The priorities of scoundrels

Regions make a stake on roads, not on defense capabilities

The volume of expenditures of the regions on road maintenance sometimes exceeds the expenditures on the Territorial Defense Forces and public safety by ten times. It is important that it is meant here that road maintenance is not construction, but maintenance of the existing infrastructure in proper condition, i.e. ongoing repair. The same repairs, expenses on which, on the contrary, should have been reduced after several years of the ambitious "Big Construction" project. Although even if we assume that our roads are really in dire need of repair, the question still remains whether their proper condition is a higher priority than funding for the Territorial Defense Forces. However, it has already happened that the "Big Construction" project literally cemented the scheme of distribution of budget money precisely through "road workers". The ready-made corruption infrastructure was successfully used by some regions last year as well. So this issue, unfortunately, has arisen despite all efforts to overcome this phenomenon.

There are several reasons that made this possible. The first one is that politicians have not stopped stealing in Ukraine. Nowadays, it seems that the society is more united than ever, courageously confronting the enemy, communities are giving their last money to the Territorial Defense Forces, and a new, fundamentally different Ukraine will be born. Although it is not quite so. According to the latest observations, the percentage of those who want to embezzle budgets has not decreased significantly. As opposed to the percentage of public data that would allow us to control embezzlers, this is the second reason. Information about budget plans can still be found somehow, but only the most persistent can find out about the implementation of these plans or the adjustments made during the year. Today we are sincerely grateful to everyone who helped us collect these grains of truth. However, in reality, open budgets, interim reports, the publication of which was obligatory, transparent purchases, which could be viewed by anyone, are a thing of the past. As a result, the situation began to escalate and become more difficult, from which it is already difficult to get out, and, unfortunately, no one prevented it. So, the third reason is the blessing of the central government, which knows this exactly, and since it is silent, it is also engaged.

However, it is true that the rest of the officials have nothing to be ashamed of and refrain from, if even the head of the Dnipropetrovsk region, who is the undisputed leader in the management of road expenses, d oes not have any problems. Mr. Reznichenko simply spent almost two billion hryvnias of regional money on road maintenance last year, of which one and a half billion went to his fitness trainer's company. Do you want to know how it all ended? How the president, who appoints and dismisses heads of state administrations, reacted to the obvious violation? He did not react at all. Reznichenko went to Kherson with Zelenskyy, shook hands with Yermak on camera, and the girl trainer was simply removed from the company's official beneficiaries, that was the end of it. What conclusions do you think other regions of Ukraine will draw, in which spending on road repair is much more modest? I think they will increase the amount of funds for their repair needs this year. After all, they understood that there is a resource for this.

In fact, unlike the state budget, local residents do not experience disasters, because the growing deficit of UAH 150 billion per month did not fall on their heads unexpectedly. According to the Office of Support for Decentralization Reform, the main drop in local budget revenues occurred in March-April last year. Moreover, this drop was not as big as, say, during the coronavirus crisis of 2020, not below the level of 2019.

Since May, the incomes of the general funds of the community budgets have been growing steadily, and at times this increase was double-digit. It is clear that some people were better off than others, and some people had a really bad time - the areas where the hostilities are taking place definitely did not receive enough funds either in May or in December. Fortunately, such areas are a minority. On the other hand, in the rest of the regions, on the contrary, things went very well: in Lviv region, revenues increased by 41% compared to 2021, in Zakarpattia - by 38%, in Volyn and Ivano-Frankivsk - by 31, in Rivne - by 27, in Dnipropetrovsk — by 16, in Kyiv and the region — by 5 and 7%, respectively.

This success is mainly attributed to the personal income tax, which increased by 35%. This tax on salaries provides 68% of the revenues of the general funds of local budgets. Last year, despite the war and internal migration, the personal income tax increased, because, firstly, at the beginning of 2022, the standard for its deduction to local budgets increased by 4%, and secondly, thanks to the salaries of the military. It is worth noting that the second reason is key one.

If we look at the monthly dynamics of the personal income tax, its significant increase begins precisely from March 2022, when military salaries increased sharply. Currently, of the 25 billion UAH of the personal income tax that the Treasury receives every month, 10 billion are taxes on financial support, rewards and other payments to military personnel. That is, thanks to the soldiers, the regions can not only live and work peacefully, they also feel much better financially. Where do those soldiers' taxes go? You already know the answer, but we will elaborate.

We have analyzed and compared road and security expenditures only in areas adjacent to the zone of active or possible hostilities. After all, the priority in spending for them should be approximately the same. Agree, it is unfair to demand the same level of anxiety and preparation for meeting the enemy from cozy and peaceful Cherkasy or Khmelnytsky regions as from the people of Kharkiv or Sumy. Also, unfortunately, we did not manage to get a complete picture of Mykolaiv region, which can be explained given the circumstances. The resulting comparison is eloquent (see figure).

So, everything is given to the repair of the road, and the security gets only the leftovers. An exception to the rule, and now a reference point for a fair distribution of expenses, is long-suffering Kharkiv region, where the amount spent on roads is comparable to the spending on security, and the need for road repair is really justified by the existing destruction. Rivne and Volyn regions pleasantly surprised us, there a lot went "on road patches", but they did not spare money on security in anticipation of an offensive from the north. In other regions, the situation remains tense.

Expenditures on road maintenance exceed expenditures on public transport, public safety and mobilization by ten times: Sumy region — 218 million UAH for roads, 5 million for security, Chernihiv region — 153 million for roads, 5.5 million for security, Odesa region — 242 million for roads, for security 12 million, Kyiv region — 130 million against 13 million, Zhytomyr region — 443 million against 4.8 million UAH.

In Dnipropetrovsk region, by the way, spending on security and public transport hit record 280 million UAH, but everything is spoiled by an even more record 2 billion UAH for road works. Moreover, Dnipropetrovsk region has one of the largest budgets (after Kyiv) in the amount of over 11 billion UAH, and these hundreds of millions are quite reasonable expenses for it. In contrast to 18% of the budget spent on road repairs.

At the same time, local residents note that only two road sections in the region needed real repair, and it certainly would not have cost more than UAH 300 million. In addition, local gossipers add that Reznichenko would not have spent so much on repairs if Zelenskyy had not believed in the fairy tale that the region needs such expenditures on roads, because the roads need to be expanded to become runways if necessary. We would believe it if we didn't know that the Ukrainian airfields, which really sustained great damage at the beginning of the war, are actively being restored, and their use is clearly a higher priority, because one runway is not enough for military aviation. Well, let's assume that the president did not know this. However, we see a trend in the regions' spending priorities and understand that Bankova Street's tacit agreement to its continuation is more than a real budget risk this year, and the scale of road works being carried out in Dnipropetrovsk region for "soldiers’" money this year will be gladly implemented by other regions.Eventually, all these actions will remain unpunished.

This year, the financing of local budgets provided for by the state budget will amount to UAH 605 billion. Meanwhile, in 2023, the norm regarding the enrollment of the increased personal income tax rate at the level of 64% was extended. Also, local budgets will continue to include personal income tax on financial support and other payments to military personnel. This approach is correct because it was decentralization that largely ensured the stability that the Ukrainian economy demonstrates, taking into account the losses and costs associated with the war. However, the priorities of the regional leaders should change before the electorate punishes them at the next elections. After all, if the issue of security is neglected, then instead of elections, you can get a "referendum". In addition, if you continue to steal, another “Maidan” may occur. So it’s up to you to choose, gentlemen.

Read this article in russian and Ukrainian.