How does decentralization work in wartime? What is life like for communities without “military” personal income tax? What can Soviet cultural establishments in towns and villages be transformed into? And is it worth repairing roads during martial law? In the new episode of the podcast “Budget Talks,” you will find answers to these and other pressing questions. The Head of the Fiscal Policy Research Center, Viktor Mazyarchuk, public finance expert Roman Slobodyan, and local development expert and head of the NGO “Recovery and Development Agency” Oleksandr Solontay discuss the challenges local self-government has faced since the war began and the changes Ukrainian towns and villages have undergone.
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ROMAN
Good day, friends! We are pleased to welcome you to our podcast “Budget Conversations,” supported by the International Renaissance Foundation. Today with me is the head of the Center for Fiscal Policy Research, Viktor Maziarchuk.
VIKTOR
Hello, Roman. Colleagues.
ROMAN
And Oleksandr Solontay.
OLEKSANDR
From the NGO “Agency for Reconstruction and Development,” happy to be with you.
On Decentralization as a Vaccine Against Federalization
ROMAN
Good day, friends! We are happy to welcome you to our podcast “Budget Talks,” supported by the International Renaissance Foundation. Today, I am joined by the head of the Fiscal Policy Research Center, Viktor Mazyarchuk.
VIKTOR
Hello, Roman. Colleagues.
ROMAN
And Oleksandr Solontay.
OLEKSANDR
From the NGO “Recovery and Development Agency,” glad to be here with you. On Decentralization as a Vaccine Against Federalization
ROMAN
Today, we will talk about decentralization. I believe it was one of the most successful reforms (and I’m probably not alone in this) that began in 2014. Its success is evidenced by the unification of 1,469 communities. My first question is for you, Oleksandr. Considering the tragic date for all of us, the start of the full-scale war on February 24, 2022, how would you evaluate this decentralization reform? Were there any drawbacks?
OLEKSANDR
I think the start of the reform in 2014 is directly linked to the onset of the war. In fact, the war began on February 18, 2014, and the decentralization reform was officially approved on April 1, 2014. The first changes and laws were adopted, and the first steps implemented, in May 2014, when local elections were restored, and self-government began to be revitalized. In the summer, the Law of Ukraine “On Cooperation of Territorial Communities” was adopted. At the end of 2014, changes to the Budget and Tax Codes were made. This began to fill the communities with funds, back when there were still 11,000 communities. The money started flowing down to the local level, still within the old community structure. Why did the war start back then, and why has it been ongoing for over 10 years while Ukraine implements the decentralization reform? Because we knew very well in 2014 that the best response to Putin’s attempt to break up the country, to the infection of separatism, to the infection of federalization, was decentralization – letting everything down to the people’s level, allowing local people to make decisions and live like Europeans. Thus, the decentralization reform began, partly under the influence of the actual state of war. The escalation on February 24 – the full-scale invasion, in my opinion – is a reason to deepen the decentralization reform. Because what Putin broke his teeth on in 2022 when he launched his armada against the country was the communities. One reason why he failed in his plan to capture Ukraine in a few days or weeks was because of the communities. Each community turned out to be an independent, already prepared unit where certain decisions were made. For example, near Kyiv, there was a case where the community head was a traitor who called for surrender to the Russians. He was removed, and the community mobilized because the community is the people and the self-government body. People took to the checkpoints, and the self-government body removed such a head of the community. Under the blue-and-yellow flag, holding it firmly, they helped the territorial defense, the volunteer formation of the territorial community (DFTC), the Armed Forces, and all the volunteer units that came out to defend the Kyiv region. This is a real indicator of what an independent community means. This whole process is about making communities self-sufficient, capable of responding to the challenges of the time. We had training. Not just military. For example, Covid. Different decisions had to be made. Or political turbulence. Presidents change, prime ministers change, parliaments change, but decisions must be made locally. Then, for example, elections when the central vertical wants one party, mayors want another, activists want a third. I was also involved in the political process and know it well. This too was a test of self-government strength. Then international cooperation. When opportunities arose for communities to establish direct inter-municipal cooperation, travel to partners within the European Union framework. Because the European Union is not just an economic entity, it’s also an entity of communities and regions, it’s territories of communities, euro-regions, etc.
So, communities had many opportunities to go through tests of very different nature. And communities at the moment of the full-scale invasion… I even remember well the telebridge on February 23, 2022. The evening before the introduction of martial law. The evening before the full-scale invasion. I remember Vadym Karpyak leading. I’m on the air of “Freedom of Speech,” and on the screen, the mayors of Kharkiv and Lviv are alternately included. Kharkiv and Lviv – seemingly different corners. And we in the studio with journalists are discussing how communities are preparing. We all still hope that nothing will happen on February 24, but in the evening of the 23rd, publicly, openly, so that every grandmother in front of the TV screen can see, the mayors say: we are preparing, we are ready to take the necessary hits. And then we see the adequate behavior of the local self-government leaders – both of them. Here it is important to understand that decentralization, even for the defense of Ukraine, is already useful. Although the goal, of course, is not war, not the defense of the country, not decentralized procurement, not decentralized financial expenditures, not a decentralized system of financial support for military units. This is all a positive side effect. The goal of decentralization is still the independent economic development of each territory.
VIKTOR
Tell me, please, is it possible to somehow highlight or group some general approaches to how the territories met the first months of the war? How did they behave? Perhaps there are some general patterns that are interesting to highlight?
OLEKSANDR
I’ll give three examples. Looking at you, I always think about budget finances. There are such communities, fewer in number, that prepared a little before February 24. They adopted targeted programs, allocated funds to support territorial defense, few for the DFTC, but strengthened territorial defense, began to build civil protection, started creating shelter networks, etc. They allocated funds, and on February 24, they simply intensified actions according to the adopted program. The second group is larger, broader, extensive – on February 24, maybe someone on February 25, maybe someone on February 26, but they quickly began to adopt various targeted programs, including support for defense forces, specific military units, brigades, military units, the National Guard, etc. Plus, those who had already adopted actions expanded their programs. That is, they allocated a larger amount of money and a greater variety of resources – material, organizational, premises, buses. A large number of school buses went to transport the military.
ROMAN
Did this depend on geographical location?
OLEKSANDR
I don’t think so. I can give such a telling example. The third group of communities is, for example, those communities that are silent on February 24, silent on February 25, silent on February 26…
ROMAN
And are still silent.
"Heads of some communities earned phenomenally large amounts of money"
OLEKSANDR
There are fewer of them now. Finding a community now where I can find a full set of documents: yes, this is a targeted program for working with veterans – such an amount of finances goes there; this is a targeted program for working with military families, monthly allocating funds to the families of those who are fighting… In Kipti, for example, the head of the community Volodymyr Kuchma (he is also the head of the “All-Ukrainian Association of Communities”) has an initiative called “Communal Enterprises – Your Land is Plowed.” According to this program, one of the points provides that a tractor will come and plow your land. Various types of assistance. Additionally, assistance to the DFTC, the military, different tools. I can find many such communities. But finding a community in Ukraine where there is no tool involved in the Armed Forces, I cannot. Additionally, now communities are already forcibly included in all mobilization processes by the law on mobilization. They understand that in finances – starostas, in finances – clerks, in finances – apparatus, when you pay them for their work, you pay for their efforts, including assisting the TCC. In fact, you work for the TCC. Maybe the salary hasn’t changed. No one gave you a bonus. Moreover, recently there has been a trend of falling salaries in the public service sector. It is very noticeable in local self-government. It would be interesting if Viktor did such a study and showed it in numbers.
VIKTOR
It exists, in numbers. Based on all the declarations we downloaded from NAPC, the trend is quite different. We can talk about it separately.
OLEKSANDR
No, I’m ready to argue.
VIKTOR
Come on, come on, with pleasure.
OLEKSANDR
The salaries of starostas – the starosta earns less than the janitor.
VIKTOR
Absolutely right. And we have such cases.
OLEKSANDR
The starosta earns less than the janitor. Many local self-government leaders, heads of communities, rural, village, settlement, city heads, and starostas have left the service, writing resignation letters because they believe their work is not appreciated. They could be earning phenomenally large amounts of money, but they don’t.
“At the start of the war, some communities fell into a comatose state.”
OLEKSANDR
But let me go back because Viktor asked, “How did they behave at the beginning?” Back then, at the start, I saw some sad cases. It was like they fell into a sort of comatose state, a stupor, let’s use this collective image…
ROMAN
Isn’t that a natural reaction?
OLEKSANDR
It is natural. But you expect, for example… I talked about a collective image. For me, it’s the Lviv Regional Council – a local self-government body. It’s always been a kind of flag bearer for me. Even when the Soviet Union was falling apart, Vyacheslav Chornovil was already leading the Lviv Regional Council and fighting for an independent Ukraine. In the 90s, while people were thinking about small privatization and other issues, the Lviv Regional Council was already signing various cooperation agreements related to future European integration. Or during the Euromaidan, the Revolution of Dignity was in full swing, and the Lviv Regional Council was already expelling Yanukovych’s vertical structure. So, the Regional Council has always shown itself to be ahead in various periods and times. And here I see, February 24 – they don’t convene, February 25 – they don’t convene, February 26 – they don’t convene, March – they don’t convene…
VIKTOR
Sasha, they left.
OLEKSANDR
Some went to fight, and some really left and were waiting for who knows what. But we’re talking about… because you asked if there was a geographical difference. I want to show you with this example that those who fell into a comatose stupor weren’t just in the east. And those who went to fight weren’t just in the east either. So there were both in the east and the west. Fortunately, the situation has changed today. The same Lviv Regional Council is allocating money for many things. Consolidated decisions are often made on these issues. But back then, for example, I lacked this leadership in self-government from some councils and some areas that are traditionally leaders. Because usually, if the Lviv Regional Council convened, then every regional council would hold a session. But we ended up with a situation where some regional councils held sessions, and some didn’t. So, to say that local self-government was decentralized, ready, and met the war fully engaged – no. There were, forgive me, traitors, and those who were in a comatose stupor, and so on. But overall, there were, and still are, communities like, for example, the Opishnyanska community in the Poltava region, which, without waiting for changes to the legislation on how to properly procure drones… you know the numbers, you saw them, they are among the leaders. And they allocate more money to the Armed Forces and even allocated more money when they had the “military” personal income tax.
VIKTOR
And tell me, please, who else surprised you and why? Can you name 5 interesting examples?
ROMAN
I think it depends on leadership, right?
OLEKSANDR
If we talk about personal leadership, that’s certainly a factor. The Opishnyanska community is a factor because of Mykola Riznyk. But I will tell you some stories, specifically showing different examples from various camps that surprised me…
ROMAN
In a positive sense?
OLEKSANDR
In various ways. For example, on February 24, in the first half of the day, I was walking along Khreshchatyk. Running from Channel 24 to Bankova Street, I entered the Kyiv City Council. Together with the Right Sector or DUK, I don’t remember, at the entrance to the Kyiv City Council, they were recruiting volunteers for the front. In my understanding, this is how every council should have operated, right? But since I didn’t hear the Lviv Regional Council session in the morning, and the Kyiv City Council was doing this at the entrance, it was pleasant for me. I was in the capital, and it was pleasant to see the capital responding like this. In every district, I remember these first days; it’s all about the capital. And it also set a certain pace. Remember, I said that Kharkiv was preparing on the night of February 23-24. So, for me, it was a question in the morning, calling Kharkiv and asking: “What’s up with Terekhov?” So, what’s up with the city hall? Everyone is in place, they say. And what about the others? They say: the SBU guys ran away, and the others are there. Those who are supposed to fight. I ask: what about local self-government? And the local self-government is standing. You exhale. I personally helped, worked with Yura Bova, who is a model exemplary mayor over a long period of tenure. I cooperated with a large number of different representatives of local self-government. But, of course, I am most inspired by those community leaders who, in the first days in the Luhansk region, went into occupation. And they went out with local self-government. The same day columns went, the same day the occupation started, and they, seeing, knowing what the Luhansk People’s Republic is, understanding that the Luhansk People’s Republic came eight years ago. Eight years! Remember, in 2014 we also hoped: it’s two-three months, Akhmetov-Kyiv will agree, well, later, now Minsk one, Minsk two, it will calm down… Eight years of the Luhansk People’s Republic. They knew this perfectly. Nevertheless, on the side of Ukraine, the leaders, women, of different ages, often young, led their communities out. Sometimes with problems, sometimes hiding. Sometimes they had to quickly. So, when, roughly speaking, “scumbags” in certain places surrendered our territories in Kharkiv region and led local self-government, re-hanging flags, those who worked in the occupation under the blue-yellow flag, did not let it be taken down until the last: Vasylivska community in Zaporizhzhia region, Skadovska community in Kherson region. I can name them by dozens. You asked for five. I can name these leaders by dozens who kept the blue-yellow flag until the last. This was already a month of occupation, the second month of occupation. They worked, went on marathon, went on air, commented, said: we are happy to hear that the battles near Kyiv are in the opposite direction, that Priirpinya is being liberated. The first days of April, I remind you, Kyiv region was liberated, Zhytomyr region, Chernihiv region, Sumy region. They prayed, hoped, and believed they were next, keeping… And when it became clear that no, they came out like Mariupol residents. They came out, left, saving their lives. And some of them were in captivity. We have, let me remind you, local self-government leaders who are still in captivity. And there are local self-government leaders who were in captivity, and they were pulled out, ransomed, and so on. Naturally, for such people, when we return to the topic of finances, budget expenditures, the issue of a targeted support program for the Armed Forces, a targeted program for defense forces, and so on does not arise. At the same time, when I hear certain discussions in the local council about where to allocate money: for some unmet military needs that cannot be met in any other way at the moment, or for some other projects, for example, replenishing the statutory fund of a utility enterprise…
VIKTOR
Yes, repaving the cobblestones.
OLEKSANDR
Yes. I, of course, then say: make all these infographics and “burn,” although it ricochets against the authority of local self-government. But how else to act if not to clear the story of such things. As of now, the financial situation has changed. You know, the “military” personal income tax has been taken away.
ROMAN
Let me interrupt you because not all our viewers might know. You’ve already mentioned that local self-government bodies financed both drones and territorial defense.
OLEKSANDR
And are still financing
What are the responsibilities of local communities?
ROMAN
What authority do local governments have in terms of funding? And what belongs to the state? I think people are a bit confused when they say everything goes to the army.
OLEKSANDR
It’s simple. Local governments don’t have the authority to fund the army. In a normal country, with a developed democracy and order, local governments shouldn’t even touch this issue. Ideally, in the standard we strive for, and in the future, it will be like this. A simple example. Right now, we have power outages. Everything gets disconnected. Water supply, infrastructure, everything falls apart. How much money is needed to maintain this? And how much money do our communities transfer to the military? These are incomparable things. So much goes to the military, while maintaining electricity costs so much. If our communities hadn’t been giving this money to the military, we could have already rebuilt all this infrastructure in terms of money. But everyone understands that the military needs it more. Not because legislation requires transferring funds to the military. According to the budget distribution, Budget Code, state powers, Constitution, the defense and security sector is the state’s responsibility, sometimes socio-economic issues. We have a social state, so many social and some economic issues. Our community deals with socio-economic issues. Again, since our state is very social according to the Constitution, there’s a lot of social welfare and some economy in the community. But overall, it should be simple. Economic development and infrastructure, urban planning, everything we do here, what we earn here, and why we live here – these are community issues. The state’s main focus is to ensure defense, secure borders, provide external relations, alliances, especially in the current conditions. The distribution is very clear. But these lines intersect. Sometimes there’s abuse from the state, and sometimes it’s a normal situation. The state introduces, for example, a military administration in the community. It’s necessary. Otherwise, the situation won’t be handled. This happens sometimes. Often, there’s abuse from the state. It wasn’t necessary to introduce a military administration. It’s an overreach. A simple example. The state introduced a military administration at a certain community level. The situation requires state intervention. Especially during martial law. And the same situation from local self-government: legislation doesn’t require funding the military, but the community clearly understands – it’s needed. It’s a priority. Money needs to be allocated for this. And the military units accept the subsidy because military units are also the state.
VIKTOR
Sasha, explain this.
ROMAN
Because people just don’t see it. There’s a lot of analysis being done, showing: bridges, paving, many cases in housing and communal services. And these scandals affect our information space, but what are communities actually doing? I think our viewers don’t fully understand.
OLEKSANDR
Well, first, look, if we take a unit, some military division, where do the military get money from? First, the state transfers, the state gives a lot. Second, volunteers and public organizations give, everyone knows this. Less known, but these are colossal amounts, local communities, local governments also transfer money.
VIKTOR
23 billion hryvnias in 2 years, these are subsidies.
OLEKSANDR
23 billion in the last 2 years. Additionally, the local community buys what is needed. Because very often the military unit says: procurement, accounting, there’s no specialist, no person, please buy this and that from the community and transfer it to our balance. Actually, any military unit has at least 4 sources of resource, financial, material support. First – the state directly. The army is still the state. Second – volunteers, the public, various collections, donations, everything possible in different forms, starting from a specific soldier to a public organization that bought something specific and handed it over. Third – local budgets transfer money to the military. Local budgets themselves buy and transfer. And these are colossal resources. And the local share here is huge. So, when we talk about taking more money from the community and giving it to the military, it goes through established schemes, established mechanisms, so what’s the danger, what’s the problem? The problem is that what’s left for local communities is also needed by the military. Let’s give simple examples. For example, a community near the front line. There’s a question that someone has to make this road. The speed of military and ambulance travel depends on how many lives of military personnel will be saved.
VIKTOR
Absolutely.
OLEKSANDR
And someone starts shouting: take money from the local community, give it to the military the same way you gave a certain part, using the same scheme, no need to make the road, because it’s for whom, for Russian tanks, so they can pass faster during a breakthrough? And you have to explain. Because you’re right: no one understands anything. No one understands that, sorry, but at least patch the holes, even if it’s with violations, even if the ambulance breaks down, but it quickly brings the military to the stabilization point, and from there quickly evacuates, because he needs to be saved. This is a very important issue. And it depends on the state of the road. Another example. 30 km, 40 km, 50 km, 70 km. Where are the military located? Only in tents, only in trenches? The military constantly uses the infrastructure where civilians live. If there’s no water, no communal infrastructure, no sewage, the military loses a huge amount of what? Material support. Again, a huge amount of expenses will have to be spent on what? It’s clear on what. But a huge number of people say: don’t invest in the community now. Tomorrow this community might be captured by the enemy. And there’s a constant problem of prioritization, what, after what, to what extent is a priority.
You asked, what are the responsibilities of local communities? If, of course, there was a national priority that everything the military does, the state covers everything, the locals – cover so that when the military come to a village or city, everything they need is there: a road, water, sewage, no infections, garbage removal, etc. This distribution. If it was clear, then, of course, we could talk differently. As of today, these are connected distributions because on February 24, local communities fully joined the defense of the country, everywhere they could. And this connection has existed since then.
We thought that maybe, because taxes will start to be credited differently, for example, tax from the military, personal income tax, salary from the military. If it is not credited to the local budget, then maybe the state will cover more of these issues. And local communities will help the military less. But there’s actually such a factor. I see that many local communities today are really stopping helping the military because they simply have nothing to help with. But many local communities are cutting, changing their expenses, changing their system, cutting down, squeezing in culture, education, libraries, clubs, medicine, different things, shrinking, squeezing in repairs, but still continue to help the military.
VIKTOR
Does it depend on the head of the community? On his position?
OLEKSANDR
The head of the community, his position, if self-government is preserved. Or the military administration, if the head of the military administration is appointed. The local council. It greatly depends on the voting of deputies. It also very often depends on what business is in this territory and how much it influences this territory. If it’s a community under the influence of a large business, under the influence of a company that understands that their decision depends on paying these taxes, they can leave this territory. It’s clear that then there’s a dialogue between them, and they ask this local business where to pay. But it happens that this doesn’t work. The head of the community has one opinion, the deputies have another, the business has a third, and there’s some kind of quarrel for a certain period. It happens that everyone has a consolidated position – one or another. Local democracy is local democracy. There can be a very different formula for decision-making. But overall, the tendency today is this: local communities, despite losing the payroll tax from the military, lost it all over Ukraine (not everyone had it, but everyone lost it), continue to help the military in various forms: buying and transferring, transferring money, i.e., sending money to the military, and they then buy it themselves.
How are Communities Coping Without the 'Military' Personal Income Tax?
ROMAN
Let’s shift the focus a bit. You’ve already touched on my favorite topic. Viktor and I previously discussed the military PIT. It was very relevant last year when the state budget was being considered. At that time, the issue was 120 billion UAH, if I’m not mistaken, which was taken from local budgets and redirected to the state budget. Moreover, if you remember, it was done retroactively; the law was passed, and then the money was taken from the communities. One of the main arguments of the Ministry of Finance at that time was: “Guys and girls, look, you have cash reserves of about 200 billion UAH as of October 1, 2023.” This amount changes monthly. Everyone can see it on the Ministry of Finance’s website. There were always such debates between the state and local authorities. How do you assess this decision? Has the situation improved because the funds were transferred and essentially taken from local authorities? Should this have been done at all?
OLEKSANDR
I believe the situation looked like this. By the end of last year, it became clear to the state that there was no way to finance such a large number of military personnel that already existed and that would still be needed. There was a statement that another 120,000 people were needed for the Armed Forces. In other words, the state lacked the funds to support and develop the army. In my opinion, some decision needed to be made, and they made that decision. Here we agree. Now the question is about what decision. It was a quick decision to quickly solve this problem and raise the money. From a quick perspective, we agree that the problem was solved quickly. But the martial law is long-term. We see that this is dragging on. And here we return to the distribution of powers. It seems to me that decentralization is necessary. The state cannot simultaneously support the Defense Forces. As we see, local communities continue to help. And the state, while not fully supporting the Defense Forces, continues to handle a large number of various socio-economic issues in different spheres unrelated to the military. It seems to me that all this should be given to the communities. It is impossible to constantly take funds from local communities to cover gaps at the central level. And it is impossible to expect that we will be funded for the army from abroad, just as we are supported with money for various socio-economic spheres. Accordingly, the state needs to, at the state level, say, shed the ballast. But at the local level, this is not ballast. These are the main issues that the local community should deal with. It seems to me that it’s time to review competencies, areas, and powers.
VIKTOR
Are we ready?
OLEKSANDR
No, we are not ready. Our society is paternalistic. When it hears that the state is giving up certain obligations in certain areas, socio-economic sectors, etc., it means that now they will transfer responsibilities to the local level, and at the local level, private property, private services, business, etc., will start to encroach. But I look at it this way: Do we need to increase jobs? Yes, we do. Do we need to reduce paternalism? Yes, we do. Do we need to develop self-reliance, self-organization, and self-governance? Yes, we do.
“It's Time to Say Goodbye to the Soviet Union Everywhere, in All Spheres”
VIKTOR
Let’s talk about education, which we were discussing earlier.
OLEKSANDR
It’s time to say goodbye to the Soviet Union.
ROMAN
It’s been time for a long while.
OLEKSANDR
It’s time to say goodbye to the Soviet Union everywhere, in all spheres. Sorry, let me give you some simple examples. In Ukraine, there are still a huge number of inefficient municipal and state cultural institutions. Meanwhile, there are more and more successful private cultural institutions in Ukraine. Due to power outages, co-working spaces will continue to develop massively. A co-working space is the same cultural institution if it has not only office chairs but also lectures, training, education, evening guitar sessions, a non-alcoholic zone, a children’s area with an animator, etc., depending on the format. In a small village, it could be the first non-alcoholic café with a pizzeria where children can spend time. At the same time, they work because there is electricity. Here is a simple example for you. This is a modern cultural institution. But what’s the difference…
VIKTOR
…self-sufficiency and people go there.
OLEKSANDR
Self-sufficiency, jobs that bring taxes to the local community, not take them from the local community. Here, you might say: well, what about the poor? Those who can’t afford co-working spaces, can’t afford to buy pizza. Funds can be left in the budget to support those people who are poor, or those we want to support, certain categories, for example, family members of those who are fighting. So, we can leave certain tools. But in terms of budget funds, it turns out to be cheaper and more efficient.
VIKTOR
The main thing is efficiency.
OLEKSANDR
But is there a readiness today to create such co-working spaces, family pizzerias, institutions in every large village in Ukraine? No, there is not.
VICTOR
Not sure. There is where there is leadership.
OLEKSANDR
You don’t have to think you’re not sure, there definitely isn’t. There are a huge number of villages, a huge number of settlements. We still do not have enough organizers, people who can create something more than a small shop where something is poured. That is, a concept of an institution, a project, to unite the community around it, to make them co-owners, participants in this process. We still have a lot of work to do on this human capital. But will the stressful conditions of abandoning paternalism and a very strong welfare state during martial law develop these leadership skills in them? Yes, of course. It’s like the 90s. A huge number of people only after losing the ability to enter the gates of the factory began to move with the first kind of business – trading in the market. And then something more, more, more. Obviously, we need adult education to live in new conditions. Obviously, we need more market mechanisms. But to go back to where we started this discussion? As a quick solution, did the “military” personal income tax work? It worked. The army covered the expenses. As a long-term solution, we still need…
ROMAN
It didn’t work.
OLEKSANDR
Well, long-term we can’t keep repeating it. That is, you did it once, and then what?
ROMAN
There will be more restrictions, more surprises.
OLEKSANDR
And if we go down this path globally, then it’s a dead end. Because if we continue to look for what can be taken from local budgets to the central one to cover the army, then what I was talking about will happen – life at the local community level will stop. If we go the other way: what the state cannot finance but belongs to the socio-economic block, to shift to the level of local communities and transfer to the level of business and citizens, explaining that we have closed the military issue, you already here with business, public initiatives, the non-profit sector, the profit sector, self-government, prioritize. But then try to still take the military theme away from local communities. The only thing that can stand in the way here is politics. Many local communities help the military, hoping that tomorrow…
VIKTOR
…they will be in politics?
OLEKSANDR
Yes, that they will be very much thanked in politics. Many do it sincerely, many have even gone to fight. But many still hope for political bonuses. And to separate one from the other… Roughly speaking, if you love the mayor of this particular city, you will say: well done, and fights, and drives, and helps, and so on. And you will not consider that he, before that, was declaring unclear slogans. If you don’t like the mayor, then for you, what he does for the army won’t be an argument. It won’t even be an argument that he, roughly speaking, grew up from scouts, was engaged in military scouting, raised the blue and yellow and red and black flags when Berkut was hitting for that. You just don’t like him. Therefore, at the local level, the presence of this military mix is actually also a problem. Because it distracts from the development of the community and confuses people. You rightly said: people don’t understand. People really don’t understand the distribution of powers. Who is responsible for what, who has what competence, who reports to whom. A simple example. You gather the school, the parents’ committee, the teachers, and ask a simple question: who finances what? That the state provides a subsidy for the teacher’s salary, everything else is financed by the local community. How many of them, both groups, will give the correct answer?
VIKTOR
None, and there is also the school funding fund by parents. If there is one.
OLEKSANDR
Some will say.
ROMAN
We will say.
OLEKSANDR
My point is that we really lack even public opinion leaders, “LOMs,” as they say, we lack such budget “all-round education.” Because we are moving a little, we are increasingly understanding taxes, finances, and so on. But as citizens, we are still far from understanding what happens with our money, how it moves.
VIKTOR
That’s why we communicate with you, and with other colleagues, to analyze complex things, explain them, and make sure as many people as possible learn about this.
“Aid to the Military – A Consolidated Position of Local Authorities and Opposition”
OLEKSANDR
Thank you for inviting me, you can count on me.
You puzzled me with the question about which community leaders impressed me. I’m thinking. There are more and more examples in my head. And they continue to impress. Up to now, there are community leaders who do various interesting things related to the military, personally visiting the front line, delivering aid directly to those in need, as long as the military command allows it. Some local government leaders are still mobilized.
ROMAN
The head of the Shatsk Village Council.
OLEKSANDR
The situations are very diverse. There are examples where local communities cut expenditures drastically, stating that the priority is the military. Not what I said the state should do: abandon socio-economic issues and shift them to the local community level. But they do it at the local level, even though military matters are not their responsibility at all.
ROMAN
For initiative, they can be punished. Could they be told later that it is prohibited by law and even fined?
OLEKSANDR
They might even be jailed for buying drones. That’s a problem, actually. I know such examples. Today, I was talking to journalists, and they said: we know, there was an investigation done on one person. I said, if you investigate every local government leader, how they purchased and what they did with drones, you’ll find something on each one. But the point was to urgently buy and provide. Another example, which is also interesting to understand, are there such directive, coercive stories? There are. Indeed. Regional military administrations sometimes come up with some kind of collection for a unit, or for a specific purchase, and ask all local communities to transfer funds.
VIKTOR
Yes, that happens a lot.
OLEKSANDR
So the transfer goes. There are those who help the army, as they say, forcibly. But mostly, the aid to the army comes from the local community. How are financial decisions made? They vote. The community head can do a lot in an organizational directive manner. But they don’t have the unilateral authority to make specific financial decisions. We see that in most cases, the government-opposition, even if the government is very large and the opposition is very small, aid to the military is a consolidated topic. What factors play a role? Besides the factor you mentioned, the unclear division of responsibilities, who is responsible for what, and the public’s lack of understanding of who is responsible for what, demands are made of everyone: people demand the President to pave streets and the mayor to help the military. So, there is chaos in people’s minds. Besides these two factors, another significant factor is hope that this will end. We talk about how it should be for ten years, for example. But everyone hopes that, well, we’ll live in this situation for another year or two, and then it will end and there will be peace. So the system is built not for many, many years, but under the need for urgent response and quick decisions. This is the third significant reason why people make such decisions. There’s also a fourth reason. We have the only legitimate local elections that can be held, the only legitimate authorities left at 100%, because their term hasn’t ended. It’s local self-government. But next year, local elections should be held. Five years have passed. More and more talk is about whether there will be elections soon? And then in the elections, the question will be: how did you help the front? How did you help the war effort? This factor will also influence. And also the legal factor. According to the Constitution, there are restrictions on holding elections to the Verkhovna Rada. The question of holding presidential elections under martial law is probably not very wise, because it’s the commander-in-chief. But what about local elections? There is no ban in the Constitution. And the martial law act can be amended, in fact. And it is not illogical not to hold local elections far in the rear if possible. This issue will be politically heated. So this factor will also add. Significant. And the factor you already mentioned, Viktor mentioned it. Deficit. Budget deficit.
VIKTOR
Unfortunately, lack of money.
OLEKSANDR
So, a deficit for everything, in all areas. And here, in the case of a deficit, although it’s chaotic, unsystematic, unprioritized, the question will always arise: this is for us, for defense – we close it, of course. And so will always arise: drones, vehicles, equipment, provision, etc. Also, military funerals are local communities’ responsibility. Families of the deceased, missing in action – that’s local communities. This is all the context carried by large local communities. But local communities will continue to help. My forecast is this: if at the national level, there are no such calls or reasons to say that in the near future the state will clearly divide, saying: thank you for helping, but take on 100% veterans, shelters, military families. And we will fully cover the military units. And so divide. Because in a unitary sovereign state, defense forces should be for the state, not the community. If such a clear division does not happen in the near future, communities will have the opportunity to continue financing, as it was before martial law, financing the police, even though the police should not have been financed. They helped the prosecutor’s office, threw money at the SBU, somewhere bribed, somewhere helped, but did these things.
Another significant factor. Communities believe in Victory. Communities want Ukraine to Win.
ROMAN
Everyone wants that.
OLEKSANDR
Yes, everyone wants that. And so do the communities. And local self-government leaders want that. And they think: if we can do anything more, to bring Victory closer, let’s do it, including financially.
Guys, thank you very much! And thank you for what you do. Glory to Ukraine!
VIKTOR
Glory to the Heroes! And, of course, we thank the defenders for the opportunity to breathe in a free country.
ROMAN
Oleksandr, Viktor, thank you for your time and for joining such an interesting discussion. I hope today we clearly explained to our viewers how the budget is formed, how their funds are used. And, of course, without our servicemen, we would not be able to record our podcast. So, thank you very much and see you next time.
OLEKSANDR
See you.
VIKTOR
See you.