OVERVIEW OF FISCAL DECENTRALISATION

The sub-national government organisation in Poland is based on a three-tier structure: 16 regions (voivodships), 314 counties (poviats) and 2,478 municipalities (gminas). Data in this factsheet refer to the sub-national government level as including regions, counties and municipalities.

Legal acts governing fiscal decentralisation

The Constitution of 1997 assigns to local governments all functions that are not explicitly assigned to other government levels. The key piece of legislation setting the financial framework for sub-national governments is the Act on Local Government Revenue of 2003.  

Qualifying fiscal decentralisation

Municipalities' budgets account for roughly 75% of total public finances managed at the sub-national level, reflecting the higher number of tasks assigned to them. Counties and regions account for the remaining 25%, reflecting their fewer responsibilities.
Overall in 2018, sub-national expenditures in Poland accounted for 33% of total government expenditures (see the pie chart below).

National law establishes that sub-national governments can have three different revenue sources: own revenues (in 2016, 32.7% of total), consisting of local taxes (only for municipalities), shared taxes (PIT, CIT in different shares for municipalities, counties and regions), fees and charges (in 2016, 8.1% of total), and revenue from assets. The general subsidy, which is transferred from the state budget every year and is weighted according to each local unit's needs;  and earmarked grants (both together 57.6% of the total in 2016) used to finance central government functions delegated to sub-national governments. A special education subsidy is transferred by the Ministry of Education to all entities in charge of educational tasks and represents the major financing source for primary and secondary education.  

Fiscal equalisation mechanism

The size of the general grant transferred to each sub-national government is determined in order to perform a fiscal equalisation function among municipalities. The formula used to calculate the grant for municipalities takes into consideration the revenue-generating capacity of each local unit in the form of tax revenue per capita and, with a lower weight, population density. The grants for counties and regions also take into consideration other factors like unemployment and specific regional factors such as infrastructure. 

LEVEL OF FISCAL DECENTRALISATION

Revenue autonomy (own revenues relative to total resources available) at the local level is lower than the EU average (41% versus 53% in 2018), which indicates a dependency on central government transfers that is higher than the EU average (59% versus 48% in 2018). Local own revenues represented 14% of total government revenues, a value largely in line with the EU average (13% in 2018).  

Source: authors’ elaboration on EUROSTAT data. For further details, see methodology.  

Fiscal rules and borrowing capacity

Local governments are subject to strict fiscal rules. The general rule imposes that current expenditures planned for a budget year cannot be higher than the sum of current revenues, the budget surplus from the previous year and unassigned resources. From the end of 2013, a general rule applied to all sub-national government units requiring that the overall debt of each local unit could not exceed 60% of the revenues at the end of the year, while interest payments could not exceed 15% of revenues. From the beginning of 2014 a new rule, which allows for greater flexibility, is in force. The new rule introduces a unit-specific coefficient of debt (calculated on a three-year average ratio of the sum of the current surplus and sales to total revenues) that defines specific debt thresholds for each local government entity.  

Deficit and debt at sub-national levels

In 2018, the consolidated gross debt of the Polish local government sector amounted to 3.9% of GDP. Debt levels had increased from 1.1% in 2000 to 4.5% in 2014 and has since gradually declined.

EXPENDITURE BY GOVERNMENT LEVEL AND BY POLICY AREA

Expenditures of municipalities represent a significant part of total general government expenditures in the fields of housing and community amenities (87% in 2017), environmental protection (76% in 2017), recreation, culture and religion (74% in 2017) and education (72% in 2017). 

Source: authors’ elaboration on EUROSTAT data. For further details, see methodology.

Municipalities' spending is more concentrated than the EU averages in the fields of education (26% of total local spending in 2017), health (15% in 2017), economic affairs (13% in 2017), and recreation, culture and religion (7% in 2017). 

Source: authors’ elaboration on EUROSTAT data. For further details, see methodology.