WAYS TO COVER EXPENDITURES OF LOCAL BUDGETS WITH OWN REVENUES WHILE MODERNIZING FISCAL POLICY

  • Valentyna Martynenko
Keywords: modernization, financial decentralization, fiscal policy, local budget, coverage level

Abstract

The modernization of fiscal policy consists in the redistribution of powers to make administrative decisions in the fiscal sphere between central and regional public authorities. Fiscal policy modernization aims at ensuring financial autonomy of administrative and territorial units by reducing interdependent transfers. Financing own-source expenditures is the main criterion for local budgets autonomy. The purpose of the article is to develop ways to cover local budget expenditures with their own revenues while modernizing fiscal policy in Ukraine. The article explores the main ways of covering local budget expenditures with own revenues in the context of fiscal policy modernization, which are capable of ensuring the extension of financial autonomy of administrative and territorial units in Ukraine. The necessity to deepen the reform of financial decentralization in order to modernize the regional fiscal policy to expand the sources of own financial resources formation and optimize the expenditures of local budgets is substantiated. During 2014-2017 it was possible to increase the level of local budget expenditures covering with own revenues by 7%. It is proved that in order to increase the level of local budgets expenditures coverage with own revenues it is necessary to create favorable preconditions for the increase of population incomes. Since a 1% increase in household income causes a 0.21% increase in the level of local government expenditures. Another important area for extending the financial autonomy of local governments is to create conditions for reducing the labor emigration flow. After all, increasing the population of the region by 1% leads to an increase in the level of local budgets expenditures coverage with own revenues by 0.37%. Prospects for further research lie in the development of optimization models to increase the level of local budgets expenditures coverage with own revenues.

Published
2019-09-28