COMPENSATORY GRANT IN POLISH
RURAL COMMUNES – MODIFICATION
CONCEPT AND ITS IMPACT ON
FINANCES OF COMMUNES
Jarosław Olejniczak, PhD
Department of Finance
Wrocław University of Economics, Poland
Aim of presented research:
to present the results of research on the scale of
the compensatory mechanism in Polish rural
communes in the context of their
differentiation by the development level
described by means of the taxonomic measure of
development by Hellwig..
Aim of presented research:
The following research questions were formulated:
• how significant is compensatory grant for rural
communes from the viewpoint of their income and
current expenses,
• should its present beneficiaries receive funds from the
viewpoint of their development level as a criterion for
awarding grants,
• what financial effects might the modification of the
list of beneficiaries cause.
Method
• The results of earlier research, conducted by the author, on
diversity of the development level of rural communes in Poland
against their basic taxable income were used in the analysis
• Analysis of the variables from the years 2009- 2011 and that were
accessible in the Local Data Bank of the CSO which reflect the
development level of communes;
• elimination of the variables that are characterised by a high degree
of correlation;
• standardisation of the features of the variables;
Method (continued)
• determination and classification of development measures for
individual municipalities in compliance with the Hellwig’s method
(taxonomic development measure),
• by the above means synthetic indicators in the years 2009, 2010
and 2011 for each of the rural municipalities were determined,
• the municipalities were divided into four groups.
Method (continued)
• the municipalities of a high development level (type A) included
the entities with the development index higher than the mean plus
the standard deviation.
• the municipalities of a higher than medium development level
(type B1) included the entities with the index falling within the
range of mean to mean plus standard deviation.
• the third group municipalities of a lower than medium
development level (type B2) included the entities with the index
falling within the range of mean to mean minus standard deviation.
The last group comprised the municipalities of a low development
level (type C), where the index achieved was lower than the mean
minus the standard deviation.
The next stage of the study involved the analysis of the income
Method (continued)
The next stage of the study involved the analysis of the:
- grant amount per resident in the examined communes,
- relation of compensatory grant to the operating result and the selffinancing
ratio from years 2009, 2010, 2011.
- impact of the current income decrease by the grant amount on the
operating result and the commune self-financing ratio - it will
enable the assessment of this grant’s significance for the current
sustainability of communes.
- comparision of the development level of communes with the
obtained ratios – it will enable the adoption of another perspective
when assessing the reasonability of applying compensatory grant.
Source: Own work based on the results of the study and LDB CSO data
Results of study
Source: Own work based on the results of the study and LDB CSO data
Number of municipalities in the individual categories BTI per capita in the years 09-11
G>150%Gg
92% G g< G
≤ 150% Gg
75% G g< G
≤ 92% Gg
40% Gg < G
≤ 75% Gg
G ≤40%Gg
Voivodeship ’09 ‘10 ‘11 ‘09 ‘10 ‘11 ‘09 ‘10 ‘11 ‘09 ‘10 ‘11 ‘09 ‘10 ‘11
Lower Silesian 7 6 6 20 19 22 19 16 14 32 37 36 0 0 0
Kuyavian-Pomeranian 3 3 3 8 8 7 12 10 8 66 65 69 3 6 5
Lublin 1 1 1 3 3 4 5 6 6 123 91 99 39 70 61
Lubusz 1 1 1 11 8 11 5 7 9 24 25 20 0 0 0
Łódź 5 5 5 8 9 12 16 15 16 82 79 81 22 25 19
Lesser Poland 0 0 0 6 6 6 3 3 4 69 69 74 43 43 37
Msovian 13 14 14 16 14 13 20 20 21 139 136 140 41 45 41
Opolskie 1 1 2 5 5 4 9 9 13 20 20 16 1 1 1
Podkarpackie 1 1 1 2 2 5 4 3 6 63 66 78 39 37 19
Podlaskie 2 2 1 7 9 8 6 3 7 59 56 56 4 8 6
Pomeranian 5 6 5 11 9 10 11 7 10 53 59 55 1 0 1
Silesian 8 8 7 19 23 24 20 18 20 48 45 44 1 2 1
Świętokrzyskie 1 1 1 2 2 2 2 3 3 45 40 47 21 25 18
Warmian-Masurian 0 0 0 9 9 9 12 9 7 44 43 47 2 6 4
Greater Poland 6 6 5 17 17 18 15 12 16 72 72 71 7 10 7
West Pomeranian 7 8 7 6 6 8 10 6 8 27 30 27 0 0 0
• The operating result is the difference
between current income and current
expenses of a commune.
• Its positive value reflects the commune’s
capacity to engage in additional projects.
• Its negative value indicates a shortage of
funds relative to objectives and incapacity
to take investment actions.
OPERATING RESULT
Source: Own work based on the results of the study and LDB CSO data
Number of municipalities in the years 2009, 2010 and 2011 by voivodeships –
with surplus or deficit in budget balance with and without equalization grant
Number of communes with surplus Number of communes with deficit
with grant without grant with grant without grant
‘09 ‘10 ‘11 ‘09 ‘10 ‘11 ‘09 ‘10 ‘11 ‘09 ‘10 ‘11
Lower Silesian 63 57 68 29 23 36 15 21 10 49 55 42
Kuyavian-Pomeranian 91 84 90 24 24 20 1 8 2 68 68 72
Lublin 170 147 162 12 11 12 1 24 9 159 160 159
Lubusz 37 35 40 18 10 11 4 6 1 23 31 30
Łódź 131 123 128 32 29 25 2 10 5 101 104 108
Lesser Poland 115 115 113 20 16 17 6 6 8 101 105 104
Msovian 225 218 223 65 50 50 4 11 6 164 179 179
Opolskie 33 27 34 7 7 11 3 9 2 29 29 25
Podkarpackie 101 89 105 19 12 11 8 21 5 90 98 99
Podlaskie 78 64 69 11 14 11 0 14 9 67 64 67
Pomeranian 77 72 75 29 27 25 4 9 6 52 54 56
Silesian 90 85 90 48 46 48 6 11 6 48 50 48
Świętokrzyskie 69 61 67 10 9 7 2 10 4 61 62 64
Warmian-Masurian 60 49 54 9 9 8 7 18 13 58 58 59
Greater Poland 114 106 113 35 33 35 3 11 4 82 84 82
West Pomeranian 46 34 41 18 13 18 4 16 9 32 37 32
Source: Own work based on the results of the study and LDB CSO data
Number of municipalities in the years 2009, 2010 and 2011 by voivodeships – with
surplus with equalization grant by development category
Total Type A Type B1 Type B2 Type C
‘09 ‘10 ‘11 ‘09 ‘10 ‘11 ‘09 ‘10 ‘11 ‘09 ‘10 ‘11
Lower Silesian 78 7 9 5 30 34 23 12 12 14 0 0 0
Kuyavian-Pomeranian 92 4 3 3 21 17 18 37 38 46 6 10 5
Lublin 171 1 1 3 25 28 26 99 108 107 34 23 23
Lubusz 41 1 4 3 10 9 12 12 18 15 0 0 0
Łódź 133 2 4 1 31 35 41 61 59 62 7 6 4
Lesser Poland 121 7 2 8 38 38 33 47 52 50 9 13 13
Msovian 229 1 3 1 24 37 32 113 112 111 26 27 35
Opolskie 36 3 6 3 12 13 10 13 10 11 1 0 1
Podkarpackie 109 1 1 1 21 17 20 58 70 69 10 9 8
Podlaskie 78 2 1 2 6 8 9 38 38 34 21 17 22
Pomeranian 81 3 0 1 28 23 26 20 29 26 1 2 3
Silesian 96 6 8 6 34 32 34 8 10 8 0 0 0
Świętokrzyskie 71 1 1 0 10 8 14 43 48 43 7 5 7
Warmian-Masurian 67 1 1 2 8 9 7 33 33 32 16 15 18
Greater Poland 117 14 14 15 15 14 12 6 5 8 0 0 0
West Pomeranian 50 10 8 11 7 3 6 1 2 1 0 0 0
Conclusions:
The results of the analysis prove that the positive “adjusted” self-financing ratios are
achieved mainly by communes characterised by a high development level.
The number of these communes was not affected by the financial effects of the 2008-
2010 crisis since their number in individual voivodeships did not change significantly
over the examined period.
What can be observed, however, is analogies in the distribution of communes with
respect to the previous ratio.
Normally, communes from western Polish voivodeships are more developed, have
better income ratios per resident and much more frequently achieve positive selffinancing
ratios.
This means that it could prove reasonable in practice to include the development level
ratio as the criterion for obtaining compensatory grant
Estimated number of municipalities in the year 2011 by voivodeships after proposed
change in grant system
Equalization
LowerSilesian
Kuyavian-Pomeranian
Lublin
Lubusz
Łódź
LesserPoland
Msovian
Opolskie
Podkarpackie
Podlaskie
Pomeranian
Silesian
Świętokrzyskie
Warmian-Masurian
GreaterPoland
WestPomeranian
Liczbagminłącznie:
amountmlnPLN:
share:
No 35 12 7 14 18 15 28 10 6 8 16 40 2 9 24 17 261 210, 4 0,05
Partly
43 71 95 27 95 71 141 24 79 45 62 55 48 38 87 33 1014
2636,
4 0,68
Full 0 9 69 0 20 35 60 2 24 25 3 1 21 20 6 0 295 103,5 0,27
It should be emphasised that:
When taking into consideration only the abandoning of financing the best
communes (the first two categories) with grant, it would have been possible to
obtain as much as PLN 210,394,000 in 2011, which constituted circa 5.5% of the
overall compensatory grant for rural communes.
At the same time, it needs to be noticed that this would mean disturbing the
financial sustainability of certain communes from the viewpoint of the analysed
ratios.
The consequences of such a solution would be diverse in individual
voivodeships.
The greatest decrease in income per resident would be experienced by the
Lower Silesian, Masovian, Greater Poland and Silesian voivodeships.
It should be observed that the change in the redistribution scope would also
enable shifting some funds from the pool currently transferred to communes with
an average development and income level, which receive merely 26.7% of grant at
present.
Thank You for attention.
Jarosław Olejniczak, PhD
Wroclaw University of Economics
jaroslaw.olejniczak@ue.wroc.pl