This reform is aimed to form efficient local governance and territorial organisation of power for the purpose of creating and maintaining adequate living conditions for individuals, provision of high quality, affordable public services, establishing direct democracy institutions, coordinating the interests of the state and those of local communities.
The reform means that local bodies will be responsible to their communities for their operational efficiency while reporting to the central Government for the legality of their work.
The decentralisation process was launched in Ukraine in 2014 with the adoption of the Concept of Local Governance Reform and Territorial Organisation of Power in Ukraine (01 April 2014), Law of Ukraine “On Local Community Cooperation” (17 June 2014), Law of Ukraine “On Voluntary Consolidation of Local Communities” (05 February 2015) and financial decentralisation-related amendments to the Budget Code and Tax Code.
The process has helped to form, under the principles of the European Charter of Local Self-Government, a basic yet considerable, effective and empowered local governance system — united local communities (ULC).
Over the 6 years of the reform, 1,070 ULCs have been formed, including 4,882 communities which joined voluntarily. First local elections took place in 936 of the newly created communities.
The Government has approved the long-term plans to form community areas in 24 regions covering 100% of their territory.
The newly formed ULCs occupy nearly 47% of the total area of Ukraine. More than 70% of the residents of Ukraine live in ULCs and cities of regional significance.
Pursuant to Law of Ukraine No. 562-IX of 16 April 2020 “On Amendments to Certain Laws of Ukraine on Defining Areas and Administrative Centres of Local Communities”, the Cabinet of Ministers of Ukraine has defined administrative centres and approved the areas of 1,470 empowered local communities where the 2020 elections will be held on a new territorial basis.
The communities were able to consolidate their efforts and implement joint projects due to intermunicipal cooperation. In particular, 1,354 local communities signed 604 cooperation agreements.
Today, democracy is the most popular form of political organisation of society allowing people both to elect leaders and control power. Despite all the issues of the democratic system of government and political order, the rule of the people best copes with the challenges of today.
The lack of political will to carry out full-scale decentralisation of public administration has over time become one of the reasons for increased separatist movements in the East of the country. The total centralisation of power in Ukraine has resulted in:
significant regional dependence on the central Government;
low investment appeal of the regions;
weak communities in terms of infrastructure, finance and HR;
complex demographic situation;
low quality of public services;
low trust in government;
high level of corruption;
inefficient managerial decisions.
At the time the reform was launched in 2014, only 6 regions in Ukraine were self-sufficient, which caused a significant regional disparity and, hence, a low quality of life and services provided to Ukrainians. These challenges required radical reforms of public administration, local governance and territorial organisation of power in Ukraine.
Voluntary association and consolidation of local communities
The decentralisation reform has given impetus for building a viable local governance system of power focused on the people’s needs.
After the voluntary consolidation of local communities, the newly established local governments could get the powers and resources previously vested in cities of regional importance.
The interests of the residents of the united communities are now represented by an elected chairperson, deputies and executive bodies of the community council which ensure that the powers granted by law are used to the community’s benefit. In the settlements that are part of a united community, the right of residents to local governance and the provision of services to people are ensured by their elected representatives.
Pursuant to Law of Ukraine “On Voluntary Consolidation of Local Communities”, communities were enlarged and consolidated through voluntary consolidation with due regard to public opinion. Planning of communities must include defining the community’s resource potential for economic and social development and provision of quality services to people.
Efficient local governance and progressive socio-economic development of the regions require more resources and finance. Proper exercise of decentralised powers is conditioned upon adequate resources.
To this end, after amendment of the Tax Code and Budget Code local governments began to receive more funding to increase their economic capacities from 01 January 2015.
The united communities were given powers and resources of cities of regional significance, e.g. 60% of the personal income taxes are now paid to the ULC budgets to be used for exercising the local-governance powers. In addition, the following taxes remain entirely in the communities: single tax, corporate and communal financial institution income tax, and property tax (real estate, land, vehicles).
ULCs also have direct inter-budget relations with the state budget (only regional and district budgets and budgets of cities of regional significance had direct relations before the reform); ULCs are given certain benefits (such as grants, educational and healthcare transfers, community infrastructure development subsidies, etc.). for exercising the powers delegated to them by the central Government. As a result of the legislative changes local governments have also acquired the right to approve local budgets regardless of the date of adoption of Law of Ukraine “On State Budget”.
These improvements have already produced first meaningful results. The local budget revenues have increased by UAH 200 billion (from UAH 68.6 billion to UAH 267 billion) over the period from 2014 to 2019. It is a real tool for influencing the outcomes and responsibility for community trust.
New powers and opportunities
In addition to an increase in the financial potential of the united local communities, decentralisation has offered them other tools of economic development such as external borrowing, choosing institutions for servicing local budgets for the development purposes as well as own revenues of budget-funded entities. Decentralisation has also concerned the powers of architecture and construction control and improvement of urban planning legislation, and local governments have been given the right to define the town-planning policy at their own discretion.
After the adoption of some laws for decentralisation of powers and regulation of land relations, local communities will have the right to manage the land located outside their settlements. The Verkhovna Rada of Ukraine has adopted laws which allow decentralising certain powers of the CEBs associated with the provision of basic administrative services, including registration of real estate, business, place of residence, by delegating such powers to communities.
Bills have been prepared to clearly delineate education, healthcare, leisure, socio-economic development and infrastructure powers between local governments and executive bodies at each of the territorial levels of the territorial structure of the state’s administration.
To build a new territorial basis for the operation of public bodies by:
defining the basic territorial structure of the state’s administration necessary for the formation of empowered local communities on a new territorial basis;
defining the subregional (district) territorial structure of the state’s administration as a territorial basis for the operation of public bodies;
defining of the principles of the territorial structure of administration of Ukraine, the process for creating, liquidation, setting and changing the boundaries of administrative units and settlements in accordance with the European standards;
creating and administering the State Register of Administrative Units and Settlements of Ukraine as part of the new budget programme “E-Government in the Development of Communities and Territories of Ukraine”.
To ensure efficient local governance and create an optimised system of territorial organisation of power on a new territorial basis by:
consolidating the reform of local governance and territorial organisation of power in Ukraine by amending the Constitution of Ukraine;
distributing powers among local governments and executive bodies, including the powers of local agencies of central executive bodies and their subdivisions on the subsidiarity principle and the new territorial basis;
launching a balanced budget model of local government receipts and disbursements for their own and delegated powers;
reformatting the local state administrations in accordance with their new competence, i.e. ensuring law and order, observance of rights and freedoms of individuals, implementation of national and regional programmes, coordination (interaction) of local agencies of central executive bodies, administrative supervision of local governments’ acts;
developing various forms of intermunicipal cooperation such as creation and operation of city agglomerations;
addressing the issue of open and transparent management of local taxes and duties by local governments;
building the basis for involving the members of local communities in the administrative decision-making process on the ground, developing various forms of local democracy;
creating and administering the Unified State Register of Local Government Acts as part of the new budget programme “E-Government in the Development of Communities and Territories of Ukraine”;
creating and administering the State Register of Local Government Powers as part of the new budget programme “E-Government in the Development of Communities and Territories of Ukraine”.
The President of Ukraine, the Office of the President of Ukraine, the Main Department of Regional and Personnel Development and the Department of Local Governance and Decentralisation, the Verkhovna Rada Committee for State Power Organisation, Regional Policy and Local Governance, the Ministry of Communities and Territories Development, the Association of Rural Councils, Township Councils and Consolidated Communities, the Ukrainian Association of District and Regional Councils, the Association of Consolidated Local Communities, the Association of Ukrainian Cities, Regional State Administrations, District Councils, District State Administrations, U-LEAD with Europe Programme
Order No. 77-р of the Cabinet of Ministers of Ukraine dated 23 January 2019 “On approval of the 2019—2021 action plan for a new stage of reforming local governance and territorial organisation of power in Ukraine”