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Grzegorz W. Kolodko
Transformation, Integration
and Globalization Economic Research
Kozminski University, Warsaw
www.tiger.edu.pl
Off-budgetin transition economies
The case of Poland
3
it refers to all outcomes, incomes and public financial processes which don’t belong to the budget system
Off-budget
„Off-budget” – international aspect:
„Off-budget units” – international aspect:
the institutions (organizations) engaged into off-budget operations, which have their own structure and often are independent, or quasi-independent, on the basis of specific legal acts
4
budgetary establishments
auxiliary units of budgetary entities own revenues accounts motivations funds appropriated funds (central government
and local authorities)
The system of the off-budget entities in Poland consists of:
Off-budget
These off-budget entities are in a broad way connected with public budgets.
5
are legal persons realize state tasks are supervised by proper minister financial plans are being attached to the State
Budget and hence scrutinized by theParliament
Off-budget
Off-budget in broad understanding embraces also state agencies, which are regulated by separate acts and:
6
functioning within the national/State budget system
financial plans are attached to the budget
cover the cost of its activity by their own incomes
the rules concerning finance policy of extra-budgetary units in Poland are set in the Public Finance Act of June 30th, 2005
moreover financial policy of appropriated funds is defined by separate acts
Off-budget
Main rules:
7
enable flexibility of public means usage
enable to avoid competition for budget means each year
are useful in social areas
enhance activity and increase efficiency of public means utilization
Advantages:
Off-budget
8
pressure to create units which independently run a business
lack of accountability for financial outcome can cause a danger of abuse
mistaken decisions and policy errors are done at the costs of the state budget
Off-budget
Threats:
9
independent, but not being legal person, state or council organizational unitcollect payments for its servicescover its expenses with own revenuesfinancial plan is the base of financial
policy and embraces incomes, among others budget subsidy, costs, the level of turnover, the level of amount dues and obligations at the beginning and at the end of the period and settlements with the budget
Budgetary establishments (I):
Off-budget
10
Connections of budgetary establishments with the budget – simplified version (II):
Off-budget
Budget
Budgetary establishments
subsidypayments
11
can be granted subject subsidies
on the basis of separate acts can receive entity subsidies or purposeful subsidies in order to co-finance investments
newly created budgetary establishments can be granted single budget subsidy devoted to its first equipment in financial means
subsidies granted to the budgetary establishments cannot exceed 50 percent of its activity costs
are obliged to pay to the budget the surplus of turnover which is established at the end of settlement period
Off-budget
Budgetary establishments (III):
12
Off-budget
Incomes and costs of state budgetary establishments
in 2005-07
350 000
390 000
430 000
470 000
2005 2006 2007
Incomes of budgetaryestablishments (000 PLN)
Costs of budgetaryestablishments (000 PLN)
13
Off-budget
Incomes and costs of local authorities budgetary establishments
in 2005-07
8 150 000
8 250 000
8 350 000
8 450 000
2005 2006 2007
Incomes of localauthorities budgetaryestablishments (000 PLN)
Costs of local authoritiesbudgetary establishments(000 PLN)
Off-budget
Number of state budgetary establishments
55
65
75
85
2005 2006 2007
Off-budget
Number of local authorities budgetary establishments
1000
2000
3000
4000
2005 2006 2007
16
Off-budget
Employment in budgetary establishments in 2007
Item State Local
authorities
Employment
(full-time)
2 280 82 000
17
From Shock without Therapy
to Therapy without ShocksGDP growth (left scale) and unemployment rate (right scale)
in Poland, 1990-2008
-11,6
3,8
6,2
4,5 4,2
0,6
1,9
3,8 3,5
6,1 6,5
2,6
-7
5,27,0 7,1
5
1,1
5,34,8
Shock "therapy"
Strategy for Poland
0vercooling
Public Finance Reform Program
EU memberrship
-14
-7
0
7
14
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 I poł 2002 II poł
2002
2003 2004 2005 2006 2007 2008
-15
-10
-5
0
5
10
15
20
18
19
Thank you
21
23
not being legal person, state or council organizational unit,
separated from the budgetary entity part of its basic activity or side activity in terms of finance and organization,
financial plan is the base of financial policy and embraces incomes, among others budget subsidies, costs, cash flow statement, the level of turnover, the level of amount dues and obligations at the beginning and at the end of the period and settlements with the budget,
collect payments for its services, cover its expenses with own revenues.
Auxiliary units of budgetary entities (I):
Off-budget
24
Connections of auxiliary units of budgetary entities with the budget – simplifies version (II):
Off-budget
Budget
Budgetary entity
Auxiliary units
of budgetary entities
Subsidies Income
25
sell services to its budgetary entities with no margin (profit),
can be granted subject subsidies,
newly created auxiliary unit of budgetary entities can be granted budget subsidy devoted to its first equipment in financial means,
are obliged to pay into the budget half of its profit.
Auxiliary units of budgetary entities (III):
Off-budget
26
Off-budget
Incomes and costs of state auxiliary units of budgetary
entities in 2005-2007
1 700 000
1 800 000
1 900 000
2 000 000
2005 2006 2007
Incomes of state auxiliaryunits of budgetary entities(000 PLN)
Costs of state auxiliary unitsof budgetary entities (000PLN)
27
Off-budget
Incomes and costs of local authorities auxiliary units of
budgetary entities in 2005-2007
510 000
525 000
540 000
555 000
2005 2006 2007
Incomes of local authoritiesstate auxiliary units ofbudgetary entities (000PLN)
Costs of local authoritiesstate auxiliary units ofbudgetary entities (000PLN)
Off-budget
Amount of state auxiliary units of budgetary entities:
380
400
420
440
460
2005 2006 2007
Amount
29
Off-budget
Employment in auxiliary units of budgetary
entities in 2007
Item State Local authority
Employment
(full-time)
11 530 5 920
30
budgetary entities, which are obtaining revenues from defined sources, can accumulate them on separated own revenue account,
means can be accumulated on this account among others from the following revenues:
– payments for making tender documents available,
– inheritances, legacies, donations in form of cash, which are given to budgetary entities,
– compensations and payments for lost or damaged property which is managed or used by budgetary entity,
– other receipts and payments which are indicated in Public Finance Act or resolution of local authorities,
own revenues can be devoted to financing expenditures connected with obtaining revenues by budgetary entity and to other expenditures,
Separated own revenues account (I):
Off-budget
31
decision concerning creation of own revenues account is made by managers of budgetary entities,entitlement of budgetary entities is connected with
revenues which are occasional and with revenues which usually cause generation of additional costs,own revenues together with interests cannot be devoted
to finance personal expenditures, except additional salary of police and Internal Revenue Service,own revenues from each source has strictly defined
destination.
Separated own revenues account (II):
Off-budget
32
Off-budget
Incomes and expenditures of state separated own revenues
account in 2005-2007
630 000
700 000
770 000
2005 2006 2007
Incomes of state separatedown revenues account (000PLN)
Expenditures of stateseparated own revenuesaccount (000 PLN)
33
Off-budget
Incomes and expenditures of local authority separated own
revenues account in 2005-2007
640 000
750 000
860 000
970 000
2005 2006 2007
Incomes of local authorityseparated own revenuesaccount (000 PLN)
Expenditures of localauthority separated ownrevenues account (000 PLN)
34
financial means accumulated by state budgetary entities on separated bank accounts, from the part of budget incomes which are obtained from forfeiture of property or financial benefits coming from disclosure of crimes and offences against property and treasury crimes and treasury offences,
devoted to rewards for employees, soldiers and officers who are responsible for creation budget incomes which are mentioned above.
Motivation funds:
Off-budget
Motivation funds are not appropriated funds
which are defined in Public Finance Act.
35
Off-budget
Incomes and expenditures of motivation funds in 2005-2007
600
1 100
1 600
2 100
2 600
2005* 2006 2007
Incomes of motivation funds(000 PLN)
Expenditures of motivationfunds (000 PLN)
* Incomes of motivation funds were increased by part of incomes of liquidated special funds
36
are set up on the basis of legal act,
incomes come from public means,
expenditures are devoted to strictly defined tasks,
can act as a legal entity or constitute separate bank account which is managed by authority indicated in the act of creation.
Appropriated funds (state and council) (I):
Off-budget
Off-budget
Appropriated funds (state and council) (II):
the base of financial policy is yearly financial plan,
expenditures general can be made within financial means, which embrace current incomes, including budget subsidies or local authority subsidies and other means obtained in previous periods,
can incur credits and debts, however it has to be stated in the act which creates appropriated fund.
38
Off-budget
Incomes and expenditures of state appropriated funds in
2005-2007
135 000 000
145 000 000
155 000 000
165 000 000
2005 2006 2007
Incomes of state appropriatedfunds (000 PLN)
Costs of state appropriated funds(000 PLN)
39
Off-budget
Incomes and expenditures of local authority appropriated funds
in 2005-2007
1 000 000
1 100 000
1 200 000
1 300 000
2005 2006 2007
Incomes of local authorityappropriated funds (000PLN)
Expenditures of localauthority appropriatedfunds (000 PLN)
Off-budget
Amount of appropriated funds, whose financial plans are being attached to State Budget:
22
23
24
25
26
27
28
2005 2006 2007
Amount