Healthy finances – basis for future

BUDGET NEGOTIATIONS – EXPIRIENCE OF NALAS COUNTRIES

Ginka CHAVDAROVAExecutive Director of NAMRB

12 March, 2010 Podgorica

FINANCIAL PROBLEMS OF THE MUNICIPALTIES IN THE REGION

o Non-alignment between legal duties and necessary resources – the problems are not in the amount of the financial resources, but the lack of balance in the budgets;

o Low municipal incomes – the own revenues are between 10 – 30 % as average for EU – 45%;

o Lack of rules for defining the common amount of the state transfers – the size of the municipal share;

o Non-transparent and complicated system for allocation of the state transfers between the municipalities;

o Lack of standards for conducting budget negotiations.

ROLE OF BUDGET NEGOTIATIONS

The most important and difficult task of each National Association of Local Authorities (NALA);

Contribution for the financial decentralization – how to increase the municipal own incomes?

Contribution for equal attitude to the local authorities;

Transparency and publicity of the budget process.

HOW TO GUARANTEE CONDUCTING OF THE BUDGET NEGOTIATION?

Legal regulation – Low for local self-government, Low for local financing or local budgets, annual budget procedures;

Agreement between the Ministry of Finance and the respective Association of Local Authorities;

Agreement between Council of Ministers and the respective Association of Local Authorities and/ or arrangement in a regulation by the Government;

Non-formal dialogue by terms of agreement.

LEGAL BASIS FOR BUDGET NEGOTIATIONS

The legal frame ensures National Associations of Local Authorities to have the right to:

National Associations of Local Authorities submit to the MF proposal concerning

the total size of relations between the municipal budgets and state budget;

National Associations of Local Authorities draw an opinion on the draft State

Budget Act in its part concerning the municipalities; The consultations are conducted based on rules of

procedure; A Protocol is signed by both parties; The Protocol is reviewed in the Council of Ministers and the

National Assembly.

MAIN PRINCIPLES OF NEGOTIATIONS

1. Mutual respect and trust

2. Equality

3. Transparency and publicity

4. Responsibilities adequate to the powers

5. Providing funds from the state budget for the municipalities based on effective and transparent mechanisms

SUBJECT OF THE NEGOTIATIONSMacro-frame of the municipal budgets

Dividing the responsibilities for funding of public services between the state and municipalities. New or dropped off duties.

Municipal revenue – total, distributing by types and municipalities.

State transfers for the municipalities – rates, criteria and formulas for allocation between municipalities

Municipal expenditures:-Expenditure standards;-National limitations (for salaries);-National priorities and incentives.

PREPARATION FOR NEGOTIATIONS

Analysis of the financial situation of the municipalities for the current year;

Development of common position for the macro-frame for the next year – expert forum – proposals, consensus;

Discussion and acceptance of the common position – Board of Directors of the Associations of Local Authorities – prioritizing, outlining the main issues, defining of the possible compromises;

Development of strategy for the negotiations:

- do we announce our position in advance and who?

- wide or strict frame for our representatives?

- who are our potential partners and when do we involve them in the process?

- after the negotiations with MF, do we continue our “battle” in the Parliament?

•Well chosen structure of the municipal representatives;•Defining the right speaker for each topic;•Who is the “good cop and the bad cop”;•When do we make compromises and who is suggesting them;•Do we sign a Protocol or leave the negotiations;•What do we announce to the media.

Meetings at political level

Meetings at expert level

FORMS OF THE CONSULTATIONS

Intergovernmental Commission for Local Finance

What do we underestimate during the negotiations – our weaknesses

Lack of preparation – we go to negotiations without our own researches and serious arguments;

We talk more about “money” than the services and what the citizens can loose and what they can win;

We go to negotiate with “big basket” – our proposals have to be realistic and prioritized. The principle “Want more to give you something” lowers the associations’ reputation;

Lack of self-confidence that we are equal partner – we underestimate our strengths;

We don’t attract partners – sectoral ministries, syndicates, NGOs and other organizations;

We don’t involve some of our members – each mayor has its own channels for influence.

What we do not have to allow during

negotiations

Formal and protocol agreement – monologue and protocol meeting;

Dividing and opposing municipalities to big and small, to political parties, to regions or other reasons;

Refusal of taking engagement – if you want to get you should give;

Using the Association in the battle between the ruling and the opposition.

What next?

Evaluation of the results;

Informing municipalities for the results;

Dividing the work for influence the deputies;

Meetings with parliamentary groups – common or individual;

Involving the partners and medias;

……..starting the preparation for the negotiations for the next year.

THANK YOU FOR THE ATTENTION!

Ginka Tchavdarova

Executive Director of NAMRB