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2.0 Politics
2.1 Decentralization — a true success story from Ukraine
Decentralization is often said to be one of Ukraine’s most successful reforms. And with good reason. It has breathed new life into stagnant Ukrainian villages, which now have incentives to spur their own development to use their own tax money. Remarkably, the success of the reform has generated controversy: some villages are so successful that they are reluctant to be adjoined to cities despite governmental plans.
As a successor of the USSR, Ukraine inherited a highly centralized system of public administration. Apart from some minor changes in 1991-1996, the system mostly remained the same: public costs were distributed from the central budget to local municipalities through the system of state subsidies, managed by regional administrations appointed jointly by the President and government. Local budgets were limited due to taxation laws that provided most of the costs to the central budget. Local councils, both village and district (rayonna rada), could define local priorities but largely depended on funding provided by the central budget.
The decentralization reform launched in 2014 changed the situation dramatically and many local municipalities started collecting larger budget revenues per capita than large cities. This has created a new and unexpected phenomenon in Ukraine where many villages oppose proposed unification with cities since they can now operate better by themselves.
The transition period ends this year, in 2020. So it’s time to sum up how Ukraine developed with decentralization, and also to outline some controversies that have emerged during the reform. In general, while financial decentralization and new taxation laws are praised by the consensus and demonstrate obvious improvement in Ukrainian villages, expert assessments of the administrative model of the reform have been mixed.
Decentralization reform has been ongoing in Ukraine since 2014. The intent of the reform was to give local municipalities additional authority and tax revenues to take responsibility for the most pressing local issues, such as infrastructure, schools, parks and public spaces, cultural institutions and resources such as libraries and art schools, waste management, ecological management, and healthcare (including medical centers, facilities for general practitioners, and even maintenance of hospitals).
Essentially, municipalities were to de-facto take responsibility for all public issues, leaving the state responsible only for pensions, higher education, security and police, and medical insurance, as well as regulatory policy and norms.
Yet, in order to acquire such autonomy, municipalities had to unite into so-called united territorial communities (OTG) to be sure they had enough territory, population, and capacity to provide all required services.
On average, 6 villages that previously had been separate municipalities with separate management, were united into one OTG of 50-100 km2, although
5 UKRAINE Country Report September 2020 www.intellinews.com
