Between 2019 and 2023, municipalities governed by United Right governors received almost 2.35 times more in government subsidies than municipalities governed by the parliamentary opposition. Most of these subsidies came from the COVID-19 Fund (111.4 billion). The activities of this Fund were largely financed by issuing bonds, which means that all citizens would be burdened with the debt.
These are the conclusions of a comprehensive study conducted by the Institute of Public Finance, whose lead author is PhD Łukasz Wiktor Olejnik, a research fellow at the Warsaw School of Economics, an external expert at the Institute of Public Finance and associate author Marcin Grygo a junior analyst at the Institute of Public Finance.
The full report is available for download (only polish version):
The analysis shows that municipalities governed by a mayor supported by the United Right received a total of about PLN 5486 per capita, municipalities governed by independent local government officials received about PLN 3684 per capita, and municipalities governed by the opposition from the so-called “Senate Pact” received about PLN 2333 per capita.
Map of grants awarded:
This analysis shows several important pathologies. First of all, the local investment process was centralized. Instead of planning their development autonomously, municipalities were dependent on the decisions of a central-level office. Secondly, the bulk of the grant money was allocated under the COVID-19 Counteracting Fund, which included such programs as the Government Program for Reconstruction of Monuments. This mechanism (officially an emergency pandemic intervention) should not be used for such purposes. Especially since the COVID Fund covered a large part of its expenses with bonds issued outside the budget, a debt that all taxpayers will have to repay for many years. And, of course, beneficiary selection. Our comprehensive analysis conclusively proves that political criteria were the most important in deciding which municipality would receive the funding. – PhD Slawomir Dudek, president and chief economist of the Institute of Public Finance.
The authors of the study cite, among other things, the conclusions of the Supreme Audit Office’s audit, indicating that local government’s revenues, which had fallen as a result of legislative changes, were increasingly replaced by transfer revenues, which very often were discretionary and went to those groups of local governments that, for various reasons, were favored by government bodies.
The study conducted by IFP is the most comprehensive that addresses this issue.
More than 40,000 grants awarded in more than 70 calls under 15 support programs for local governments in 2019-2023 were analyzed. The total value of grants awarded is PLN 168.6 billion, which is 6.14% of Poland’s average annual GDP from 2019-2023.
This is a huge sum that has macroeconomic significance and significantly affects the economic growth of entire regions.- the study’s authors emphasize.
Of the programs studied, those implemented under the operation of the COVID-19 Fund, managed by the Polish Development Bank (BGK), were particularly important:
- Government’s Polish Governance Fund: Strategic Investment Program (nine calls with a total value of approximately PLN 99.2 billion)
- Government Local Investment Fund (two competitive calls and a pool for mountain and post-statehood municipalities with a total value of approximately PLN 7.2 billion)
- Government Monument Reconstruction Program (two calls for proposals with a total value of approximately PLN 4.3 billion)
- Government Housing Development Fund (investments worth about PLN 0.7 billion)
The COVID-19 Fund has provided grants worth a total of PLN 111.4 billion in this way. At the same time, the competition criteria in the programs implemented by this fund were relatively general and allowed for considerable discretion in the selection of beneficiaries.
The Supreme Audit Office writes about this in the results of its recent audit:
The criteria for evaluating applications in the resolutions creating the Government’s Strategic Investment Fund and Strategic Investment Program were defined in very general terms, while no uniform, transparent, and open mechanism for evaluating applications was developed at the application review stage. (…) Justifications for both positive and negative decisions were not documented in any form (paper or electronic). This made it impossible to determine the rationale behind them and made the procedure for evaluating applications not open and transparent. There was also no indication of the specific criteria based on which applications involving subjectively similar investments were considered differently. Moreover, none of the members of the commission, during oral explanations or hearings, was able to specify why one application received support and another did not. This demonstrates the lack of transparency in the process not only for the auditors but also for the commission members, who are unable to evaluate the same applications, in the same way.
The Supreme Audit Office also had doubts about whether the commission was sufficiently reviewing applications at all. Assuming continuous work by the Commission on the Government Local Investment Fund for 12 hours at each meeting, there were less than 16, 13, and 11 seconds, respectively, to review one application, the Supreme Audit Office wrote in its audit report.
In addition, the auditors found that the Chairman of the Commission to Support the Strategic Investment Program after its meetings, at least in the first round of calls, single-handedly made changes to the recommendations issued by the Commission.
