Rogue Priorities

Rogue Priorities

Rogue Priorities 3

TRO is not interested in the regions. The main thing is the roads

Regions rely on roads, not defense, writes ZN.UA

The volumes of oblasts’ expenditures on road maintenance sometimes exceed the expenditures on SRW and public safety by dozens of times. It is important that road maintenance is not construction, but maintenance of the existing infrastructure in proper condition, that is, current repairs. Those same repairs, for which, after several years of stubborn “Big Construction”, the costs, on the contrary, should have been reduced. And even if we assume that our roads really need to be repaired indiscriminately, is their proper condition a higher priority than funding for the TRO? But it just so happened that the same “Big Construction” literally cemented the scheme for cutting budget money through the “road workers”. Some regions successfully used the ready-made corruption infrastructure last year as well. No matter what.

There are several reasons why this story is possible. First – in Ukraine they did not stop stealing. It seems that society is more united than ever, courageously resists the enemy, gives the last to the Armed Forces of Ukraine, and a new, fundamentally different Ukraine is about to be born. This is not entirely true. The percentage of those who want to cut budgets, according to our observations, has not decreased significantly. Unlike the percentage of public data that would allow controlling embezzlers, this is second cause. Information about budget plans can still be somehow picked up, but only the most persistent are able to get information about the implementation of these plans or the adjustments made during the year. And we are sincerely grateful to everyone who helped us collect these grains of truth. But in fact, open budgets, interim reports, the publication of which was an obligation, transparent purchases that everyone could look at, are in the past. As a result, they began to drag nets out of the muddy water not with a fishing rod, but with nets, and no one shook hands. So, third the reason is a blessing from the central government, which is definitely in the subject, and if it is silent, then in the share.

And really, why be ashamed and restrained by the rest, even if the head of the Dnepropetrovsk region, the undisputed leader in travel expenses, has no problems. Pan Reznichenko took for himself, and spent almost two billion hryvnias of regional money on road maintenance last year, of which one and a half billion were received by his fitness trainer’s firm. How did it all end? How did the President, who appoints and dismisses the heads of regional state administrations, react to the obvious violation? But no way. Reznichenko went with Zelensky to Kherson, shook hands with Yermak on camera, and the coach was simply removed from the official beneficiaries of the company, and that’s all. What conclusions do you think other regions will draw, where the cost of road patches is more modest? I think they will increase their appetites this year. There is a resource.

In fact, unlike the state budget, the locals do not experience a catastrophe, because the growing deficit of UAH 150 billion a month has not fallen on their heads. The main drop in local budget revenues, according to the Decentralization Reform Support Office, occurred in March-April last year. Moreover, this drop was, for example, not as deep as during the coronacrisis in 2020, not lower than the level of 2019.

Already since May, the incomes of the general funds of the budgets of the communities have been steadily growing, and sometimes this increase was double-digit. It is clear that someone was better than everyone else, and someone was really bad – the areas in which hostilities are taking place definitely did not fatten either in May or in December. Fortunately, such areas are in the minority. At the same time, in other regions, on the contrary, things went uphill: in the Lviv region, incomes increased by 41% compared to 2021, in Zakarpattia — by 38%, in Volyn and Ivano-Frankivsk — by 31%, in Rivne — by 27, in Dnipropetrovsk – by 16, in Kyiv and the region – by 5 and 7%, respectively.

The main reason for this flourishing is the proceeds from personal income tax, which grew by 35%. This payroll tax generates 68% of the income of the general funds of local budgets. Last year, personal income tax, despite the war and internal migration, increased, because, firstly, at the beginning of 2022, the standard for its deductions to local budgets increased by 4%, and secondly, thanks to military salaries. The second reason is the key one.

If you look at the monthly dynamics of personal income tax, its significant increase begins just from March 2022, when military salaries skyrocketed. Now, out of UAH 25 billion in personal income tax that the treasury receives every month, 10 billion are taxes on cash support, remuneration and other payments to military personnel. That is, thanks to the soldiers, the regions not only can live and work in peace, they also feel much better financially. And where do these “soldier” taxes go? You already know the answer, but let’s elaborate.

We analyzed and compared road and security costs only in areas adjacent to a zone of active or potential hostilities. Because the priority in spending for them should be approximately the same. Agree, it is unfair to demand from the cozy Cherkasy or Khmelnytsky regions the same level of anxiety and preparation for meeting the enemy as the Kharkiv or Sumy residents. Also, unfortunately, we were not able to get a complete picture of the Nikolaev region, which is understandable given the circumstances. The resulting comparison is eloquent (see fig.). Road repairs – everything, security – the rest. An exception to the rule, and at the same time a benchmark for a fair distribution of costs, is the long-suffering Kharkiv region, where “road” volumes are comparable to “safety” volumes, and the need for patching roads is really justified by the existing destruction. The Rivne region and Volyn were pleasantly surprised, a lot was spent there “on road patches”, but they did not spare money on security in anticipation of an offensive from the north. The rest – grab your head.

TRO is not interested in the regions. The main thing is the roads

An exception to the rule, and at the same time a benchmark for a fair distribution of costs, is the long-suffering Kharkiv region, where “road” volumes are comparable to “safety” volumes, and the need for patching roads is really justified by the existing destruction. The Rivne region and Volyn were pleasantly surprised, a lot was spent there “on road patches”, but they did not spare money on security in anticipation of an offensive from the north. The rest – grab your head.

TRO is not interested in the regions. The main thing is the roads

The cost of maintaining roads exceeds the cost of SRW, public security and mobilization dozens of times: Sumy region – UAH 218 million for roads, 5 million for security, Chernihiv region – for roads 153 million, for security 5.5 million, Odessa region – for roads 242 million , for security 12 million, Kyiv region – 130 million against 13 million, Zhytomyr region – 443 million against 4.8 million UAH.

By the way, Dnipropetrovsk region has a record 280 million hryvnias for security and SRW, but everything spoils an even more record 2 billion hryvnias for road works. Moreover, the Dnipropetrovsk region has one of the largest budgets (after Kyiv) in the amount of over UAH 11 billion, and these hundreds of millions are quite commensurate expenses for it. As opposed to 18% of the budget spent on road repairs.

At the same time, natives note that only two road sections required real repairs in the region, and it certainly would not have pulled in the amount of more than 300 million hryvnias. And local gossips add that Reznichenko would not have pulled so much for repairs if Zelensky had not believed the fairy tale that the region needs such road expenses, because the highways need to be expanded to become runways if necessary. We would have believed it if we didn’t know that the Ukrainian airfields, which really suffered heavy losses at the beginning of the war, are being actively restored, and their use is clearly a higher priority, since one runway for military aviation is still not enough. Well, we fully assume that the president did not know this. But we see a trend in the expenditure priorities of the regions and we understand that Bankova’s tacit consent to its continuation is more than a real budgetary risk this year, and the “Dnepropetrovsk” scale of road works for “soldier’s” money this year will be gladly picked up by other regions. It’s always like this with impunity.

This year, financing of local budgets, provided for by the state budget, will amount to UAH 605 billion. At the same time, in 2023, the norm on enrolling an increased personal income tax standard at the level of 64% was extended. Also, personal income tax from monetary security and other payments to military personnel will continue to be credited to local budgets. And rightly so, because it was decentralization that largely ensured the resilience that the Ukrainian economy demonstrates, given the losses and costs associated with the war. That’s just the priorities of the regional leaders still have to change before the electorate will punish them for them in the next election. Because if the issue of security is neglected, then instead of elections, you can get a “referendum”. And if you continue to steal – Maidan. Take your pick, gentlemen.

Julia Samaeva

Dnipropetrovsk region Large construction regions roads TrO