The financial stability of the local budget in if decentralized

Abstract

Finding a balance between decentralization and centralization is the main task of reform in Ukraine. In the course of reform, special attention is paid to local self-government. Only by having authority and resources can local governments ensure social and economic development.

In this process, an important part is the regulation of intergovernmental fiscal relations, with the aim of balancing the financial system of Ukraine and ensuring the financial autonomy and capacity of communities. It should be noted that the nature of intergovernmental fiscal relations affects both the stability of the budgetary system of the country and the financial independence of local self-government.

Ukrainian researchers are searching for theoretical approaches that provide the basis for practical application. The concept of “budget potential” has been developed on the basis of the resource approach, the expenditure approach, the approach from the standpoint of opportunity and ability. The budgetary potential is a set of real possibilities of financial mechanisms of local government to mobilize and accumulate in the local budget financial resources for the purpose of development of the respective territory.

The concept of “financial sustainability of the local budget” is also developed. It is a complex concept, showing such a state of the totality of monetary funds, in which the local government has the opportunity to develop steadily, to provide its financial security in the conditions of additional risk. The conditions of financial stability of the local budget are: the balance of incomes and expenses for development; the budgetary autonomy and solvency, the ability of a local government body to mobilize financial resources into the budget without borrowing financial assistance and to fulfill its powers fully and in a timely manner.

Determining the financial stability of local budgets requires the development and application of a certain universally recognized flexible methodology. In our opinion, the methodology for determining the financial stability of the local budget should take into account many aspects related to the diversity of communities (type of settlement, population size, business characteristics (seasonality), enterprises (quantity, product), etc.), as well as factors influencing on the expenditure side of the budget.

The multidimensional nature of the concept of financial stability of the local budget or its variations (budget potential) creates a variety of views on its support. From a practical point of view, the definitions of specific components of sustainability create a system of indicators for ruling the activities of local authorities and provide the basis for the formation of public policy in relevant areas of public life. In addition, it is relevant to the formation and implements a state policy to provide specific tools to local self-government, which will help create conditions and stimulate business entities to carry out activities in the relevant territory, create jobs and pay taxes to local budget.