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6
1.Introduction
KRZYSZTOFKLUZA,RYTADZIEMIANOWICZ
AccordingtoStanisławOwsiak,thebudgetbalanceoflocalgovernmentunits
(LGUs)is,“somethingratherspecial,whichiswhybalanceunderstoodliterally
neveroccurs”(Owsiak,1993).Inpractice,weobservedeviationsintheformof
budgetsurplusorbudgetdeficit,whichinconsequencemayleadtoindebted-
nessofalocalgovernmentunit.Simultaneously,theideaoffiscalsustainabil-
ity,i.e.anabilitytoserviceand/orrepaytheexistingdebt(seeseveraldefini-
tionsinBalassoneandFranco,2000andBohn,1998),receivesalotofattention.
However,thedebateonfiscalsustainabilityanddebtrepaymentcapacitymostly
dealswithnationalpublicfinances,withverylittleattentionbeinggiventolocal
governmentunits(seee.g.recentstudiesbyAfonsoandJalles,2016;Aldamaand
Creel,2018;Collardetal.,2015;GuillardandKempf,2017;Uryszek,2016).
Thecrisiswhichbrokeoutin2008stronglyafectedsub-nationalfinancesin
severalOECDcountries.Thetransferstolocalgovernmentswerereducedand,at
thesametime,thespendingpoliciesweremaintained,withthebudgetarydeficits
financedwithexternalrepayableresources(VammalleandHulbert,2013).The
LGUsaveragedebt/GDPratiogrewsignificantly,fromlessthan5%in2007to
7.5%in2015intheEuropeanUnioncountries.Suchascenarioalsooccurred
inPoland,wherethedebt/GDPratioalmostdoubledfrom2.2%to4.0%inthat
period.
ThegrowingindebtednessoflocalgovernmentunitsinPoland,beingacon-
sequenceofbudgetdeficits,isusuallyassociatedwithhighinvestmentactivity
oflocalgovernmentauthoritiesandiscausedbytheneedtoacceleratesuchex-
penditureratherthanbythedifcultiesrelatedtosustainablebudgetbalancing
(MalinowskaandMisiąg,2002).Itisoftenanimpulseforlocaleconomicdevel-
opment.Inasituationofpermanentpressureontheamountofownrevenueof
localgovernmentsandlimited,althoughgraduallyincreasing,financialindepen-
denceofboroughs(BrzozowskaandKogut-Jaworska,2016)andtheparticipa-
tionoftaxauthoritiesinthetaxpoliciesofboroughs(Filipiak,2015),“debtbe-
comesaspecific,forcedalternativeforthiscategoryofrevenues”(Poniatowicz,
2014),oreventheonlysolutionallowingregionalpoliciestobeimplemented.
Externalfinancing,basedonrepayablefunds,isatthesametimeanimportant
elementoflong-termplanningforLGUs,onethatrequirestheattentionoflocal
governmentauthoritiestoboththedesignofthefuturefreefundsofLGUsand
therisksgeneratedbytheexistingdebt.
Asaconsequenceofthecrisiswhichcreatedsubstantialfiscalgaps,theamount
ofthedebtofthelocalgovernmentsub-sectorgrewsignificantly.Considerable
andlastingfiscaltighteningisneededinthemajorityofOECDcountriesinorder
tobringdownthelocalgovernmentdebt(Sutherlandetal.,2012).Otherwise,
theprovisionofpublicgoodsandcontinuationofseveraldevelopmentpolicies
byLGUsmaybehindered(VammalleandHulbert,2013).Debtreductionisalso
requiredfordiminishingthesystemicriskoftheLGsectorsinceahighlevelof
indebtednesscancrippleinvestors’confidenceandmayleadtoincreasedrisk
premiumsontheexternalfinancing(Steger,2013).
