Investment, 20(2), pp. 1-25, https://doi.org/10.18196/jai.2002114.

Rivenbark, W.C. & Roenigk, D. J. (2011) Implementation of Financial Condition Analysis in Local Government, Public Administration Quarterly, 35(2), pp. 241-267.

Rodríguez Bolívar, M. P., Navarro-Galera, A., Alcaide Muñoz, L. & López Subirés, M. D. (2016) Risk Factors and Drivers of Financial Sustainability in Local Government: An Empirical Study, Local Government Studies, 42(1), pp. 29–51, https://doi.org/10.1080/03003930.2015.1061506.

Rodríguez-Vives, M. (2019) The Quality of Public Finances: Where Do We Stand?, Economics and Business Letters, 8(2), pp. 97-105, https://doi.org/10.17811/ebl.8.2.2019.97-105.

Satoła, Ł., Standar, A. & Kozera, A. (2019) Financial Autonomy of Local Government Units: Evidence from Polish Rural Municipalities, Lex Localis - Journal of Local Self-Government, 17(2), pp. 321-342, https://doi.org/10.4335/17.2.321-342(2019).

Sekuła, A. & Basińska, B. (2016) More Freedom - More Investments. The Relationship Between the Extent of Fiscal Autonomy with Respect to Own Revenues and Investment Expenditures of Polish Communes and Cities with County Rights, Argumenta Oeconomica, 1(36), pp. 241-260, https://doi.org/10.15611/aoe.2016.1.10.

Sinervo, L.-M. (2014) Interpreting Financial Balance in Local Government: a Case Study From Finland, Public Money & Management, 34(2), pp. 123-130, https://doi.org/10.1080/09540962.2014.887521.

Skica, T., Rodzinka, J. & Leśniowska-Gontarz, M. (2019) Assessment of Use and the Degree of Effectiveness of LGU Business Support Instruments in Poland, Transformations in Business & Economics, 18(3), pp. 272-290.

Sohl, S., Peddle, M. T., Thurmaier, K., Wood, C. H. & Kuhn, G. (2009) Measuring the Financial Position of Municipalities: Numbers Do Not Speak for Themselves, Public Budgeting & Finance, 29(3), pp. 74-96, https://doi.org/10.1111/j.1540-5850.2009.00937.x.

Standar, A. (2019) Location on City Centres and the Financial Results of Rural Local Governments, Studia Regionalne i Lokalne, 2(76), pp. 110-131, https://doi.org/10.7366/1509499527606.

Standar, A. & Kozera, A. (2020) Identifying the Financial Risk Factors of Excessive Indebtedness of Rural Communes in Poland, Sustainability, 12(3), 794, https://doi.org/10.3390/su12030794.

Stec, M. (2010) Legal Prawno-ustrojowa pozycja regionalnych izb obrachunkowych w systemie władzy publicznej w Polsce, In: Stec, M. (ed) Regionalne izby obrachunkowe. Charakterystyka ustrojowa i komentarz do ustawy (Warszawa: Wolters Kluwer Polska), pp. 42-63.

Surówka, K. (2019) The Influence of Revenue Sources on the Financial Independence and Investment Activity of Communes and Cities with 'Powiat' Rights in Poland, Research Papers of the Wroclaw University of Economics, 63(7), pp. 136-154, https://doi.org/10.15611/pn.2019.7.12.

Swianiewicz, P. (2014) An Empirical Typology of Local Government Systems in Eastern Europe, Local Government Studies, 40(2), pp: 292–311, http://dx.doi.org/10.1080/03003930.2013.807807.

Swianiewicz, P. & Łukomska, J. (2016) Local Tax Competition in Poland?, Miscellanea Geographica – Regional Studies on Development, 20(3), pp. 37-43, https://doi.org/10.1515/mgrsd-2016-0018.

The Ministry of Family, Labour and Social Policy (2020) available at: https://www.gov.pl/web/rodzina/rodzina-500-plus (February 25, 2020).

The Ministry of Finance (2020) Indicators for assessing the financial situation of local government units in the 2012-2014; 2015-2017; 2016-2018 time period, available at: https://www.gov.pl/web/finanse/komunikaty-i-opracowania (January 10, 2020).

The Ministry of the Interior and Administration (2020), available at: http://administracja.mswia.gov.pl/adm/baza-jst/843,Samorzad-terytorialny-w-Polsce.html (February 16, 2020).

The Ministry of the Interior and Administration (2020a), available at: http://administracja.mswia.gov.pl/adm/departament-administra/regionalne-izby-obrach/561,Organizacja-funkcjonowania-regionalnych-izb-obrachunkowych-i-jej-prawne-podstawy.html (February 20, 2020).

Wang, X., Dennis, L., Tu, Y. S. (2007) Measuring Financial Condition: A Study of US States, Public Budgeting and Finance, 27(2), pp. 1-21, https://doi.org/10.1111/j.1540-5850.2007.00872.x.

Wasilewska, K. (2013) Investment Opportunities of Municipalities in Comparison with Raising Debt, Research Papers of the Wroclaw University of Economics, 280, pp. 50-58.

Wichowska, A. & Ostrowska, A. (2018) Financial Stability of Communes on the Example of Communes of the Warmian-Masurian Voivodeship, Studies in Law & Economics, 59, pp. 339–354, https://doi.org/10.26485/SPE/2018/109/21.

Wiśniewski, M. (2011) Community’s Financial Situation Indices – Significance Estimation Using Cluster Analysis, Financial Sciences, 4(9), pp. 110-119.

Yoder, J. A. (2003) Decentralisation and Regionalisation after Communism: Administrative and Territorial Reform in Poland and the Czech Republic, Europe-Asia Studies, 55(2), pp. 263–286, https://doi.org/10.1080/0966813032000055877.

Zawora, J. (2015) Local Differences in the Financial Situation of Municipalities in Poland, Research Papers of the Wroclaw University of Economics, 392, pp. 164-172, https://doi.org/10.15611/pn.2015.392.18.

Published
2020-10-29
Section
Article