The talks focused on the current situation with the 2025 budget, the financial situation of municipalities, and the tax revenue forecasts for municipalities.
After the meeting, Gints Kaminskis, Chairman of the Latvian Association of Local Governments (LPS), said that local governments want clarity on next year's budget. The last few years have been very difficult for local governments, several of which are already in financial crisis. The LPS talks with the Finance Ministry were due to take place last week, but were postponed and held today.
Kaminskis said after the talks that the most important thing was to get more clarity on the municipalities with less funding - local authorities in the eastern border region and elsewhere in Latgale.
"There is a need for clarity because in recent years funding has been taken away from municipalities. For example, as a result of the redistribution of personal income tax (PIT), which we never agreed to. Already five municipalities are coming, asking for help, for working capital. This means that these are not the wrong decisions of one municipality. It is a system error. It cannot go on like this," said the President of the LPS.
Data compiled by the LPS show that in the last two years, spending by local authorities on additional functions has increased by €200 million as a result of decisions by the Parliament and the government. As a result, several municipalities, including Talsi, Valka, Balvi, and Valmiera, are in financial difficulties.
Also, for three years now, an additional solution has been sought for the municipalities with the lowest revenues, and the number of such municipalities has increased year after year. While in 2022 six municipalities received an additional state subsidy, in 2024 there are already 19.
Kaminskis said that local governments need predictable and stable revenues, which is the basis for maintaining at least the current standard of living for the population. Funding will also be needed for project implementation and other activities.
However, compensatory mechanisms for municipalities are not on the table yet.
After the meeting, Karina Ploka, Parliamentary Secretary at the Ministry of Finance, said that the discussion had been constructive and outlined the main issues on which negotiations would continue in the near future. The issue of compensation to local governments was not discussed in detail.
"The issue was highlighted that municipalities need additional financial resources and there are functions that need to be financed. For our part, we see that municipalities have a personal income tax surplus, and that savings for municipalities are not falling as fast as they could be. Since this issue is on the table, it needs to be addressed, but we cannot say what the solution will be at the moment," says Ploka.
The talks are expected to take place in the next few weeks. Clarity on the budget should be in place by September 17.
