2015 Tbilisi Budget: New developments and problems
On December 19, Tbilisi City Council approved the 2015 Tbilisi budget. Compared with the original, a number of significant changes were included in the final version of the budget. These changes are particularly significant as relates to health and social affairs.
Compared with 2014 the capital’s income will increase by GEL 47.59 million (by 7.2%) and spending will increase by GEL 38.15 million (by 5.78%) in 2015.
1. General Assessment
1.Social spending in 2015 will reach GEL 170 million, which is a significant amount of funding considering that the largest share of social affairs spending in Tbilisi comes from the national budget. At the same time, the number of beneficiaries of a variety of programs will increase in 2015.
2.The 2015 Tbilisi program budget appendix represents a very significant step towards accountability and transparency. The program budget is much better at meeting corresponding requirements than the Georgian national budget or a number of local government program budgets.
3.In 2015, Tbilisi government employee salaries have risen by GEL 20.97 million (by 73.44%) compared with 2012 and by GEL 2.11 million (4.45%) compared with 2013.
4.The Tbilisi budget deficit approved for 2015 grew by 143.6% compared with the Tbilisi budget approved in 2012 and by 196.6% compared with the final 2012 Tbilisi budget.
2. Priorities and new developments
The majority of new developments in Tbilisi’s 2015 budget are in the program appendix. The Tbilisi government has provided an excellent example of the use of best practices for the national government and local governments, much as the government of Ajara did in 2014 with its program budget. In 2015, Tbilisi’s program budget presents the activities which the Tbilisi government intends to implement in 2015 in detail. This is a very significant step towards accountability and transparency.
The 2015 Tbilisi budget has three clear priorities:
(1) Spending on health and social affairs will increase by GEL 12.6 million compared with 2014. GEL 205 million will be spent in total, which is 29.37% of the budget. Spending on health will increase by GEL 10.37 million (by 43.1%). Spending on social affairs will increase by GEL 2.24 million, moving from GEL 168.71 million to GEL 170 million (a 1.33% increase). GEL 170 million is a very large amount of money for the Tbilisi government to spend on social affairs when the national budget finances the largest share of Tbilisi’s social spending.
Benefits for socially vulnerable families will increase. Socially vulnerable families with 70,000 rating points or less will receive GEL 500 per year in support instead of the GEL 250 given in the original version of the budget.
Compared with the original version of the budget, subsidies for city transport have increased. New categories of citizens will benefit from free travel in the city including former political prisoners. In the program appendix, the word “prisoner” is used, although this category largely consists of former political prisoners. Employees of Tbilisi kindergartens and Tbilservice Group LTD will also travel for free (janitors, street cleaners, work supervisors, yard crews, workers, worker assistants, drivers).
In Tbilisi, socially vulnerable families with 100,000 rating points or less will receive one time aid in the form of GEL 800 upon the birth of a third child and GEL 1000 upon the birth of a fourth child. If a child is the fifth or a higher number, the family will receive GEL 1500.
In 2015 a number of new programs and subprograms will be implemented for individuals and families with 100,000 rating points or less. For every newborn, families will receive GEL 500 in assistance. Support for the socially vulnerable up to the age of 18 and physically disabled individuals will increase by GEL 800,000, while assistance for the blind will increase by GEL 1 million. Support for social integration of disabled persons will increase by GEL 400,000.
(2) Education. Compared with 2014, spending will increase by GEL 13.02 million to a total of GEL 92.63 million, an increase of 16.36%.
Kindergarten construction and rehabilitation works will receive GEL 20.32 million in financing. Eight new kindergartens will be built, allowing up to 4000 more children to attend kindergarten.
(3) Housing and Utility Upkeep. GEL 164.56 million will be spent on housing and utility upkeep, an increase of GEL 20.89 million (14.55%) compared with 2014.
It is notable that in 2015 compared with 2014, cultural and recreational spending will increase by GEL 8.8 million to GEL 62.62 million (by 16.36%).
Figure 1. Spending increases in 2015 compared with 2014 (%)
3. Positive Changes
1.The 2015 Tbilisi program budget appendix should be considered a serious step forward, as more information is given than ever before for planned infrastructure works, social affairs spending, education and other projects. The 2015 Tbilisi budget consists of estimates which are also referenced in the budget. This is a very significant step towards government accountability and transparency. The Tbilisi budget includes important elements, which the national budget entirely lacks, although the absence of intermediary and final outcome indicators remains a problem.
Tax revenue will increase by GEL 32.3 million compared with 2014 (a 25.29% increase).
Although other income has declined nationally since 2013, it has risen in Tbilisi.
1.The Tbilisi budget deficit approved for 2015 grew by 143.6% compared with the Tbilisi budget approved in 2012 and by 196.6% compared with the final 2012 Tbilisi budget. The 2015 Tbilisi budget deficit has increased by 300% compared with the final 2013 budget deficit. It is notable that the deficit is mainly increasing at the expense of increases in non-financial assets i.e. property related expenditures. Nevertheless, we believe the dramatic increase to the deficit is fiscally unsustainable.
2.In 2015, Tbilisi government salaries have increased by GEL 20.97 million compared with 2012 (by 73.44%) and by GEL 2.11 million compared with 2013 (by 4.45%).
3.In 2015 administrative expenditures will increase by GEL 3.03 million (by 5.39%) compared with 2014.
4.Health and social affairs spending will increase to 29.37% of the expenditures. It is important that capital spending increases, because increased capital spending by government supports economic growth. Capital spending should not be increased through dramatic increases in deficit spending, but rather through decreasing social expenditures.
5.Since 2013, spending on transportation infrastructure construction, rehabilitation, and development has decreased. In 2015 spending will decrease by 27.28% compared with 2013 and by 4.5% compared with 2014.
Given the above, we believe that the Tbilisi government should:
1.Decrease the Tbilisi budget deficit through decreasing social affairs spending;
2.Explain why Tbilisi government salaries increased by GEL 20.97 million in 2015 compared with 2012 (a 73.44% increase) and by GEL 2.11 million compared with 2013 (a 4.45% increase);
3.Continue to improve the 2015 Tbilisi program budget and before the budget is accepted, define the most important intermediate and final indicators. Intermediate indicators will allow us to tell whether it is possible or not for the Tbilisi government to reach the goals defined in the budget;
4.Decrease social spending and use the funds freed up from social spending to develop the capital’s infrastructure. This will not only improve infrastructure, but also create jobs. GEL 170 million is far too much money to spend on social affairs in Tbilisi when the national budget finances much of the capital’s social spending;
5.Ensure the active involvement of civil society and public at large in the budgeting process.