Creation of functioning local government in 1990 after a long period of centralized governance during the communist regime is considered to be a major achievement of the democratic transformation which took place after 1989. The Polish People’s Republic had no real local government and façade institutions existing at that time enjoyed little to no autonomy from the state and party institutions. Local government, which was thoroughly reformed in 1999, played (and still plays) a key role in building a democratic society.
One of the most pressing needs of the state after 1989 was decentralization and delegation of tasks in accordance with the principle of subsidiarity. Local government was entrusted with numerous competences and is responsible for providing vital public services and infrastructure. Available data and public perception suggest that it has been largely successful in these tasks. According to the Central Statistical Office, in 2017, more than 60% of surveyed individuals declared that they trust their local governments, which is a result to be envied by other public authorities in Poland (a mere 27.4% of Poles trust the parliament, while central government achieved only a slightly better result – 31.1%)1.
However, despite its overall success, local government is facing many challenges that cast doubt on its ability to cater for the needs of communities across Poland in the future. The looming crisis is related in particular to the way it is financed.
The majority of income available to local government units is derived from funds redistributed by the state. Local government, which has only limited influence over its income, is increasingly burdened with additional tasks by the central government, even though additional funding is not always secured for them. At the same time, expectations on the local level are rising. Many services or facilities that used to be a luxury are now taken for granted, and people expect higher standards of services or more sophisticated needs to satisfy.
Aging population, migrations, increasingly difficult access to European Union (EU) funding, and structural deficiencies built into the design of public administration put additional pressure on the entire system. It is becoming evident that a major overhaul of the way local government is financed in Poland should take place.
The purpose of this article is to analyze the trend to centralize income from taxes or levies and decentralize competences or obligations that local government units have to fulfill. It will put emphasis on potential solutions that could address existing challenges and explain how decentralization of taxes may help finance local government in a sustainable, efficient way.
Financing Local Government in Poland: A Mixed System with Mixed Results
Before discussing how local government is financed nowadays in Poland, it is necessary to briefly outline how it is organized in terms of type and number of its units, as well as competences assigned to its every level.
Local government in Poland has three tiers. There are 2,478 units on the lowest tier, called gmina (municipality), 314 units of the middle tier, called powiat (county), and 16 regional units called województwo (voivodeship).
Among municipalities, there are 302 urban municipalities, 621 mixed municipalities and 1,555 rural municipalities. Additionally, 66 major cities form special municipalities which are responsible for tasks delegated both to the municipal as well as the county level. Municipalities vary greatly in terms of size, number of inhabitants, population density, and level of development. Local government is in consequence rather fragmented.