OVERVIEW OF FISCAL DECENTRALISATION
Slovenia’s government organisation is based on two levels: the central government and 212 municipalities.
Legal acts governing fiscal decentralisation
The Slovenian 1991 Constitution guarantees the principle of local self-governance. The key legislation setting the municipal financial framework, municipal revenues and borrowing limits is the Financing of Municipalities Act (2007).
Qualifying fiscal decentralisation
In 2018, sub-national governments' expenditures in Slovenia represented 19% of overall government expenditures. This figure is 8 points below the EU level average.
The financial arrangements of municipalities are based on the complementary principles of “adequate spending" and 'adequate funding'. The adequate spending formula estimates the adequate level of expenditures for each municipality, taking into account the functions devolved to the sub-national level and a set of idiosyncratic municipal factors (i.e. inhabitants, age of population, surface area, and local infrastructures).
Municipal financial needs, determined through the 'adequate' spending formula, are met by a particular mix of municipal funding according to the principle of 'adequate' funding. The principal source of revenues (55.5% of the total municipal revenues in 2017) is the personal income tax (PIT). PIT is collected by the central government and it is redistributed to each municipality taking into account their revenue-generating capacity and spending needs. PIT plays a crucial role in redistributing resources among municipalities (solidarity compensations) and is the first resource deployed to help less affluent local governments reach their 'adequate' spending level. If PIT resources are not enough to cover the financial needs of all the municipalities, additional government resources, in the form of grants, are transferred to those local governments in need.
Municipal revenues are also composed of own resources (local taxes), over which municipalities have limited autonomy for setting rates and tax bases) and municipal fees, over which local governments are entitled to some discretion and autonomy.
Source: authors’ elaboration on EUROSTAT data. For further details, see
methodology.
LEVEL of FISCAL DECENTRALISATION
Revenue autonomy (own revenues relative to total resources available) at the local level (regions and municipalities) is slightly higher than the EU average (61% versus 53% in 2018), this entails a dependency on central government transfers that is lower than the EU average (39% versus 48% in 2018). Local own revenues represented 12% of total government revenues in 2018, a value in line with the EU average (13%).
Source: authors’ elaboration on EUROSTAT data. For further details, see
methodology.
The composite ratio, which captures aspects of fiscal decentralisation of both revenue and expenditure, suggests that the sub-national governments in Slovenia have a degree of fiscal decentralisation (14% in 2018) that is slightly below the EU average (16% in 2018). The indicator measuring the level of tax autonomy also points towards a moderate level of autonomy for local governments: only 15% of total tax revenues can be fully controlled by local governments, while the largest share (77%) is represented by shared taxes (mostly PIT).
Source: authors’ elaboration on EUROSTAT data. For further details, see
methodology.
Fiscal rules and borrowing capacity
The possibilities of borrowing for municipalities are limited by strict rules. Municipalities are allowed to borrow domestically for liquidity purposes up to a ceiling of 5% of the budget of the previous year. Borrowing for investment purposes is also subjected to quantitative limits and, for any medium to long-term investment, a specific authorisation by the Ministry of Finance is required. Municipalities are not allowed to issue bonds but they can guarantee loans to certain public entities (legal entities that provide public services). The total annual ceiling for the repayment of loans principals and interest, financial leasing, trade credits and contingent liabilities is set at 8% of the revenues of the previous year.
Deficit and debt at sub-national levels
In 2018, the consolidated gross debt of the Slovenian local government sector amounted to 1.8% of GDP, a value that has decreased by 0.4 percentage points in the past 4 years.
Source: authors’ elaboration on EUROSTAT data. For further details, see
methodology.
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 (89% in 2017), environmental protection (57% in 2017), education (57% in 2017) and recreation, culture and religion (46% in 2017).
Source: authors’ elaboration on EUROSTAT data. For further details, see
methodology.
Municipalities' spending is most concentrated, and more so than the EU averages, in the fields of education (38% of total local spending in 2017) and recreation, culture and religion (8% in 2017). Other important areas of municipal spending are health (12% in 2017), economic affairs (12% in 2017)and social protection (12% in 2017).
Source: authors’ elaboration on EUROSTAT data. For further details, see methodology.
