LGI / Resources / CEE and CIS 1994 /

Latvia

Karlis L. Streips

Commissioned by the Institute for Local Government and Public Service

1 BASIC STATISTICAL DATA

1.1 Size of territory and population

Size of territory: 64,600 square kilometres

Population: 2,565,900 (estimated, 1 January 1994)

Population density: 40.18 inhabitants per square kilometre

Major ethnic divisions: Latvians 54.2 %,

Russians 33.1%,

Others 12.7%

Pensioners: 657,698 pensioners (25.63%, 1 January 1994)

School-age children: 672,500 children (26.21%, 1 January 1994)

1.2 Per capita GDP

Per capita GDP 1,011.20 USD (1993)

Local government expenditures
as a percentage of GDP 7.96% (1993)

Local government expenditures
as a percentage of national
government expenditures 28.05% (1993)

1.3 Number of settlements by size

Latvia is divided into seven cities, 69 towns and 492 rural divisions:

1.4 Number of local governments and middle-tier governments

Each city, town and rural administrative division has its own local government (seven cities, 69 towns and 492 rural divisions, for a total of 568 local governments). These are first-tier local governments. There are also 26 districts (counties) in Latvia, and each of these has its own local government as well (for a grand total of 594). The regional governments are middle-tier. The seven Latvian cities have dual status as city and regional local governments, thus filling both first-tier and middle-tier functions.

1.5 Number of civil servants

Latvia only adopted its law on civil service in April 1994. It is expected that eventually approximately 40,000 individuals will attain the rank of civil servant, but all these individuals will undergo an attes-tation process first and will become civil service candidates for at least two years before becoming full-fledged civil servants (i.e., there will be no full-fledged civil servants in Latvia until 1996). The attestation process will begin with state secretaries in the national government ministries and will work down from there. Attestation of civil servants at the local government level is not expected to occur until 1995.

2 LEGAL BASIS

2.1 Constitutional provisions

The Latvian Constitution of 1922, which is the highest governing document in Latvia, did not address the matter of local governments. The Latvian government is in the process of revising the Constitution, and it is expected that the revised text will address core issues such as the electability and supervision of self-governments, their financial and administrative structures, and their rights and obligations. In May 1994, however, no firm predictions could be made concerning the content of the revisions. Officials were still debating whether to add entirely new paragraphs to the Constitution or amend existing ones to address local governments.

2.1.1 Legal authority and types of local governments

The highest governing document addressing local governments, therefore, is the law 'On Local Governments', which took effect on 9 June 1994. It provides for local governments which are made up of popularly elected councils and administrators appointed by said councils.

There are three types of local government in Latvia. These are regional local governments, city or town local governments, and rural division local governments. Each of these has its own council. Latvia's seven cities function with the status of both city and regional jurisdictions, which means that they are not included in the regions where they are located in terms of local government jurisdiction. In other words, although the city of Riga is located in the Riga region, it is not considered a town of the Riga region in relations with the Riga region council.

2.1.2 Roles and responsibilities assigned

The law defines a broad range of mandatory, service-related obligations for local governments (for a list of these obligations, see section 3.3). The execution of these obligations is governed by the law itself and by various regulations and other normative documents issued by parliament or the Cabinet of Mini-sters. Parliament has the right to assign other, temporary obligations to local governments, and the Cabinet of Ministers may order local governments to carry out specific functions. The Cabinet of Mini-sters may not, however, assign any functions without providing the necessary financial resources for the execution of said functions.

In addition, local governments may voluntarily undertake any other actions or responsibilities which are not prohibited by law. They may also agree to share mandatory functions, or to assign such functions from one local government to another.

It must be noted that there was a legal 'hangover ' after the adoption of the new law on local governments in the sense that several dozen laws and regulations which were issued under the old system of local governance remained in effect, many of them contradictory to the new law. Efforts were underway in the summer of 1994 to identify and correct such contradictions.

2.2 Major specific laws on public administration and local governments

– The law 'On Local Governments', June 1994

– The law 'On Elections to City Councils, Regional Councils, and Rural division Councils', January 1994, as amended

– The law 'On the Status of City Council, Regional Council and Rural division Council Deputies', May 1990, as amended

– The law 'On Budget and Finance Leadership', April 1994

– Numerous pieces of legislation pending in parliament as of May 1994

2.3 Civil service legislation

– The law 'On the State's Civil Service', May 1994

2.4 Major legal reforms in progress and their context

With the exception of the most basic governing document, nearly every aspect of local government re-form in Latvia was still ongoing in May 1994. Most crucially, this included laws on local government budget and fee procedures, a law on equalization of local financial resources, and the proposed amendments to the Latvian Constitution which would address the very heart of the local government system in Latvia.

Local government reform in Latvia has been a source of much controversy. As the highly centralized Soviet system of governance collapsed in the late 1980s and early 1990s, local governments in Latvia inherited, sometimes by default, a vast range of responsibilities and obligations. In the immediate post-Soviet period several more or less stop-gap laws of a decentralizing nature were adopted, but as the post-occupation Latvian government became established, it began to reclaim many functions for the central government, often over the vociferous objections of local governments. The final version of the law on local governments was promoted by the national government as a law which offered effective decentralization of government, while local government officials denounced it as one which centralized to excess. It is true that a great majority of local government functions occur as the result of mandates from the state. On the other hand, pending legislation on local government budget authority would guarantee budgetary independence for local governments, and the adopted law on local governments sets up an official negotiating system whereby local governments can discuss issues of controversy with the national government and seek compromise or consensus. In addition, the government's working conception of local government reform (a document adopted by the Cabinet of Ministers in September 1993) promises that reform will be based on the principle of decentralization of authority and the principles of the European Charter on Local Governments (1985).

One other issue which is troubling in the context of local government reform is the vast dissimilarity between the financial possibilities of some local governments such as the City Council of Riga (estimated population approximately 1,000,000) and others such as the rural division governments in impoverished Eastern Latvia. Negotiations on various financial equalization proposals have proved tortuous.

3 HIERARCHICAL STRUCTURE OF AND COOPERATION
AMONG LOCAL GOVERNMENTS

3.1 Main governmental subdivisions in the country

The Latvian system of governance is subdivided into two groups: the state (national) government and the system of local governments (city, regional and rural division). The national government exercises its authority through the popularly elected parliament, which in turn appoints the Cabinet of Ministers. The ministries in turn have authority over a variety of departments. Thus, for example, the Customs Department is under the authority of the Ministry of Finance, while the Veterinary Department is subjected to the Ministry of Agriculture.

3.1.1 Hierarchical structure of the national and local administrations

The national government exercises its authority through the popularly elected parliament, which appoints the Prime Minister and members of the Cabinet of Ministers. The ministries have governing or supervisory authority over a variety of departments such as the Customs Department, the Privatization Agency, the Civil Service Council and the Aviation Administration. There is an independent State Control Office with overall audit and supervisory functions. A number of national government institutions (the Environmental Inspections Office, the Police Department and the Agriculture Department are three examples) have representative offices in each of the country's regions.

National utility and service providers such as the Latvian Gas Company and the Latvian Railroad are either wholly or partly state-owned shareholders associations.

Local governments are run by popularly elected councils, each of which elects a chairperson and appoints committees. Local governments have governing or supervisory authority over numerous institutions and facilities within their territories, including non-privatized industrial and manufacturing facilities, schools and medical facilities.

3.1.2 Other major decentralized organs of central government

National government organizations which provide on-site services, including the Latvian police force, the social security system and the environmental protection agency, have representative offices in the regions, but there are currently no structures which are administered in a fully decentralized and independent fashion. Reform of the state's social security and pension systems may institute some types of directly or indirectly elected governing bodies.

3.2 General distribution of functions among local, middle-tier,
central and other governments

The overall function of city and rural division local governments, as defined by law, is to provide for local governance and the social, economic, cultural and educational needs of their populations. As noted above, local governments may pass functions along from one to another, with the agreement of the recipient local government.

The overall function of regional local governments, as defined by law, is to coordinate the work of rural division and city or town local governments in the respective regions for the purpose of resolving issues of common interest. The regional governments also have several specific functions of regional significance (see below).

All local governments are charged with designing socio-economic development plans for their jurisdictions; developing and executing local government budgets; 'rationally and usefully' caring for local government properties; collecting taxes and fees; 'rationally and usefully' expending financial resources; and reporting to the Cabinet of Ministers on questions which concern the work of local governments when such information is requested.

3.3 Specific public services for which local (city, town and rural division) governments are responsible

– Overseeing of municipal services (water, sewerage, heat, waste collection, etc.)

– Infrastructural needs (roads, lighting, parks, cemeteries, etc.)

– Maintenance of protected natural objects, regulation of the use of forests and waterways (in areas which the national law does not regulate)

– Education and culture (school infrastructure and non-educational support staff, museums, libraries, etc.)

– Health care and treatment

– Distribution of some types of individual social assistance for the poor and otherwise ill- protected

– Control of adoption, guardianship and foster care matters

– Supervision of publicly owned housing in the area of jurisdiction

– Promotion and organization of entrepreneurial possibilities (opposition to monopolies, issue of licences and permits, etc.)

– Efforts to counter unemployment, including organization of socially useful jobs for the unemployed

– Maintenance of public order, including fighting against 'drunkenness and profligacy'

– Regulation of building and construction in the jurisdiction

– Registration of acts of civil marriage

– Collection and submission of necessary data for the state's statistical needs

– Organization of elections and other types of voting

The national government mandates several specific activities for local governments:

– Development of an economic development plan and a territorial development plan for each local government;

– Development and acceptance of an annual budget;

– Collection of taxes and fees;

– Report to the national government on local government operations.

3.4 Legal relationships between local and central government, and
supervision of local governments

The primary supervisory power held by the national government over local governments is that par-liament may dismiss an entire local government council if it violates the Constitution, state law, Cabinet of Ministers' regulations or court orders, or if it tries to take action in areas which are under the jurisdiction of the national government. A local government may also be sacked if its council fails to attract a working quorum to three meetings in a row. The law does not provide an avenue of appeal in this event. In addition, the Minister for State Reform may suspend the chairperson of a local govern-ment if the chairperson violates the Constitution, state law, Cabinet of Ministers' regulations, or court orders. The suspension becomes a dismissal if upheld by a court (or if the affected official does not appeal the suspension in court within two weeks). The dismissal of a chairperson does not invalidate the mandate of the respective individual to serve as a member of the council and can be appealed in court. A dismissed chairperson may not, however, be re-elected to the chair in the same session of the local go-vernment. These powers could give the national government considerable leverage over the operations of local governments. The law on local governments states that the work of local government councils 'must correspond to the interests of the populace and must be maximally useful'. A decision by a par-liament or a Minister for State Reform that a council's work is not 'maximally useful' could thus theo-retically be considered in violation of law which might trigger the cited scenario, although officials of the Ministry for State Reform have specifically denied that the government which was in office at this writing has any such intent.

As far as supervision of financial matters is concerned, the proposal of the law on local government budgets which was on the table at the time of this writing stated that 'state administrative institutions shall have no right to interfere in the formulation and execution of local budgets' but, later in the same proposal, that 'the legitimacy of the spending of amounts received by local governments from the state budget shall be controlled by the State Control and the Ministry of Finance'.

It is important to note that the Cabinet of Ministers may issue regulations and directives which are binding to local governments when laws adopted by parliament provide for Cabinet oversight and regulatory authority, and parliament may adopt laws which affect local government operations in one respect or another.

Under certain, specific circumstances, regional governments may adopt decisions which are binding to all city and rural division local governments in the respective region, but otherwise they do not have supervisory authority over the lower-level governments.

The law on local governments provides that the Cabinet of Ministers must consult with local government representatives before adopting any decisions which affect any or all local governments, but local governments do not have any decision-making say concerning matters before the Cabinet of Ministers. The minutes of negotiation meetings which occur within the consultative system are recorded, and the law states that the government must 'review' any areas of disagreement which might arise.

The local governments law also set up structures called 'consultative councils'. Each region and city in Latvia has one. Regional consultative councils bring together officials from the respective regional government and all the city, town or rural division governments in the region. City consultative councils gather the chairperson of the respective city council and the chairpersons of the council's standing committees. Various representatives of the national government are also supposed to attend meetings of the consultative councils. Meetings of these groups occur at the call of their chairperson, and are intended to provide more or less informal opportunities for various levels of government to discuss pending issues. The consultative councils do not, however, have any decision-making authority.

3.5 Specific public services for which middle-tier (regional) governments
are responsible

– Public transportation in the region

– Health care of regional residents, including provision of regional medical facilities

– Establishment and maintenance of educational and residential facilities for orphans and abandoned children, as well as other types of specialized educational and residential facilities

– Establishment and maintenance of retirement homes for the elderly

– Establishment and maintenance of shelters for the homeless

– Provision of storage for or recycling of industrial waste

– Maintenance of regional libraries, museums, cultural facilities and natural and cultural monuments

– Organization of a regional civil defence system

– Organization of elections and other types of voting

– Organization of the election of lay assessors for the courts

3.6 Mandatory and voluntary forms of cooperation among local governments

The only sense in which cooperation among local governments is mandatory is that the law permits regional governments to adopt decisions which are binding on all local governments in the respective region under certain and specific circumstances which are set out by law.

Otherwise, local governments are free under the law to sign agreements of cooperation (although such agreements must specifically address the financing of any proposed cooperation), and to establish associations or other types of organizations. The Union of Local Self-Governments of Latvia, a lobbying and information organization, unites more than 80 per cent of the country's local governments. There are also the 'consultative councils' which are referenced above.

4 LOCAL GOVERNMENTAL INSTITUTIONS AND ACTIVITIES

All local governments are headed by an elected council which has between seven and fifteen deputies, depending on the population of the local government's jurisdiction. An exception is the City Council of the capital city of Riga, which has 60 deputies.

4.1 Electoral system

Suffrage rests with citizens of the Republic of Latvia who are 18 years of age or older and who are not incarcerated or imprisoned and who have not been declared incompetent as defined by law. Residents of Latvia who are not citizens may not vote. Local governments are elected for three-year terms on the second Sunday of March in the appropriate year (except in 1994, when elections were held in May). The chairperson of the council is chosen by elected deputies from among themselves, using a secret ballot, and he or she serves both as the head of the council and as the head of the local government.

4.2 The internal structure of the legislative body

Each local government has the right to set up its own rules of operation, but certain guidelines are set out in the national law. Each council must elect a chairperson and a deputy chairperson and must by law establish a committee on finance (its chairperson must be the chairperson of the respective council) and a committee on social, educational and cultural matters. Local governments may establish other committees as well. Seats on council committees must be distributed proportionally to the number of seats each party or organization holds in the council as a whole. Councils may also establish ad hoc or temporary committees or working groups to address specific matters. People who are not members of the respective council may also serve on such bodies. Decision-making authority in council committees rests only with elected deputies, while votes in ad hoc and other temporary committees are open to all members of said committees, irrespective of whether they are elected deputies.

Each council must also elect an auditing committee. Its members may not be elected or appointed officials with any connection to the local government (including employees of government-controlled factories, businesses and other institutions) or their relatives. The size of the audit committee must be between three and seven members (except in Riga, where there are 15 members).

Local governments have the option of appointing an executive director for their territory who serves as an assistant to the chairperson of the council.

4.3 Distribution of power between the legislative and the administrative body

The council of a local government has broad decision-making authority over the affairs of the respective territory. The executive director serves at the pleasure of the council and serves primarily as an executor of the council's decisions. The audit committee has supervisory functions over the budget of the local government and over the work and doings of local government officials.

4.3.1 Distribution of functions

The local government council has a number of specific powers. The most important of these are:

– The right to establish local government-run institutions or enterprises or hold stock therein;

– The right to privatize most objects in their territories and to purchase and expropriate property;

– The right to levy local taxes and fees (but only if a specific fee or tax is not set by the national government);

– The right to set prices for services provided by the local government;

– The right to hire and fire the directors and other administrative officials of businesses and institutions which are under local government jurisdiction and to reorganize or liquidate such businesses and institutions;

– The right to overturn decisions taken by the directors of businesses and institutions under local government control.

Local government councils also may issue binding regulations (and provide for sanctions against those who violate them) in a number of areas. The most important of these are regulations concerning:

– Building construction and maintenance in the specific territory;

– Trade and other economic activity in public places;

– Use of forests and waterways in the territory.

A local government's executive director does not have independent decision-making authority. His function is to carry out the decisions of the local government council, although he does have the right to formally propose action to the council in a number of areas.

The audit committee must conduct an audit of the respective local government's operations at least once a year and must file a report with the council at its next meeting and make recommendations concerning the rectification of any problems noted. The audit committee may hire outside auditors at the expense of the local government when conducting its audit. In addition, the audit committee supervises the financial and general operations of all institutions and businesses owned or operated by the local government. It is important to note that members of the audit committee serve at the pleasure of the local government council and may be dismissed with a two-thirds council vote. Also, the law does not specify any avenue of appeal should a council ignore or subvert the recommendations of its audit committee.

4.3.2 Decision-making process and conflict resolution

Local government council decisions are taken in open meetings, but councils may hold closed meetings under certain, specified circumstances. Meetings must take place at least once a month and are at the call of the chairperson, although the Minister for State Reform and the Cabinet of Ministers may order the calling of a meeting. Councils consider issues which are proposed by the chairperson or any member of the council, by council committees, by the council audit committee, or by the official or organization which ordered the calling of an emergency session. Issues are first submitted to a committee, but committees do not under the law have the right to reject proposals. They merely give proposals a first vetting before they are considered by the full council. Most decisions by the full council are taken by a simple majority vote.

4.4 The administrative body

4.4.1 Management and divisions

Beyond the officers and committees which serve local government councils, as described in sections 4.2 and 4.3 of this document, local governments have governing authority over numerous institutions and businesses which have not been privatized. Local governments have the authority to appoint governing officials or establish governing bodies to oversee these institutions and businesses when necessary. Naturally, each business or institution has its own, internal governing structure.

4.4.2 Size, certification and professional composition of personnel

There are approximately 6,000 individuals who are directly employed by the local government (i.e., receive a salary for functions they perform for the government itself, as opposed to one of the government-affiliated institutions such as schools or police departments).

Elected officials in the Latvian government must be citizens of the Republic of Latvia at least 21 years of age with at least 12 months of residency in the territory where they are standing. They must also speak the Latvian language at a proficient level. Individuals who are incarcerated, who have been declared incompetent in the eyes of the law, who have been previously punished for certain types of felonies, and who were at one time employees or close associates of the Soviet-era KGB, the Soviet Defence Ministry, or the security agency, military, or espionage service of any foreign country, may not be elected. Elected officials also face ethics restrictions with respect to their and their families' association with businesses and industries which receive financing from the respective local government. All of the restrictions listed above also apply to Latvian civil servants, except that civil servants may be as young as 18 years of age. In addition to the above restrictions, civil servants must also have completed at least the middle level of education, must speak at least one foreign language, and must never have been members of any organization which has been banned by the Latvian government. Civil servants must undergo a certification and probation procedure which is described elsewhere in this document. They must also take an oath before entering the civil service.

The PHARE programme finances local government employee training programmes in Latvia, with the main focus at the moment on preparing instructors who will be able to teach broader numbers of local government workers in the future. There are also several other programmes which educate local government officials and civil servants, including an ongoing programme at the University of Latvia and a US-Baltic Foundation-financed Municipal Training Centre. The law on civil service provides for a national school of administration, but its regulations had not been established by the Cabinet of Ministers at the time of this writing.

4.5 Institutions and companies run or controlled by local governments

Latvian local governments have control (sometimes unwanted control) over literally tens of thousands of public facilities, residential buildings and businesses and industries. Many of these facilities and functions are intended for eventual privatization (in a process which is controlled by the national government, not by local governments), but it is safe to assume that local governments will maintain control over such institutions as schools, public-financed health-care facilities, parks, etc.

Latvian local governments as a rule do not own the public utility services in the country, such as the gas company or the electric company (the very rare exception is a few local governments which own locally important electric power stations), but they often do have ownership control over non-gas heating sys-tems (meaning coal and heating fuel) and sewerage facilities. Local governments are responsible for collecting payments for all utility services within their territories. Local governments which do not collect sufficient payments can get cut off from such services as heat and hot water.

4.6 Mechanisms for the redress of citizens' grievances

Under current law, if a resident of Latvia believes that a local government has adopted an unlawful de-cision or has in some way impinged on the citizen's rights, he may file a complaint with the Latvian procurator's office, which must investigate the case and may sue the local government if necessary. In practice this procedure has been cumbersome and has very seldom resulted in a lawsuit. At the time of this writing, the Ministry of Justice was writing a new administrative process code which is expected to address the citizens' grievance procedure in some detail.

4.7 Citizens' participation in decision-making processes and forms
of expressing public opinion

The residents in a local government's territory have the right to be present at local government council meetings (but not committee meetings) and to read all documents containing council decisions, orders by the chairperson of the council, and the minutes of council meetings. The law on local governments does not provide any right, however, for such individuals to address the council. Citizens may write proposals for new laws or regulations, but local governments are under no obligation to consider such proposals. Proposed regulations on local government administration which were pending at this writing provided that council chairpersons, their deputies, as well as local government executive directors must have open office hours at least once a week where residents of the respective jurisdiction may approach them with questions or concerns. In practice most Latvian officials have such hours already.

5 PUBLIC FINANCE

5.1 Major sources of revenue for the local government budget

In 1994, Latvian local government budgets were made up the following elements:

Source of revenue Percentage of local government income

51% of the national income tax 22.8%

100% of the national property tax 7.9%

100% of the national land tax 5.1%

30% of national cutting fees 0.7%

75% of the national natural resources tax 0.6%

State subsidy grants 9.2%

Targeted state grants 52.5%

Other income 1.2%

The state subsidy grants and targeted grants, which go to regional governments and are distributed by them to town and rural division governments in the respective regions according to a nationally deter-mined formula, try to provide some level of budget equalization for the various local governments. The subsidies are direct hand-outs, but the targeted grants go to support four areas: education, health care, social security and support and assistance to the poor. The major change in local government financing from 1993 to 1994 was the elimination of any local government income from the national sales tax and profits tax. This led to a sharp increase in the state's subsidy and target grants, which some local government officials view as an increased method of centralization in the state's system of governance.

Local governments also have the right to set fees for locally provided services such as licencing and permits, but at the writing of this report the national government had not yet issued regulations concerning maximum levies which were necessary before local revenue collections could start.

The proposal for the new law on local government budgets which was on the table at the time of this writing proposed that henceforth local government budgets receive 100 per cent of the nation's land tax, property tax, and personal income tax, as well as a segment of the profits tax and the natural resources tax, as well as income from the nation's forests. This law was, however, still under discussion at the time of this writing.

5.2 Distribution of local government expenditures

The following data concern actual local government expenditures for 1993, with all Latvian local governments counted together. The categories are listed in descending order of amounts:

– Health care 24.78%

– Education 23.25%

– Architecture and building 16.48%

– Social security 12.11%

– Subsidies and contributions
to lower-standing budgets 8.22%

– Support for state
governance institutions 6.65%

– Culture 3.55%

– Environmental protection/regional
development 0.83%

– Support for state law-enforcement
and defence structures 0.83%

– Support for roads maintenance 0.32%

– All other expenditures 2.98%

5.3 Partnership between the public and private sectors

In the post-communist society, relations between the private and public sectors are only just emerging. There is nothing in Latvian law to prohibit the contracting out of services or other procedures, but regu-lations concerning the process are still in development. A law on conflict of interest in contracting, for example, was being worked out at this writing, as were regulations on disclosure of bid solicitation and similar processes.

5.4 Forms of financial cooperation among local governments

As is noted above, regional governments in Latvia sometimes extend financial assistance to lower-standing town and rural division governments. Such subsidies, some of which are mandatory and others of which as voluntary, made up slightly more than 8 per cent of all local government expenditures in 1993. In addition, regional governments distribute state block-grant and direct aid, though regional governments have no say over the distribution; they simply execute decisions made by the national government.

Local governments are free under the law to sign cooperation agreements for one project or another. Financing of such agreements must be specified in the budgets of the local governments which are involved.

5.5 Regulatory controls on local government finances

The Latvian law 'On Budget Rights in the Republic of Latvia' specifies that local government budget resources must be used for the following purposes:

– Financing of local investments, economic undertakings, and government-controlled businesses and economic organizations;

– Financing of facilities for education, culture, health care, culture and sport;

– Financing of facilities for the social security system;

– Financing of locally significant environmental protection schemes;

– Financing of inter-regional programs in which the local government is participating;

– Loans to lower-level local government budgets;

– Repayment of bank credits and loans;

– Other expenses.

This law has been partly superseded by the new law 'On Budget and Finance Procedure', which states only that local government budgets must 'reflect the administrative structures of the local government and must correspond to specified requirements of classification for income, expenditure and financing'. The law will be further superseded by the new law on local government budgets, which had not been adopted at the time of this writing.

6 BURNING ISSUES

(i) Unquestionably the most serious problem for local governments in post-Soviet Latvia is the poverty of Latvian residents. This directly affects local governments in the sense that many residents cannot or do not pay bills for rent in government-controlled housing, for utility services, etc. Local governments can and do get cut off from utility services if they do not collect a significant percentage of the money owed by area residents, and eviction procedures for non-payment of rent are messy and can be quite ugly. Local governments also expend a great deal of effort in distributing social security payments to pensioners, the poor, orphans, war veterans, and other groups which are still largely on the government dole. Naturally, the poverty of the country has a direct impact on local government revenues from present sources (especially the income tax and the property tax) and will have an impact on revenues from expected future sources (especially the profits tax and the sales tax).

(ii) Relative local government poverty directly leads to a second problem, which is the difficulty many have in attracting bright, young people to local government service. This is partly because of the low pay of local government jobs, and partly because of the enormity of the problems which face local governments in the post-Soviet era. In the local government elections which were held in the spring of 1994, the nominations period had to be extended in some districts because no one could be found to run. The same problem affects the national civil service system, which will also have an impact on local governments.

(iii) Ongoing local government reform is proving to be a tortuous process both in terms of the scope of necessary restructuring and in intensive arguments between the national government and local governments over the appropriate level of centralization/decentralization. The Latvian Union of Local Self-Governments lists three pending pieces of legislation as particularly critical: revisions to the Constitution; the law establishing a Constitutional Court (including provisions on local government redress of grievances against the national government); and the law on local government budget equalization. Generally the Union of Local Self-Governments feels that the national government of Latvia is a centralizing force, while the national government feels that it is generally a decentralizing force. The conflicts which these differing perceptions can engender are obvious. An additional problem is that while the central law on local governments specifies a number of functions, obligations and authorities for local governments in theory, in practice supporting legislation and/or regulations have not been adopted, making the theoretical base meaningless, or leading to confusion about what exactly local governments are supposed to do.

BIBLIOGRAPHY

1. Latvian Ministry for State Reform, Pasvaldibas Latvija (Local Governments in Latvia) (Izglitiba, Riga, 1994).

2. Latvian Ministry for State Reform, Local Self-Government Reform in Latvia, unpublished information packet (Riga, 1994).

3. E. Vanags, Vietejais budzets Latvija (Local budgets in Latvia), unpublished manuscript.

4. G. Kokars, 'Pasvaldibu likums stasies speka junija ' (The law on local governments will take effect in June). Newspaper article in Jurmala, 12 May 1994, p. 3.

5. Texts of the following laws, proposed laws, regulations and other government documents (available through the Ministry for State Reform):

Law on the Status of People's Deputies in the Republic of Latvia (amended) (28 May 1990)

The Concept of Local Government Reform of the Republic of Latvia (Cabinet of Ministers document, 28 September 1993)

Law on Elections for City, District and Division Councils (amended) (13 January 1994)

Law on the State Budget for 1994 (3 February 1994)

Law on Budget and Finance Leadership (6 April 1994)

Law on the State Civil Service (21 April 1994)

Law on Local Governments (9 June 1994)

Law on Local Budgets (pending proposal)

Law on Local Fees (pending proposal)

Regulations concerning local government councils (pending proposal)

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LGI / Resources / CEE and CIS 1994 /