KLAIPEDA - With the year heading into the second half, local municipalities are finding that their coffers are running dry, putting pressure on where they'll come up with funds to meet social security payments.
According to the Association of Local Authorities in Lithuania (ALAL), on average only 45 percent of planned budget revenue has been collected by local governments during the first half of 2009.
Municipalities struggling with budget shortages had hoped revenues would flow in at the end of the year, when companies usually make their tax payments, the so-called, 'thirteenth salaries,' thereby closing the budget gaps.
The story is quite different this year. Due to the economic meltdown, most local enterprises are drowning in debt and asking the State Tax Inspectorate to allow them to make payments in parts. According to the ALAL, most municipalities were short of funds intended for social security benefits already in July, and are now asking the central government for more money.
President of the ALAL, Ricardas Malinauskas, says that approximately 100 million litas (29 million euros) in extra funds are needed to meet the nation's social security demands by the end of the year.
Telsiai municipality is one of the many severely stricken regions. It is currently dealing with an unemployment rate of almost 13 percent. "In the beginning of the year no one expected [unemployment] would skyrocket so high," said mayor Valdemaras Rumsas to The Baltic Times. "The higher the unemployment rate, the more unemployment allowances we have to pay out on a monthly basis. We didn't plan to allocate so much money for this purpose," he added.
Initially, the local authority planned to spend 2.2 million litas over 9 months for the needy, but has already spent 2.4 million litas. This looks to spiral higher. Too crippled to meet its financial commitments, the municipality has already ceased paying out social allowances for students, extraordinary grants and some other allowances. The municipality is struggling under debts of nearly 1 million litas for heating bills since the beginning of the year.
"Recently, we made some calculations on how much money we need to meet our financial commitments. We'll need an addition 4 million litas until the end of the year. We would not have ended up in such a desperate situation if the Ministry of Finance and the State Tax Inspectorate would have transferred nearly 6 million litas that we had budgeted for 2009. The government should not forget that payouts of social security benefits are a delegated function, and we are only administering them," said Rumsas.
Since the local budget has been cut several times within the past six months, and no additional revenues are expected, Rumsas is convinced that his municipality is doomed to bankruptcy unless the government steps in. He dismissed the possibility of getting a loan, since borrowing limits have been reached.
Neighboring Silale is doing comparably better. Its mayor Albinas Ezerskis said that "Silale has relatively low unemployment, 8 percent, because of its insignificant amount of industry," adding that "We are an agricultural region, with little industry, so the economic turmoil on us has been slight. Moreover, farmers do not complain as much as entrepreneurs do. A lower unemployment rate means less unemployment allowances."
Smaller municipalities can console themselves with the fact that the biggest municipality in the country, Vilnius, is squeezed by debt, which, according to the Department of Statistics, totals 666 million litas. Vilnius's latest attempt to increase its borrowing, by around 50 million litas, was rejected due to it also having reached its legal borrowing limit.
After a recent meeting with Lithuanian President Dalia Grybauskaite, Vilnius's Mayor Vilius Navickas said that "the 45 percent limit restricts the municipality's movements to the point where it is being crippled," reports news Web site delfi.
In the first half of 2009, Siauliai turned in the best performance in collecting taxes, recording 56.9 percent of its planned budget; others were well behind, with Pakruojis at 37.9 percent, and Telsiai at 40.7 percent of plan. ALAL's Deputy Director for Finance and Economy Rimantas Cepas previously said to news daily Valstieciu laikrastis that in September, or October, most Lithuanian municipalities will halt social security payments due to lack of funds.
Municipalities' planned budget incomes for 2009 from income tax, a significant source of the local budget, have fallen by 394.6 millions litas. Some municipalities that have applied to Vilnius for financial assistance were told to tackle the problems on their own, which means further local budget cuts.
With the growing pains to provide social security payouts amid rising social tensions, a solution will have to be found soon. ALAL is waiting for a reply on the issue from the government. Some municipalities have hinted that the Ministry of Finance has worked out a plan with the Ministry of Social Affairs and Labor, and is about to transfer the needed funds within the next week.