Debt Limitation In The Management Of Local Government Units With The Example Of The Financial Forecast Of Voivodeship Governments In Poland

Abstract :

Managing local government units requires using efficient tools to ensure their effective and efficient operation. In the case of local government units in Poland, many instruments improving the process of local finance management have been implemented in the last decade, such as internal control, long-term financial forecasting and participatory budgeting. Significant changes were also introduced in the area of debt management, especially in terms of the limitation and monitoring of financial liabilities made by LGUs. These changes concerned the debt limit in 2014 based on the Individual Debt Index (IDI), which was obligatory until the end of 2018. The introduction of this index was widely criticised not only by local government officials themselves, but also in the literature on the subject, which resulted in the government undertaking legislative work in Poland to modify the index. As a result of discussions and the work of parliamentary committees, the Act of 14 December 2018 amending the Public Finance Act and other laws was passed and, on its basis, a new formula for calculating IDI was introduced from 1 January 2019. The aim of the paper is to assess, based on the many-year financial forecast, the impact of a change in the way of IDI calculation on the possibilities of incurring and repaying liabilities by voivodeship governments in Poland. The research was conducted for the years 2016-2026.