Abstract
The economic crisis affected local self-government much more severely in Hungary than in the other OECD Member countries. The basic characteristics of the Hungarian local self-government system are that it provides local public services and is the basic institutional framework for urban governance. State support is the most important financial source of local public services. Before 2008, the amount of state support, together with other municipal revenues, was not sufficient for financing all local government tasks. The municipalities complemented the missing amount from external sources. The financial problems of the Hungarian local self-governments were not caused by the economic crisis; it only increased these problems: the economic crisis had a considerable negative effect on the financing possibilities of the Hungarian local self-governments. The dramatic increase in the volume of local self-government debt started in 2006 and was primarily caused by the issue of local self-government bonds. This study deals with the related legal background, the economic effects, the reforms for solution and the consequences. The purpose of this chapter thus is to present the legal background of the Hungarian local self-government system, to point out the impact of the economic crisis on Hungarian local self-government, to underline the reforms and the results. The chapter highlights the weaknesses of the local self-government’s economy, and the methods which were applied in Hungary in order to fend off the negative impacts of the crises. The related funds (e.g. state subsidies and own revenues) were not sufficient to carry out the duties of local self-government; therefore, the debts increased significantly since they were formed about twenty-five years ago. Accordingly, serious financial problems occurred, which deepened significantly due to the economic crisis. This phenomenon shows that effective supervision and monitoring is needed, real local autonomy based on appropriate regulation is required, in order to guarantee the fulfilment of local tasks.
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- 1.
“One of the most important legislative tasks of these months and even of this year is to adopt the act on local governments and to hold local elections”, said Antall József, Prime Minister in the Hungarian Parliament on 22 May 1990.
- 2.
In effect until 1 January 2012, hereinafter referred to as the Constitution.
- 3.
The capital of Hungary is Budapest. The territory of Hungary consists of the capital, counties, cities and towns, as well as villages. The capital, as well as the cities and towns, may be divided into districts. Provisions pertaining to public authority at a local level can be found in the part called “Local self-government”. The fact that “constitutional statutes”, called cardinal Acts, detailing special rules pertaining to local self-government (to be adopted later) are referred to four times in this part indicates that essential content elements of legal regulation appear in the detailed rules. [“Cardinal Acts shall be Acts, the adoption and amendment of which require the votes of two-thirds of the Members of Parliament present.” Article T(4) of the Fundamental Law.] The provisions pertaining to the territorial division of the country and to local self-governments are structurally in the Fundamental Law. In Hungary, local governments shall be established to administer public affairs and exercise public power at a local level and the basic rules are to be defined by a cardinal Act [Article 31(1) of the Fundamental Law].
Article 32 of the Fundamental Law sets forth that in administering local public affairs local governments shall, to the extent permitted by law:
-
(a)
adopt decrees;
-
(b)
adopt decisions;
-
(c)
perform autonomous administration;
-
(d)
determine their regime of organisation and operation;
-
(e)
exercise their rights as owners of local self-government properties;
-
(f)
determine their budgets and perform independent financial management accordingly;
-
(g)
engage in entrepreneurial activities with their assets and revenue available for the purpose, without jeopardising the performance of their compulsory tasks;
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(h)
decide on the types and rates of local taxes;
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(i)
create local self-government symbols and establish local decorations and honorary titles;
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(j)
ask for information, propose decisions and express their views to competent bodies;
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(k)
be free to associate with other local self-governments, establish alliances for the representation of interests, cooperate with the local governments of other countries within their competences and be free to affiliate with organisations of international local self-governments, and exercise further statutory responsibilities and competences.
-
(a)
- 4.
A provision in the chapter titled Freedom and responsibility lays down, “Every adult Hungarian citizen shall have the right to vote and to be voted for in elections of Members of Parliament, local self-government representatives and mayors, and Members of the European Parliament”. [Article XXIII(1) of the Fundamental Law].
- 5.
Article 33 of the Fundamental Law.
- 6.
Article 34 of the Fundamental Law.
- 7.
The Municipal Act defines the principles of granting powers (e.g. the differentiated imposition of tasks). The approach of the ministerial reasoning can be justified by the provision of section 13(1), which specifies such services as well which are defined as optional tasks by sectoral acts. Point 7 of the referred paragraph, for example, specifies the maintenance of theatres as a municipal task, which is defined as an optional municipal service by Act XCIX of 2008. Similarly, tasks related to local public safety are defined as voluntary services by section 17 of the Municipal Act.
- 8.
According to a significant modification of the regulation, new instruments of legal supervision could guarantee the fulfilment of these tasks. In addition to the new instruments of legal supervision, the differentiated imposition of tasks is required. Although this differentiation was allowed by Act LXV of 1990 on Local Self-Governments, it is required by the New Municipal Act.
- 9.
The main criteria for the definition of these tasks are determined by Act CLXXXIX on the Local Self-Governments of Hungary.
- 10.
Section 11(2) of the New Municipal Act.
- 11.
Res. No. 8/1996. (23rd February) of the Constitutional Court.
- 12.
In a legal supervision procedure, the government office shall examine the legality of the organisation, operation and decision-making procedure of the local self-government; the legality of the decisions (decrees and decisions) of the local self-government; the fulfilment of the local self-government’s fulfilment of their statutory legislative obligation, and the fulfilment of their decision-making or task performance (public service provision) obligation.
- 13.
Legal background: Act on State Budget of 2012, section 76/C; Act on State Budget of 2013, sections 72–75.
- 14.
Detailed rules are prescribed by Act CXCIV of 2011 on the Economic Stability of Hungary.
- 15.
Local governments and state organs shall cooperate to achieve community goals. An Act may set out mandatory functions and powers for local governments. For the performance of their mandatory functions and powers, local governments shall be entitled to proportionate budgetary and/or other financial support. Article 34(1) of the Fundamental Law.
- 16.
31 October, 2013.
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Fábián, A. (2017). Local Self-Government in Hungary: The Impact of Crisis. In: Nunes Silva, C., Buček, J. (eds) Local Government and Urban Governance in Europe. The Urban Book Series. Springer, Cham. https://doi.org/10.1007/978-3-319-43979-2_4
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