THE IMPACT OF THE ECONOMIC CRISES ON FINANCING - Polish Journal of Management Studies

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THE IMPACT OF THE ECONOMIC CRISES ON FINANCING

Abstracts > Vol 7

THE IMPACT OF THE ECONOMIC CRISES ON FINANCING
OF MUNICIPALITIES IN SLOVAKIA
Jenčová S., Litavcová E., Štefko R., Maťovčíková D.

Abstract: Municipalitys financing represents a substantial part of borough politics. It results from the fundamental functioning of the municipality. One of the main tasks is not only to raise enough funds to cover and satisfy their needs, but also to guarantee their effective usage and to apply new approaches to multi-source municipalitys financing. The budget of the municipality is closely linked to the state budget and its efficient management on the income site can ease the pressure on the state subsidies funding. The paper deals with the current issues regarding to financing of municipalities of the selected region of Svidník County with its 65 municipalities, yet the results can be applied to all Slovak municipalities. It has been proved that there is the strong link between preferred forms of financing and the view on the deterioration in the availability of financial resources in times of crises.

Keywords:
municipality, autonomy, financing, standard resources, alternative resources, cluster analysis

Introduction

Municipalities  (basic territorial units of the State)  play an important   role   in regional and   micro-regional   development.  Municipality is an independent self-governing territorial unit which unify citizens with permanent residence on its territory, it is actually the level of local self-government (Tej, 2011). Municipalities with their institutions have to make decisions about their financing. The question is, how they differ in this deciding. In generally, according to Ferencová, organisations, institutions, companies and firms have to be aware of social and cultural influence, they have to observe how they differ inside the society and within the markets where they operate. Consistent knowledge of cultural characteristics and particularities can decide on competitive advantage and right marketing decisions in the favour of target subjects (Ferencová, 2010). The system of financing municipalities has been known as fiscal decentralization since 2005. The basis for implementation of system's operation is to quantify the amount of specific powers to municipalities and therefore to indicate the necessary resources. Existence of f iscal decentralization   is not   arbitrary,   but it is   an economic necessity (Lipták, 1999) .  Its presence  tends  to   lower   levels of government   decisions   on the provision of   public goods and services , taking into account  local   peculiarities (Neubauerová et al., 2001).   It is not just   about   the division of responsibilities ,  but   also the power   to obtain   revenues.   At the same time  it   is an economic   -   legal process  of an  efficient   division of tasks   between the state and   other levels of   local government , and decisions  on whether   public goods   should be procured,   but also  how they should be  financed (Medveď-Nemec, 2007). The idea is to   replace   transfers  and subsidies channeled  from the state budget   to the budgets of   municipalities   and higher territorial units  through tax revenues. Municipalities should be deciding themselves how to use these revenues.

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Summary

Municipalities of the Svidník County in the Slovakia can be divided into two clusters after the application of cluster analysis. The model captured about 77% of the variability in the data sample. Cluster 1 ranked the municipalities that were using significantly smaller number of financial resources compared to those in cluster 2. It has been proved that the municipalities from cluster 2 strongly preferred to use depreciation, bonds, leasing, factoring and supplier credit as the main source of financing, otherwise call active financing for our purposes. On the other hand, they consider the profit and revenue of the municipality less important as a financial resource and are significantly more sensitive to the deterioration in the availability of financial resources in times of crisis in the majority of resources (these are the sources with number 2 in Table 5, overall 10 out of 18 resources). It was further shown that the municipalities from cluster 1 consider depreciation, bonds, leasing, factoring and supplier credit as less important, are significantly more sensitive to deterioration in the availability of financial resources in times of crisis in a minority of sources (2 of 18), precisely in the revenue from local taxes and local fees and venture capital. Municipalities from cluster 2 are significantly more inclined to the radical view on the deterioration in the availability of financial resources in times of crisis.
The key issue   on which   we   focused   in our research  was  the   issue of the degree   of   importance of the use   of standard   forms of funding   to finance   municipalities.   Our intention was to   get to know the   character of   villages  in order to split them  into   clusters   so that   clusters   between themselves   varied greatly , yet  municipalities   within   each   cluster   differed   the least .  It turned out that   the village   district   Svidník   can   thus   be divided   into two   clusters,   which can be   identified as " richer " and " poorer".  With regards to  the  mathematical and statistical   system , this  result can be   generalized to   all  those  rural   districts   of   Slovakia  that are  characterized by   the absence of   major   industrial   center   in the district   and the   greater   distance   from the highway ,  respectively   the main road.  Once we identified two specific clusters, we  also   focused on   finding   differences   in the   perceived   impact of the crisis   on the   deterioration in   the availability of   financial resources.    It turned out that  clusters differ  also in terms of   feeling about   the impact   of the financial crisis.

References:


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WPŁYW KRYZYSU GOSPODARCZEGO NA FINANSOWANIE GMIN NA SŁOWACJI

Streszczenie: Finansowanie gmin stanowi znaczną część polityki samorządu. Wynika to z podstawowego funkcjonowania gminy. Jednym z głównych zadań jest nie tylko zgromadzenie wystarczających środków na pokrycie i zaspokojenie potrzeb, ale także zagwarantowania skutecznego ich wykorzystania i zastosowania nowego podejścia do wielu źródeł finansowania gminy. Budżet gminy jest ściśle związany z budżetem państwa, a jego skuteczne zarządzanie po stronie dochodów może złagodzić presję na finansowania dotacji państwowych. Artykuł dotyczy aktualnych zagadnień związanych z finansowaniem gmin w regionie Svidnik w którym znajduje się 65 gmin, jednak wyniki mogą zostać zastosowanie do wszystkich gmin słowackich. Udowodniono, że istnieje silny związek między preferowanymi formami finansowania a widokiem na pogorszenie się dostępności środków finansowych w czasach kryzysu.
Słowa kluczowe: gmina, autonomia, finansowanie, środki standardowe, zasoby alternatywne, analiza skupień


 
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