Paper/Speech Details of Conference Program for the 16th NISPAcee Annual Conference Program Overview I. Working Group on Local Government Author(s) Desislava Stoilova South-West University “Neofit Rilski” Blagoevgrad Bulgaria Title Local government reforms in Bulgaria: Recent developments and key challenges File Paper files are available only for conference participants, please login first. Presenter Abstract The purpose of this paper is to provide a critical analysis of local government reform in Bulgaria during the transition period and to discuss the changes in government structure and intergovernmental financial relations on the base of the legislation in force. The process of gradual political, administrative, and financial decentralization in Bulgaria started in 1991, when the Local Self-Government and Local Administration Act was adopted. Now, classified according to the European standards the administrative-territorial structure of our country includes 6 planning regions, defined as level NUTS II, 28 administrative districts corresponding to level NUTS III, and 264 municipalities, which represent the level LAU 1. According to the Constitution, the municipality - a legal entity, is the only one tier of autonomous subnational government in the country. It has the right of ownership and independent municipal budget. The bodies of local government are elected directly by the local population. During the period 1990-2007 Bulgaria has made significant progress in reforming the system of intergovernmental fiscal relations. Due to financial instability at the last decade of 20th century the relative importance of LGs within the governmental system decreased. Although providing up to 30% of public sector services, local budgets relative share in the GDP has been reduced to 5% in 2005 by comparison with 12% in 1991 and 8% in 2000. At the same time local budgets have reached respectively 25% (1991) and 13% (2005) of the consolidated state budget. The downward tendency was reversed in 2006. Now, local governments are an important part of the public sector in the country, accounting for about 18% of total government spending. A key issue in the design of fiscal federalism is the financing of LGs. Because of the advantages of taxation at the central level and spending at the decentralized level, our country have often ended up with vertical and horizontal fiscal imbalances. The decentralization of expenditure was not accompanied by equivalent revenue-raising responsibilities and the taxable base was unevenly distributed within the country territory. Significant achievement is the clear distinction between the local and central responsibilities. Now LGs provide services connected to the state delegated activities, entirely financed through the intergovernmental transfer system and to the local activities, mainly financed from own revenues. LGs financial resources comprise own revenues and governmental transfers. Before the Constitutional amendments in the beginning of 2007 LGs were prohibited from participating in the design of local taxes. Now municipalities have the authority to set local tax rates within certain limits, but the concrete legal regulation is still pending. Although local own-source revenues increase significantly from 10% of total municipal revenues in 1997 toward up to 35% in 2007, this tendency is mainly due to the increase of local charges and non-tax revenues. Since 2003 local governments have full discretion over local charges, which have tripled their importance in real and relative terms. Intergovernmental transfer system plays the dominant role in financing LGs. Although decreasing from 90% in 1997 to 64% in 2007, state transfers still form the prevalent part of municipal revenues. Obviously more efforts are needed to ensure LGs political, administrative and fiscal autonomy.
