Financial Condition of Local Government in Poland vs StructuralReforms of Municipal Government in Scandinavian States

Abstract

The authors have undertaken an analysis of the phenomenon of debt of local government units in Poland. It is a dynamic phenomenon, which affects vast majority of municipalities and districts. A barrier to debt expansion has been established in the form of the Individual Debt Index (IOI), which has been in place since 2014 and its new elements entered into force on 1 January 2020. The structure of the index is intended to allow regional accounting chambers (RIO) to control the process and prevent its progression. The authors indicate, however, that the main problem for local self-government units is insufficient own income, which forces them to increase the pool of funds transferred from the central budget to self-governments in the form of grants and subventions and to look for various forms of loans for their activities. Using the experience of the Scandinavian countries, the authors propose to start territorial and resource consolidation reforms of small local government units – municipalities and districts. The aim is to facilitate better use of endogenous resources of territorial self-government units and use of economies of scale related to local economy and social resources. This should result, as in Scandinavia, in the development of public entrepreneurship, higher social efficiency and effectiveness, and stabilisation of the income of individual units. After more than 20 years of operation, small local government units in Poland have become structurally and functionally obsolete and do not guarantee modern development of local communities.