The state will continue to function normally even without the parliament voting on a budget or adopting an extension law.
This is stated in the conclusion of an analysis by the Institute for Market Economics (IME). The experts analyze the topic “Without a budget for 2025 and without an extension law: what next?“, BTA specified.
The analysis notes that at the moment it is almost certain that the parliamentarians will not adopt the budget submitted by the caretaker government on time – the major parties are highly critical of the proposed framework and it seems that they will choose a tactic to delay the consideration of the package of budget laws as much as possible. At the same time, the acting Minister of Finance does not want to withdraw the proposed framework for state finances and has no intention of introducing a so-called extension law - a similar practice was in place at the end of 2021 and 2022, economists add.
What happens without an adopted budget for the new year and without an extension law indicating what of the old continues?
The IME notes that contrary to the apocalyptic pictures drawn in this scenario, this option is provided for in the structural laws of the three major budgets in the country.
Article 87 of the Public Finance Act (PFA) regulates the automatic extension of the State Budget Act. According to the text, in the event that the state budget is not adopted by the National Assembly by the beginning of the budget year, the budget revenues are collected in accordance with the current laws, and the implementation of expenditures and the provision of transfers is in an amount no greater than their amount for the same period of the previous year, up to the amount of received revenues, grants and donations, taking into account the acts of the National Assembly and the Council of Ministers that have entered into force, which provide for additional or reduced budget funds, and in compliance with the fiscal rules under this law and the fiscal targets approved by the Council of Ministers with the medium-term budget forecast.
Economists comment that the important points here are that the acts of the National Assembly and the Council of Ministers that have entered into force are taken into account, that is, the amount of the main payments is preserved, the fiscal rules and, accordingly, fiscal stability are observed, and the payments are up to the amount of revenues, which will nominally increase (growth in turnover and remuneration in the economy) and without the deputies taking any action. In this sense, we are not talking about a 1/12 budget, but about the normal functioning of the budget spheres at the beginning of the year, experts point out.
Art. 98 of the ZPF regulates the automatic extension of the budgets of municipalities, IME also notes. According to what is written in it, in the event that the state budget is not adopted by the National Assembly by the beginning of the budget year, the revenues under the municipal budget are collected in accordance with the current laws, and the expenditures are made in amounts no greater than the amount of expenditures for the same period of the previous year, and in compliance with the fiscal rules under this law.
Economists comment that the text for municipalities is more restrictive, which means that all local payments, including activities delegated by the state, will remain at the same amount as the previous year.
Art. 19 para. 6 of the Social Security Code (SSC) regulates the automatic extension of the State Social Security (SSS) budget.
The text states that in the event that the State Social Security budget is not adopted by the National Assembly by the beginning of the budget year, social security revenues are collected and social security expenditures are made in accordance with the current regulatory acts, and up to one twelfth of the expenditures provided for in the budget for the previous year are spent monthly for the maintenance of the bodies of the National Social Security Institute.
The IME notes that all payments under the SSS budget will continue to be made - there will be no problem with pensions and various benefits. Social security revenues will be higher, as a result of the growth of wages and the maintenance of high employment. The automatic extension of the state budget (under Art. 87 of the Pension Fund Act) ensures the transfer to the budget of the Social Security Institution and, accordingly, the necessary funds to cover the deficit. The 1/12 rule is only for the maintenance of the NSSI bodies and does not concern pensions and benefits, experts point out.
Article 29, paragraph 4 of the Health Insurance Act regulates the automatic extension of the budget of the National Health Insurance Fund (NHIF). According to it, in the event that the draft of the National Health Insurance Fund Budget Act is not adopted by the National Assembly by the beginning of the budget year, insurance revenues are collected and insurance expenses are made in accordance with the approved budget for the previous year, and up to 1/12 of the expenses provided for in the budget for the previous year are spent monthly for the maintenance of the National Health Insurance Fund.
The Institute of Medical Sciences commented that all payments under the NHIF budget (for hospital care, medicines, etc.) will continue to be made. Income from insurance contributions will be higher, as a result of the growth of wages and the maintenance of high employment. The automatic extension of the state budget (under Article 87 of the Health Insurance Act) ensures transfers for health insurance from the budget. The 1/12 rule is only for the maintenance of the NHIF bodies and does not concern health insurance payments.
"In short, the state will continue to function normally even without the parliament voting on a budget or adopting an extension law. Of course, the adoption of an extension law provides greater legal certainty, as it opens up the possibility of specifying specific expenses and commitments. And if the current legal framework allows for avoiding an immediate budget crisis, then entering a new year without an adopted budget creates risks both for the predictability of the business environment and the economy as a whole, and for the normal functioning of institutions, including local authorities", commented the Institute for Market Economics.
The expenditure part of the budget is prepared on the basis of current policies and current legislation, said Acting Deputy Prime Minister and Minister of Finance Lyudmila Petkova at a briefing at the Council of Ministers on December 18.
She commented on the opinions of experts and financiers to cut expenses and asked: “Which expenses, distinguished politicians and experts? The expenses for salaries and pensions or the expenses for the capital program?“
“I will not be the Minister of Finance who proposes to reduce people's incomes and pensions, nor will I hinder the implementation of national strategic projects and municipal projects for water supply, infrastructure, education, culture and social activities“, said the Minister of Finance. According to her, the problem is not in the costs of salaries and pensions, the problem is the way in which they were increased, without being based on sound economic logic. The Ministry of Finance has expressed a negative opinion on all amendments to the laws adopted by the National Assembly related to the increase in personnel costs, Petkova said, adding that "these opinions were thrown in the trash".
Due to the refusal of the Ministry of Finance to submit an extension of the budget for 2024, the new year will start without a budget, "We Continue the Change" said.
The co-chair of "We Continue the Change" Assen Vassilev insisted that the Council of Ministers submit an extension law for the state budget, which would come into force on January 1, 2025
In his words, if this law is not adopted, there will be no legal basis for collecting health contributions from January 1, 2025, which is 30 million leva per day of lost revenue for the treasury. There will be no electricity compensation for businesses, nor will the money for compensation be able to be collected – nor will it be distributed. Businesses will have to pay at stock exchange prices, Vassilev said.