Decentralization

1. Evaluation of reform policies of the Parliament and Government during the period from September 2019 and its compliance with the Toronto Principles (based on the analysis of the Government Program, the plans of the ministries and the adopted/rejected regulatory acts)

During 2015–2018, Ukraine did a substantial work on implementation of the reform on local self-government and local organization of power (known to the general public as the decentralization reform). In particular its first stage that included voluntary creation of Unified the Territorial Communities (hereafter - UTC) was recognized as successful by Ukrainian politicians, self-government bodies, UTC residents, and Council of Europe experts.

Nevertheless, in the first half of 2019, alarming trends emerged and intensified as a result of the election year: the energy of voluntary formation of UTC was exhausted, regional councils began to translate the issues of consideration of projects of perspective plans of formation of empowered communities into political discussions, much of the funds of the State Regional Development Fund were channelled beyond the logic of strategic planning. The work on drafting legislation to complete the aforementioned reforms has virtually stopped.

The election of the new composition of the Verkhovna Rada of Ukraine (hereafter – the Parliament) led to the formation of a one-party majority, and as a result, a new one-party government (of Oleksiy Honcharuk) on August 29, 2019.

Thus, the Honcharuk’s government received the following state of affairs in the field of local self-government reform and territorial organization of power:

1) the previous Government approved 23 prospective plans, which envisage the formation of 1 356 UTCs, uniting 9 702 territorial communities (504.4 thousand km2, or 87.6% of the total territory of Ukraine; 32.8 million people, or 83.8% of the total population of Ukraine (data excluding temporarily occupied territories). 936 UTCs were created;

2) Ukrainians are consistently highly supportive of decentralization – by over 60%;

3) there are several major international technical assistance programs for decentralization support in Ukraine, employing hundreds of consultants to assist in reform and train local government officials to work under the new conditions;

4) as a result of fiscal reform, local communities received sufficient funds to implement local policies;

5) the reform was joined by new politicians (first of all, MPs of Ukraine) and new leaders in newly formed ministries and regional state administrations, who were not sufficiently familiar with the logic, tasks and tools of the reform, but had already begun to influence it.

The development and implementation of decentralization and state regional policies of the Government's action program are within the competence of the Ministry of Communities and Territories Development of Ukraine (hereafter – MCTD) and are concentrated on the following aims:

10.1. Ukrainians are living in comfortable cities and villages; 10.2. Ukrainians living in “depressed regions” have sufficient opportunities for development; 10.3. Ukrainians have a real opportunity to influence the organization of their living space as residents of empowered communities.

In order to achieve the set goals, the MCTD had to plan the appropriate measures aimed at completing the first phase of decentralization before the next local elections on 25 October 2020.

The Parliament has taken a step towards unblocking the development of prospective plans for the formation of empowered communities in the regions by removing the regional councils from this process (Law No. 348-IX of December 5, 2019).

On 4 March 2020, Denys Shmygal was appointed as the new Prime Minister of Ukraine. His government had to complete the organizational and legal support of the reform in order to do it in time before the next local elections on October 25, 2020. To date, such work has generally been completed.

In order to speed up the process of approval of the administrative and territorial units of the base and district levels, Law of Ukraine "On Amendments to Certain Laws of Ukraine Concerning the Definition of Territories and Administrative Centers of Territorial Communities"[1] dated April 16, 2020 № 562-IX, the Government was entitled with the right to approve the centres and territories of communities and submit drafts of district formation acts to the Parliament.

On 12 June 2020, Government Order 19 719-r approved the territories and administrative centers of territorial communities on the territory of Ukraine.

On 15 July 2020, the resolution of the Parliament "On calling the local elections"[2] № 795-IX called local elections to village, settlement, and city councils of territorial communities and, accordingly, of village, settlement, and city mayors.

On 17 July 2020, the resolution of the Parliament “On the formation and liquidation of districts”[3] № 807-IX approved a new district division of the territory of Ukraine, as provided for in the Reform Concept dated April 1, 2014 № 333-r.

Government Resolution of August 5, 2020 № 695[4] approved the State Strategy for Regional Development until 2027.

On 14 August 2020, the Central Election Commission approved the resolution “On calling the first elections of deputies of district councils to October 25, 2020” № 176[5].

As of 1 September 2020, it can be stated that the first stage of the reform of local self-government and local organization of power, namely - the creation of affluent communities and the change of district division is politically formalized. Elections of local governments at all levels are scheduled for October 25.

The state regional policy for the next period received a functional planning document - the State Strategy for Regional Development until 2027.

2. Current challenges / issues in the relevant policy area

Though the formation of affluent territorial communities and new districts has been successfully completed, some serious challenges both to complete the reform and to develop communities in the future still remain:

1) Unwillingness to transform at the district level

Despite the formation of new districts, which included several former small districts, the issue of succession and the order of disposal of property, which was in the management of district councils of the "old" districts, had not been settled. The question of the competence of the district level authorities and the powers of the district councils has not been resolved yet. These problems are generally regulated by Bills № 3614 and № 3651.

2) Lack of understanding of the state supervision over the legality of local self-government activities against the background of the future multi-party allegiance of local councils after the 25 October 2020 elections

The introduction of a party electoral system in communities with more than 10 000 voters has effectively turned the local election campaign into a contest of party ideologies rather than of local development programs. After the elections, there may be a situation where the political allegiance of entire territories, and possibly regions, will be very different, and councils, in order to follow the party goals, will adopt acts that fall outside their competence. Ukrainian legislation does not provide for efficient tools of monitoring and responding to such council decisions. It could create new sources of social tension.

1) Lobbying during the formulation of prospective plans

The removal of oblast councils from the process of formulating prospective plans did not remove the problem of lobbying. As a result, either too small or too large territorial communities are still being formed, which will complicate the possibility of their balanced development in the future.

2) Lack of dialogue with regional elites and political parties

The introduction of the Bill on Amendments to the Constitution of Ukraine on Decentralization (No. 2598), which significantly changed approaches to the formation of regional and subregional administrative-territorial units and their legal status, the status and powers of the prefect, aroused concern among regional elites, local authorities, experts and scholars, as well as political parties, which do not belong to the parliamentary majority. Even further withdrawal of the bill did not facilitate the issue of understanding the essence of the changes and their impact on Ukraine's future.

3) Constitutional process

The introduction and withdrawal of draft laws on amendments to the Constitution of Ukraine on decentralization showed the unwillingness of political elites to agree on the necessity and content of constitutional changes. Transformation of the process of preparation of constitutional changes from the format of the constitutional commission into the "inclusive process" of discussion of ideas, without understanding the approaches to such ideas by actors of the constitutional process is unlikely to lead to creation of the project agreed among the political elites. Against the background of increasing pressure from Russia in the negotiations on Donbass, changes to the Constitution of Ukraine may become another line of discord, not cohesion, and will represent the current situation, rather than a strategic vision of the system for local organization of power.

4) Financial challenges

Budget revenue problems that emerged in late 2019 - early 2020, especially the quarantine restrictions, create risks for local budgets, including reduction of the income tax revenues and receiving subsidies under different budget programs. Even greater is the problem of using funds from the State Regional Development Fund in 2020, which mechanism for allocating funds to regional development projects was virtually destroyed and switched to manual mode. The Bill on Amendments to Article 24-1 of the Budget Code of Ukraine (BCU) No. 2202, which solved that problem, was considered and, after the resignation of the previous Government, was withdrawn from consideration.

5) Institutional challenges

The destruction of the state service that happened during the recent years, the frequent change of management and employees at central executive bodies of middle-level, as well as regional and district state administrations have significantly weakened the possibilities for effective policy development and implementation at the national and regional levels. The lack of state regulation of the salaries of heads of public authorities and lack of oversight of the local governments’ activities creates the basis for the independence of local government from the policy of the state, which poses a danger to stability to the country facing the ongoing war.

3. Recommendations for priority actions in 2020-2021, in particular, for the agenda of Parliament's second session