The state system of Ukraine: incomprehensible for understanding

Last year, I warned that by the end of 2016 we would have global problems at local levels connected with financing of the vocational schools industry. And so it happened. But it was not enough, and apart from the problem of vocational schools financing the local authorities are now facing the problem of financing the education and medical facilities. According to the innovations of the new draft budget, which has already passed the first reading in the Verkhovna Rada, the costs of utilities and energy resources of health care and educational institutions must be covered not by the state budget, but by the local budgets. What does this mean for the local budgets? Let’s have a look at some specific numbers of the Kyiv region:

For 2017 the institutions of medicine and education in Skvyrskyi district need spending on public utilities and energy resources in the amount of 19 million 920 thousand hryvnias. As of November 1, 2016 the available funds in the development budget of the district make up 11 million 791 thousand hryvnias. In 2017 Fastivskyi district will require more than 17 million hryvnias. As of November 1, 2016 the local authorities have… less than 8 million of the available funds.

If we expect underfunding of education and health care sectors in the Kyiv region, in accordance with the table, it is clear that in 2017 education and medicine of these districts and cities will be unsecured as early as in January.

The question arises: where should cities get money for hospitals and schools from?

There is an only way out – to rip development budgets. By doing so, the central government makes local authorities fail to perform their duties towards society, because it deprives them of funds for the development and beautification of cities, forcing the development budget funds being spent onto the areas that have always been financed by the state.

To understand what the development budget for ordinary citizens is, I will provide an example of a big city in Kyiv region – Bila Tserkva. More than 150 million hryvnias. These are the funds that the local authorities had for development. So, some of the figures and data:

During the year there have been works on construction of a new kindergarten and a new school, of school canteens and gyms, reconstruction of the premises of ten kindergartens of the city, as well as swimming pools and sports grounds in educational institutions. More than 6 million hryvnias were spent on capital repairs of pre-schools and nearly 9 million hryvnias on the repair of educational institutions. Heating systems in all schools underwent major repairs as well. This is a small list of what the city authorities have managed to do in one year using only their own funds – the development budget of Bila Tserkva.

Capital expenditure on education amounted to 33, 236, 177 hryvnias, and together with other costs, such as the construction of a pre-school for 220 children (about 5 million hryvnias), the purchase of textbooks (851, 000 hryvnias), the acquisition of machinery and equipment for schools (1, 383, 000 hryvnias), and others the total amount of expenditure on education in 2016 amounted to 40, 545, 000 hryvnias.

Medicine: capital expenditure in 2016 amounted to about 5 million hryvnias. Only the purchase of an ultrasound machine of a new generation – which has already have saved several lives – cost 2 400 00 hryvnias. 4, 915, 000 hryvnias were spent on health care.

Altogether, 49, 751 million hryvnias from the development budget were spent on education and healthcare in 2016 of, which accounted for almost a third of the city development budget. The rest of the money was spent on roads, new sidewalks, building surrounding grounds, trolleybuses, parks, etc.

In 2016, the development budget of Bila Tserkva amounted to 157, 763, 146 hryvnias. And now, ATTENTION – the estimated development budget of the city for 2017 is 5, 400, 000 hryvnias.

According to the draft budget for 2017, additional costs of maintenance of education and health care are transferred to the local budget of Bila Tserkva in the following amount: education – 26.925 million UAH, medicine – 24.245 million UAH. Altogether this makes 51.17 million USD. And these funds should be taken from the development budget.

In 2017, the local authorities will not be able to repair, build and renovate as they did in 2016. The increase in the expenditure part of local budgets will be caused not only by the changes in the state financing of individual branches, but also by other nation-wide innovations. One of them is the notorious “Law-3200”. It’s the initiative of the Cabinet to increase the minimum wage to the amount of 3200 UAH.

Due to these reasons, Bila Tserkva expects to have the development budget of a little more than 5 million hryvnias for the next year. Next year the fiscal decentralization may me destroyed since the cities are deprived of the money for their development.

Therefore, in addition to the predicted by experts problems with financing of vocational institutions, in 2017 we will have another similar situation with the institutions of education and health care. Local authorities across the country, teachers and doctors are raising alarm, warning of the catastrophic consequences, but, unfortunately, the government would not respond.

Realizing the threat, I, as the chairperson of the Standing Commission on Budget and Finance, filed an appeal to the Verkhovna Rada from the Kyiv Regional Council with a request to take into account certain prerequisites for a possible future catastrophic situation.

A few days ago I received the answer that the Verkhovna Rada understands the problem and the Finance Ministry will revise the situation.

Now it’s all in the hand of the Ministry of Finance…

Summing up.

If the deputies vote for the changes to the state budget-2017 and transfer to the local budgets the responsibility which is declared by the state standards (a constitutional right to free education and free medical care), to local governments, then the latter may face a complete collapse in the next year.

Local councils across the country will be forced to close down hospitals and schools, to cut staff, in schools and kindergartens there will be no heating, no books, no stationery and other goods for children.

As a result, we will witness reemergence of parents’ funds, through which parents will submit money for repairs and replacement of windows.

What should we do? Join forces of the communities at all levels, of both local and regional councils, and defend our right to the development of cities, and try and safe the medical and educational sectors. The situation with the local budgets will have much worse consequences than it might seem to some at first glance.

Olha Babiy

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