Struggling with severe financial difficulties, Jelgava encounters substantial monetary challenges
In the heart of Latvia, the Jelgava Municipal Council is grappling with financial difficulties, with the share of the remuneration section in the budget, as a percentage of revenue for core functions, set to increase from 47.6% in 2022 to an indicative 60% in 2024.
Uldis Ainārs, the Chairman of the Municipal Council, has pointed out that the root cause of these issues is the disproportionate increase in the wage bill in previous years. He stated that the previous administration increased the remuneration fund by €8 million over two years, without considering the lack of corresponding income in the basic budget.
To address these financial challenges, the municipality must follow the regulations provided in the Law on the State Budget and Budgetary Framework. The only solution, according to Ainārs, is to cut costs and borrowing for budgetary and financial management. Certain preparations need to be made to reduce costs and make commitments to do so in order to obtain the necessary loans.
Savings and money from property sales have been used for salary increases, but this approach is unsustainable in the long run. To ensure financial stability, the council is looking into other potential solutions.
A review of municipal expenditure and potential reorganisation of institutions is foreseen, as well as improvements in financial planning and transparency to prevent mismatches between expenditure and income. The council is also exploring additional revenue sources such as local taxes, service fees, or EU/cohesion funds, if eligible.
The financial situation of Jelgava is not unique. Several other municipalities have pointed to a difficult financial situation while preparing their budgets this year. In fact, the financial situation of Rēzekne's city council last year was so dire that it led to the dissolution of the council.
Despite these challenges, Ainārs remains optimistic. He mentioned that a misleading illusion that the current financial situation would continue has been dispelled. He also pointed out that the account balance at the end of 2023 was €10 million due to a personal income tax over-execution and lower spending.
As the council works towards resolving its financial issues, it continues to meet with experts from the Ministry of Finance to discuss potential solutions and strategies for a stable financial future.
The council is considering reorganizing institutions and improving financial planning and transparency to prevent further mismatches between expenditure and income, as a means of addressing the financial difficulties. In search of additional revenue sources, the council is exploring local taxes, service fees, or EU/cohesion funds, as potential options.
Uldis Ainārs, the Chairman of the Municipal Council, has suggested that borrowing and cutting costs are necessary solutions for budgetary and financial management, and that preparations must be made to reduce costs and commit to these reductions to obtain the required loans.
