Party Versus Regions

6 September 2013, 12:39

Whether in the opposition or in power, the Party of Regions (PR) always speculated on the expansion of regional powers and the delegation of more organizational, administrative and financial powers to local governments. In its 2007 election campaign it pledged “the maximum transfer of governance and financial powers to local governments for the implementation of regional and local development strategies”. Viktor Yanukovych’s platform in the presidential campaign once more promised to expand the powers of local governments, the maximum elimination of the bureaucratic apparatus from territorial community development issues, and “the decentralization of government and the reform of budget administration in favour of local governments”. In the 2012 parliamentary election, the PR – then already in power – committed to “expanding the powers of local governments” and delegating powers to administer 60% of the “consolidated state budget”  to them. After almost four years of absolute power with its own president and parliamentary majority, the PR continues to develop a strictly centralized system of government, restrict the organizational and financial powers of local governments, increase the dependence of territorial communities on central government and deprive more and more territorial communities of their constitutional right to elect their own local authority bodies.


Why would you need choice?

In terms of the expansion of the powers of local governments, the Yanukovych team has been most “effective” in eliminating election procedures in territorial communities. As a result, local governments accountable to the communities were replaced with those accountable exclusively to the president and the party in power. It emerged that the right to self-governance could be eliminated without amendments to the Constitution. An “incentive” for local MPs to jump ship and support what the PR needed was enough to get two thirds of a local council initiate a motion of no confidence against the head of the community – such as a mayor. Then, the PR-controlled majority in the Rada votes down an early mayoral election or amendments to the annual budget for funding the early local election. As a result, under the Law On Local Governance, the city is run by the city council secretary (usually a PR representative) whom the local community did not elect. While technically being an acting mayor, such person can sometimes stay in this office for years.

Today, Kyiv and five oblast centres have unelected governments. In 2012, Viktor Yanukovych essentially eliminated the office of Kyiv Mayor: real power in Kyiv is in the hands of Oleksandr Popov, Head of the Kyiv City State Administration appointed by Yanukovych, while Halyna Hereha, Secretary of the “zombie city council” (the term of which expired three months ago) is acting as the city mayor. Other cities in a similar situation are Chernivtsi, Cherkasy, Kherson and Mykolayiv.

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In addition to this covert elimination of local governments, local voters are unable to file a motion of no confidence against their unelected acting mayors or local councils. On November 6, 2012, parliament passed the Law “On an All-Ukrainian Referendum”, which abolished the law on local referenda but did not propose a new procedure. In all likelihood, there will be none.

On a short leash

The budget administration reform widely promoted by the PR was one of its first reforms ever. In April 2011, MP Volodymyr Rybak, then First Deputy Head of the Party of Regions, spoke of budget federalism as part of this reform during his visit to Ivano-Frankivsk: “… budget federalism will be enacted. Funding should be in the regions while the government will only keep money for state functions.” The new Budget Code of Ukraine, drafted by Azarov’s Cabinet, was adopted on July 8, 2010. At first glance, it appears to have somewhat improved the “first basket” of local budget revenues, i.e. revenues taken into account in the calculation of the budget transfer – nothing changed in the basket of revenues that are not – and these are the ones that fund community development.

As a result of these purely symbolic budget changes, the shares of various transfers from the State Budget in the structure of local budget revenues has been growing ever since the reform. Compared to 46.7% in 2009, it was 49.1% in 2010, 52.3% in 2011 when the new Code was enacted, and 53.6% in 2012. The higher the share of transfer to local budgets from the centre, the more dependent local governments are on central government bodies, i.e. the Finance Ministry, Cabinet of Ministers, parliament and president. Rarely is this dependence devoid of a very selective approach to it. One example is territorial socio-economic subventions that mostly go to the PR’s few core regions.  

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The increasing concentration of financial resources in the centre is not the only element of the PR’s policy. Over the years that the PR and Yanukovych have been in power, the government has been delegating state powers to local governments which they had to exercise at their own expense. This is in conflict with the European Charter of Local Government ratified by Ukraine. As a result, the share of local budget revenues spent to exercise these delegated state powers was 26.3% in 2009, growing to 33.4% in 2011 and 42.6% in 2012.  So the PR that spoke so much about decentralization and financial improvement for local self-governance before the election has used administrative leverage to force local governments to cover transfer cuts for them at the expense of their local taxpayers.

Whipping boys

In parliament, the PR faction has not sponsored any bill to regulate the procedure for local governments to execute the state powers they were charged with, including the option to withdraw from performing these functions when they are underfinanced or unfinanced. Quite the contrary, it was under the PR and Yanukovych’s rule that a regime of tough control over local governments was established, whereby local state administrations strictly supervise how the local governments execute delegated functions. This allows the heads of local administrations to decide on anything about inspections, including their schemes, duration and frequency. In 2011, this increased control authorized the State Financial Inspection Authority of Ukraine to “terminate”, not just “suspend” allocations to local budgets from the central state budget. Government initiatives to increase control over local governments by central environmental, financial and tax executive governments pushed many mayors to protest in 2011.  

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In 2013, the cash-strapped State Treasury began to massively freeze local authority accounts and spend the funds intended for them on the central government’s needs. To unfreeze these funds, some mayors had to stay in Kyiv instead of dealing with problems in the regions. The problem has been partly solved, but the gloomy situation in public finance, which is further aggravated by this year’s unrealistic budget (passed without discussion on the last day of the previous session of parliament that is completely loyal to the government and Presidential Administration), suggests that the PR will soon be patching its shortfalls with the funds of local communities.  

Thus growing centralization and the weakening of the self-governance of municipal institutions in Ukraine under the PR’s rule should be seen as something objective and inevitable regardless of the election rhetoric. The reason is that the political culture of Yanukovych’s team and the Party of Regions’ environment, is made up of authoritarians. These people do not have any tools for keeping power other than administrative, command and enforcement. Therefore, the PR has no alternative in centre-regions relations, other than to run counter to the interests of local communities.

Duda Andrii

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