The new impetus of decentralization reform – or, more precisely, reform of local government and territorial organization of government – has been going on for 8 years, and only the full-scale invasion has caused a change in approaches to understanding the balance of power between the central government and the local level.

In its recent statement, the European Commission praised the achievements of decentralization. “This is one of the most effective and successful reforms implemented in the country. It has become a decisive factor in social and economic development”, – the report says.

How we can avoid losing the achievements of decentralization, what challenges await the reform in the conditions of war – we discussed all this with the founder and chairman of the board of the Center of Policy and Legal Reform, Ihor Koliushko, the chairman of the subcommittee on administrative and territorial structure of the Verkhovna Rada Committee on the Organization of State Power, Vitaliy Bezgin, and the head of regional programs and deputy head of the advocacy department of the RPR Coalition, Yurii Mykytiuk. 

Briefly about the decentralization reform

The reform of local self-government and territorial organization of power was carried out in accordance with the 2014 concept, which was actively developed by experts from the RPR, the Center for Political and Legal Reforms and the Institute of Civil Society.

Its essence was the transfer of powers and finances from the state authorities to local governments as close as possible to the people.

At the first stage of this reform, it was necessary to carry out an administrative and territorial reform of the basic and district levels. This was necessary to create the grounds for decentralization. This also required changes to the Constitution to make the changes legitimate.

The consolidation was successful, experts say. Yurii Mykytiuk, Head of the Regional Department of the RPR Coalition, clarifies: “Instead of 11,509 territorial communities, 1469 were created, and instead of 490 districts, 136 new ones were created.”

After that, in October 2020, local elections were held on a new territorial basis. But no changes were made to the Constitution. So we have legal dilemmas.

“I don’t think there is a complete contradiction here, because the Constitution does not define what an administrative-territorial unit is. But on the other hand, it is true that the term “community” as an administrative unit is not really defined in the Constitution. That’s why we can’t fully build all the legislation correctly, in particular, to adopt a new law on the administrative-territorial structure”, – says Ihor Koliushko, chairman of the CPLR board. 

However, despite the constitutional unclarity, the decentralization reform was supposed to move forward after the 2020 elections. These processes were interrupted by Russia’s full-scale invasion on February 24, 2022.

The Great War and local communities

Ihor Kolishko is convinced that the challenges of the war have confirmed the necessity of the reform: “In most cases, it is thanks to the new local governments on a new territorial basis that it was possible to effectively organize local governance, including defense and prevention of invasion and provocations.” It was mostly on the basis of the new local self-government that military district administrations and territorial defense built their work on. Volunteerism was also largely developed in cooperation with local self-government.

At the same time, wartime and martial law led to the fact that further decentralization was halted. Moreover, there was talk of the need to centralize power. According to Yurii Mykytiuk, “centralization would be a logical and correct step in times of war. Especially if we are talking about the first year.”

The personnel policy of local governments also faced challenges. On the one hand, competitions for all positions in local government or the civil service have been suspended. On the other hand, dismissals without following the procedures have begun. However, among the victories was the adoption of the draft law “On Service in Local Self-Government Bodies,” which is an important step forward in strengthening the institutional capacity of the service in local self-government. 

“The right was granted to dismiss virtually everyone without following any procedures, both from local government and the civil service. This norm should have been introduced exclusively locally, it should have been done in the occupied territories. If the territory is already occupied, it is really impossible to carry out any procedures related to dismissal, resignation, etc. This problem really needed to be solved, but it was not solved correctly, leaving the possibility of a personnel bacchanalia throughout Ukraine”, – explains the chairman of the CPLR board.

The third challenge was the financing of local governments: starting from October 1, communities have to send half of the military tax – personal income tax – to the state, not to their local budgets. Vitalii Bezghin, chairman of the subcommittee on administrative and territorial structure of the Verkhovna Rada Committee on the Organization of State Power, notes on this issue: “If we compare local governments with the state level, their condition, especially the budgetary one, is much better, due to the competent budgetary policy of the central government in 2023. Local budgets were overfulfilled, although this will certainly not be the case in 2024. The key challenges for the East and South are taxpayer losses and the demographic crisis. All this deepens the imbalance in the development of the territories.” 

Thus, the war, the lack of a clear division of powers between local and executive authorities, the lack of a clear vision of regional policy from the Government, steps to centralize power, personnel issues, and funding problems are the challenges faced not only by communities but also by the entire decentralization reform. At the same time, the reform remains one of the most effective in Ukraine, according to the European Commission’s report. So how can we not only maintain these successes, but also multiply them under martial law?

Five tasks for decentralization

Ihor Koliushko emphasized five areas of work on the reform:

1. To carry out a full analysis of the powers of different levels of government and complete this distribution according to the principles of subsidiarity: what should be at the basic level, what at the district, what at the regional level, and what should remain with the state. So far, this is happening chaotically.

2. In accordance with the distribution of powers, it is necessary to revise the public funding policy. It is necessary to expand the financial base of local governments, not narrow it. “First, we need to reform local government’s own taxes, such as land tax and local fees. Secondly, it is necessary to assign personal income tax to the place of residence of citizens, not to the place of registration of the enterprise where they work. Personal income tax is the main tax that ensures a person’s connection with the CU and receipt of most basic services at the place where they live (including transportation, education, medicine, etc.)”, – the expert notes. 
3. Adopt a new version of the law on local state administrations, as we still have no oversight of the legality of local government activities and the compliance of their acts. 
4. To complete the streamlining of the administrative-territorial structure, first of all by adopting the relevant law (although there are discussions in society about whether to amend the Constitution first or adopt this law).
5. In accordance with EU requirements, it is the community that should be recognized as a legal entity, not its individual bodies. In Ukraine, we have a paradox in this regard: in the Constitution, it is the local government that manages finances or property. But in fact, it is councils and executive committees, because they are the only ones recognized as legal entities. 

The last fifth point requires an amendment to the Constitution, and this is not possible during martial law. 

Yuriy Mykytyuk adds that a month ago, the Ministry of Communities, Territories and Infrastructure of Ukraine presented the Roadmap for Decentralization. “It can be stated that the central executive authorities, the relevant committee of the Verkhovna Rada of Ukraine and civil society experts understand what needs to be done, – the expert concludes, – However, the scale of problems and challenges facing the reform is so great that full coordination of all stakeholders is required to continue the reform.”

The parliamentarians plan to focus on the draft law on local state administrations, return to the issues of agglomerations, and draft law no. 9450, which should adapt Ukrainian legislation on cross-border cooperation. This was reported to us by MP Bezghin.

The decentralization reform is a recognized success of our country, but this success is not final and requires constant steps to preserve and endorse it.

The material “Power of Communities: How Decentralization Paves Our Way to the EU” was published with the support of the European Endowment for Democracy (EED). Its contents do not necessarily reflect the official position of the EED. The information or views expressed in this material are the sole responsibility of its authors.