Decentralization on Hold: Can the Reform Survive the President’s Team and the Mayors?

Decentralization, regarded by European partners as Ukraine’s most successful reform and proven effective during Russia’s full-scale invasion when self-organized communities bore the brunt of the initial assault, is now effectively stalled.

On the one hand, local authorities are under pressure from the government through its subsurvient law enforcement bodies: the number of notices of suspicions has skyrocketed since the appointment of the new Prosecutor General. On the other hand, these same authorities are supposed to launch a mechanism of state supervision over local self-government bodies, which is a crucial stage in continuing the reform after powers and finances were transferred to communities. At the same time, the European Union expects Ukraine to take concrete steps within the framework of the Association Agreement and on the path toward accession.
Against this backdrop, the interests of the main stakeholders—sectoral associations, which have effectively become part of the political process, and the central government, which in fact never left it—differ significantly from the interests of communities and of the state as a whole. But it is the state (the government and the parliament) that must complete the legislative framework of the reform, employing every possible mechanism and internal resource to advance local self-government.

Why is state oversight crucial to the continuation of the reform, and what is the key manipulation used by the parties concerned? When will powers between central and local authorities finally be clearly delineated? And should the concept of the reform be reconsidered in view of today’s difficulties?

Let us take a closer look.

State oversight. Where is manipulation?

The Verkhovna Rada has once again failed to pass Bill No. 13150, which was supposed to redefine the functions of local state administrations. It fell short by about 15 votes. The argument that the bill would unlock €350 million from the EU for Ukraine proved weaker than personal arrangements with powerful domestic institutions and individuals. And although the bill envisioned a “monarchic” model for appointing heads of administrations at the regional and district levels—one quite favorable to the president—the Presidential Office remained indifferent to its fate. At the same time, the example of restoring the independence of anti-corruption bodies proves: when the Presidential Office truly needs something, it pushes the decision through without difficulty.

Another influential political player, Vitali Klitschko, who simultaneously holds two posts—Kyiv mayor and head of the Kyiv City State Administration—was satisfied with the bill’s failure. Moreover, he continues to chair the Association of Ukrainian Cities (AUC), often called the “one-city association.” The horror stories about future arbitrariness of heads of local state administations circulated by the Association hardly swayed MPs. More likely, they were shown attractive electoral prospects linked to the capital’s enormous budget.

Although a group of MPs, mainly from the relevant committee, registered a new bill—No. 14048—on local state administrations, it looks more like an attempt to demonstrate activity to Europeans than a genuine effort to adopt a law. The document revives the personnel reserve included in the earlier Bill No. 4298, which “died” without being put to a vote. Yet here too, implementation has been postponed far into the future—a year after the end of the war, alongside other provisions of the bill. This means that when local administrations are supposed to fully supervise the legality of local self-government decisions and coordinate territorial executive bodies, there simply will not be trained staff available.

And even if the personnel reserve were to start working immediately after the law is passed, this would not guarantee that trained specialists would become heads of district administrations. The Presidential Office continues to operate according to political expediency: all appointments are made on the basis of personal loyalty—both to positions explicitly provided for in the Constitution and to those where the president has no such powers. An example is the appointment of the military ombudsman. This is, incidentally, a clear signal: the current president is preparing for re-election, despite his repeated denials. Otherwise, he would at least leave his successor the beginnings of a European-style governance system instead of a Soviet one, where the Presidential Office makes the decisions while the Cabinet of Ministers takes the blame for their failures. At least in terms of professionalizing public administration.

It is worth noting that while the AUC in 2019 supported legislative regulation of administrative supervision over the legality of acts of local self-government bodies, it now opposes it. In other words, it formally “endorses oversight”—but only in a soft, essentially decorative form. This is understandable: since 2014, large communities have enjoyed enormous financial resources and do not want to replace their established arrangements with law enforcement agencies with the uncertain prospect of impartial oversight by a new body. Especially since, given the political nature of appointments on the posts of heads of local state administrations, impartiality can hardly be expected.

By contrast, smaller communities—represented mainly by the All-Ukrainian Association of Communities and the Association of Amalgamated Territorial Communities—are calling for a formalized, legally defined procedure of administrative supervision. Even if the body is biased, it would at least act under clear procedures prescribed by law. Where there is no procedure, there is corruption, replaced by arbitrariness where necessary.

Separation of powers. How and when?

Another direction in modernizing the public administration system, set out in Ukraine’s EU accession action plan, is the adoption of a law on the separation of powers. On this point, incidentally, the AUC is right to insist. The separation involves three dimensions: between the state and local self-government, between different tiers of local self-government and between own and delegated powers.

The problem arose after fiscal decentralization, when the rules on power distribution established by the Budget Code were violated. In the 2001 Code, expenditures were divided into two categories: those taken into account when calculating state budget transfers (delegated powers) and those not taken into account (own powers). The 2014 Code abolished this distinction. The equalization principle also changed: instead of expenditure needs, the focus shifted to communities’ revenue-generating capacity.

As a result, most communities received significant financial resources. At the same time, uncertainty regarding expenditure responsibilities allowed line ministries to offload onto local self-government the obligations that were inherently state-level. This happened both formally, through laws, and in practice, by refusing to finance benefits set by the state.

For instance, funding law enforcement. Community leaders did not strongly oppose such a burden—one must “live in harmony” with the police, after all—while conflicts of interest were left for civil society watchdogs to debate. But shifting a host of social and economic burdens onto local self-government without adequate compensation naturally provoked resistance.
For example, when the state refused to cover the debts of municipal enterprises caused by the gap between politically set tariffs and actual costs, local budgets had to take the hit. In 2021, communities were granted an additional 4 percent of personal income tax revenue—on top of the 60 percent fixed back in 2014. But this decision was political rather than economically sound. Since then, the “battle for 4 percent” has been ongoing: the Ministry of Finance keeps submitting a draft with the base 60 percent, while local government associations demand that the extra 4 percent be permanently secured. MPs, true to form, stand “for everything good and against everything bad”—that is, against the “greedy” Ministry of Finance.

This political tug-of-war must eventually end. That should be the mission of the law regulating the separation of powers and defining mechanisms for calculating their cost. And the EU is prepared to pay a lump sum for such a law.

However, the format of legislative regulation is still unclear. Should it be a law that outlines only the conceptual framework or should the list of powers be included in it (or in a separate law) for the European Commission to recognize the task as completed? In the first case, the bill has a chance of being passed by the parliament. In the second, it risks getting stuck in government offices and certainly in the Rada, where political interests have repeatedly buried even Ukraine’s formal commitments. The sad fate of Bill No. 13151 comes to mind.

Whether Brussels can be persuaded that conceptual principles alone, enshrined in law, will serve as a basis for meticulous codification in numerous sectoral acts remains an open question. Ultimately, these principles must be reflected in the Budget Code, one of the few legislative acts that allows no ambiguity, duplication or vagueness.

The concept of local government reform. What’s wrong with it?

Finally, there is another document not directly required by the EU but one Ukraine itself should be interested in—the updated Concept of Local Government Reform and Territorial Organization of Executive Power. Here, too, external “soft influence” is at play: the Council of Europe is actively pushing for its revision. And although Strasbourg lacks Brussels’ financial resources, it wields other levers of influence, primarily intellectual ones. The European Commission, moreover, usually takes its cue from Strasbourg.

Even at the stage of defining the document’s format, serious debates emerged. On the one hand, the deadlines for implementing the famous Concept, which once served as a roadmap for decentralization, had long since expired. On the other, the reform’s goals and main directions remain unchanged. After all, the adoption of Ukraine’s Constitution in 1996 did not invalidate the Declaration or Act of Independence, even though their legal significance lapsed. In the end, it was decided that the government should approve the “Specifics of Applying” the said Concept, adapted to new challenges—the war and the prospect of EU integration.

The draft “Specifics of Applying the Concept” was discussed with the main stakeholders—local government associations. Three supported it; one, the AUC, obstructed it.

The AUC’s strategy is to block any government initiative. Not only because of the upcoming elections, when criticizing the authorities becomes politically useful, but also for more pragmatic reasons: the Association is comfortable with the status quo — it has money, no accountability system, and, after the territorial reform, a solid “fiefdom.” At the same time, its strategic goals are presented in the wrapper of seemingly objective criticism.

The Association’s primary argument is that a new Concept is needed. This is a win-win position: if the government did indeed adopt a new document, it would immediately be accused of “betraying” the ideals of the 2014 reform. In addition, the AUC refers to its own project, the “Concept for the Revival of Local Self-Government,” which, it claims, should be the basis. Another argument is financial: the AUC warns that local budgets would lose autonomy if the government’s draft were adopted. This claim targets those unfamiliar with the basics of budget law, in particular the principle of the general budget fund, which means that expenditures are made regardless of the source of revenues. And, as already noted, the AUC strongly opposes introducing administrative oversight of local self-government acts, arguing that they are already “controlled” by as many as 26 different bodies.

The manipulative nature of this argument is obvious, even within the AUC itself, as shown by the fact that the Association does not even publish a list of these “26 supervisory bodies” on its own website. In reality, these are sectoral, largely “dormant” bodies, reacting only to violations in their narrow fields. Since local self-government is involved in most public policies, it naturally interacts with many oversight agencies, but this does not constitute systemic supervision. For example, businesses are inspected by two dozen agencies, but today no institution systematically monitors the legality of local self-government decisions.

The prosecutor’s office has lost its general oversight role and now intervenes only “to protect state interests”—a vague formulation that creates fertile ground for abuse. That is why the idea of establishing a body to regularly review the legality of local self-government acts irritates the AUC so much. This time, it cannot simply be brushed aside, especially if the body is led not by political appointees but by professional civil servants, shielded from corruption by a rotation system.

…Therefore, given the parliament’s low capacity for politically sensitive decisions, the prospects for adopting a law on the new status of local state administrations do not look promising. The draft law on the separation of powers is equally vulnerable, since enumerating those powers makes it politically explosive.

By contrast, the approval of the “Specifics of Applying the Concept of Local Self-Government Reform” has far better prospects. First, the document is well drafted: it clearly identifies the current situation, problems and challenges, ways to address them, tasks and expected results. Second, it is a government act and thus carries less political risk than a law. Third, most local government associations already support it.

Although the AUC will try to nip the initiative in the bud (the government), such a strategy will only backfire, compromising the Association not only in the eyes of international donors and organizations but also in those of its own mayors. At least now, they have a choice now.

The reform of the territorial organization of public authority can no longer be stopped, since society has already experienced its benefits. However, its pace depends on the political will of the main players—the parliament, the government, local government associations, and, unfortunately, the president’s office. Domestic and international experience shows that a change of power opens a window of opportunity for decisive action. The key is that such measures be thoroughly worked out and communicated so that new policymakers have the courage to adopt them.