Romanian PM talks imminent local administration reforms package with municipalities
<p>The local taxes, other than the property tax, will increase by 70% and the overall payroll will decrease by 20% by a combination of lower employment and lower individual incomes to be decided at local level, prime minister Ilie Bolojan told representatives of the Association of Municipalities from Romania (AMR) on August 5 during a meeting on the local administration reforms.</p>

<p>The government is preparing the second package of reforms, which will include the local administration reforms, according to an executive's&nbsp;<a href="https://romania-insider.us1.list-manage.com/track/click?u=2f0cf98c5bbb903b9c07ffa45&amp;id=c180f5eb6f&amp;e=cd1f92f96c" target="_blank">press release</a>.</p>

<p>The reforms aim to reduce public spending, enhance tax collection, and improve the efficiency of local services, as part of commitments under the National Recovery and Resilience Plan (PNRR). They are needed to secure fiscal consolidation in the medium term, after the first package of reforms fixed the acute budgetary needs.</p>

<p>Furthermore, the coming reforms are expected to address the social frustration by showing more efficient use of public money, after the first package mainly included tax hikes with a direct impact on households' real incomes.</p>

<p>Romania's government is slightly behind schedule as it had previously promised to come up with the second package of reforms by the end of July and approve it by mid-August. In addition to the local administration reforms, the package is supposed to include reforms in state-owned enterprises (SOEs) - an activity initially assigned to the resigned deputy prime minister Dragos Anastasiu.&nbsp;</p>

<p>After consultations between representatives of the government and AMR on August 5, it was agreed that&nbsp;the 20% cut of the personnel in the local administration might actually be replaced by a combination of lower individual incomes and fewer employees, as long as the overall payroll drops by 20%. The decision will be taken at the local level, on a case-by-case basis, according to <a href="https://www.digi24.ro/stiri/actualitate/guvernul-ia-in-calcul-cresterea-cu-70-a-taxelor-locale-ce-alte-masuri-sunt-prevazute-pentru-a-consolida-bugetele-primariilor-3358631?mc_cid=ca76f11670&amp;mc_eid=cd1f92f96c" rel="noopener" target="_blank">Digi24</a>.</p>

<p>The financing of the public investment projects funded from the national budget under the Anghel Saligny scheme will also be decided on a case-by-case basis after consultations between central and local level representatives. But the budget constraints are extreme, as minister of development Cseke Attila explained in an interview given on August 4 to B1 TV: the scheme's budget this year is RON 10 billion (EUR 2 billion), out of which RON 3.6 billion should cover invoices filed by contractors last year.</p>

<p>The scheme would need further RON 4.5 billion (EUR 0.9 billion, just over 0.2% of GDP), above the initial EUR 10 billion budget, in order to continue the financing of all projects, Minister Attila said.</p>

<p>For comparison, last year the contractors for the projects under Anghel Saligny filed invoices worth RON 17 billion – while keeping all projects open would result in a minimum of RON 11 billion invoiced this year, according to minister Attila's statements (the RON 6.4 billion from the existing budget less the overdue invoices issued last year, plus the RON 4.5 billion supplementary needed in excess to the initial budget). Some money, obviously not the entire RON 4.5 billion needed, might be obtained at the budget revision, the minister said on a cautious note.</p>

<p>Minister Attila, in his B1 TV interview,&nbsp;<a href="https://romania-insider.us1.list-manage.com/track/click?u=2f0cf98c5bbb903b9c07ffa45&amp;id=66846ebf94&amp;e=cd1f92f96c" target="_blank">implied</a> that the second package of reforms would be approved by the Parliament by the end of the month, rather than by mid-August as previously stated by PM Bolojan. He spoke about "his part" of the package [local administration], implying that the second package would also include the reforms in the state-owned enterprises.</p>

<p>The budget revision is another key topic of the government's agenda<strong>&nbsp;</strong>over the coming couple of weeks.</p>

<p>"We are in a difficult situation as of mid-2025, both in terms of the budget deficit and ongoing investments. We have started implementing the first package of measures to reduce budget expenditures and correct some imbalances. The data from the Ministry of Finance shows us that we must continue in this direction. Therefore,&nbsp;we are preparing the second government package that will include the public administration reform. Our goal is to reduce public administration personnel expenditures, improve local tax collection, increase the efficiency of public services, and continue decentralization," said Ilie Bolojan, quoted in a government press release.</p>

<p>Government and AMR representatives analyzed the proposals regarding the property taxation reform, a commitment assumed by Romania through the PNRR, the reduction of the number of employees in local public administration and the increase of professional performance, the activation of the clause according to which the budgets for balancing local budgets will be established proportionally to the level of tax collection, the cited source states.&nbsp;</p>

<p>The government's consultations with local public administration representatives will continue in the coming period.</p>

<p><em>iulian@romania-insider.com</em></p>

<p><em>(Photo source: Gov.ro)</em></p>