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On returning unused appropriations to the state budget

Case No. 1/99

 

 

THE CONSTITUTIONAL COURT OF

THE REPUBLIC OF LITHUANIA

 

R U L I N G

 

On the compliance of Article 6 of the Republic of Lithuania’s Law on an Amendment to the 1997 State Budget and Municipal Budgets with the Constitution of the Republic of Lithuania

 

8 November 2000, Vilnius

 

The Constitutional Court of the Republic of Lithuania, composed of the Justices of the Constitutional Court: Egidijus Jarašiūnas, Egidijus Kūris, Zigmas Levickis, Augustinas Normantas, Vladas Pavilonis, Jonas Prapiestis, Vytautas Sinkevičius, and Teodora Staugaitienė

The court reporter—Daiva Pitrėnaitė

The Constitutional Court of the Republic of Lithuania, pursuant to Paragraph 1 of Article 102 of the Constitution of the Republic of Lithuania and Paragraph 1 of Article 1 of the Law on the Constitutional Court of the Republic of Lithuania, on 19 October 2000, in its public hearing, considered case No. 1/99 subsequent to the petition submitted by the Kaunas Regional Court requesting an investigation into whether the provision of Article 6 of the Republic of Lithuania’s Law on an Amendment to the 1997 State Budget and Municipal Budgets that unused appropriations of 1996 municipal budgets for financing environment protection objects shall be returned to the state budget is in compliance with Paragraph 1 of Article 127 of the Constitution of the Republic of Lithuania.

The Constitutional Court

has established:

I

The petitioner—the Kaunas Regional Court—was considering a civil case on the obligation to the municipality of Kaunas city to transfer the unused appropriations of 1996 allocated for financing environment protection objects from its budget to the state budget. On 21 December 1998, by means of its ruling, the said court suspended the consideration of the case and applied to the Constitutional Court with the petition requesting an investigation into whether the provision of Article 6 of the Republic of Lithuania’s Law on an Amendment to the 1997 State Budget and Municipal Budgets (Official Gazette Valstybės žinios, 1997, No. 98-2482; hereinafter also referred to as the Law) by which unused appropriations of 1996 municipal budgets for financing environment protection objects shall be returned to the state budget was in compliance with Paragraph 1 of Article 127 of the Constitution of the Republic of Lithuania.

II

The petition of the petitioner is based on these arguments.

Paragraph 1 of Article 127 of the Constitution provides that the budgetary system of Lithuania shall consist of the independent state budget of the Republic of Lithuania and the independent municipal budgets. This provision establishes independence of municipal budgets. Meanwhile, Article 6 of the 21 October 1997 Law on an Amendment to the 1997 State Budget and Municipal Budgets stipulates that unused appropriations of 1996 to finance capital investments (the estimate value of which exceeds 5000 thousand litas) and environment protection objects shall be returned from municipal budgets to the state budget to the extent that the factual revenues of 1997 of these municipal budgets are larger than the revenues established on the approval of deduction rates to municipal budgets. The Law provides for taking some funds from the municipal budget against the will of municipal institutions. The petitioner doubts whether this requirement is in compliance with Paragraph 1 of Article 127 of the Constitution.

III

In the course of the preparation of the case for the Constitutional Court hearing, a written explanation of the representative of the party concerned—the Seimas—E. Žilevičius, Vice-Minister of Finance, was received.

The representative of the party concerned noted that Paragraph 1 of Article 127 of the Constitution and Paragraph 1 of Article 1 of the Republic of Lithuania’s Law on Budgeting provide that the budgetary system of Lithuania shall consist of the independent state budget of the Republic of Lithuania and the independent municipal budgets. The Seimas annually approves the state budget of the Republic of Lithuania and the funds allocated to municipal budgets. Municipal councils, taking account of the budget funds allocated to each particular municipality, within one month after the approval of the state budget of the Republic of Lithuania approve respective municipal budgets. The aforementioned procedure results in composition of the independent state budget and municipal budgets as Articles 12, 13, 28 and 29 of the Law on Budgeting in a special manner regulate such issues as the state budget and municipal budgets revenues and the needs covered by appropriations from the state budget and municipal budgets. The independence of the state budget and municipal budgets is also confirmed by Articles 23 and 31 of the said law which establish that additional revenues accrued in the course of the execution of the state budget of the Republic of Lithuania, and the appropriations that have lost their purpose, and which were designated for additional state expenditures, shall be distributed by the Seimas upon the recommendation of the Government of the Republic of Lithuania. Additional revenues accrued in the course of the execution of municipal budgets and the appropriations that have lost their purpose remain at the disposition of municipal councils and are distributed upon decisions of institutions authorised by the said councils for additional municipal needs.

The representative of the party concerned pointed out that Paragraph 2 of Article 1 of the Law on Budgeting provides that appropriations received by municipalities from the state budget and used not according to the established purpose or unused at all must be returned to the state budget. The Seimas may allocate appropriations designated for a specific purpose from the independent state budget to municipalities for fulfilment of certain programmes. As such appropriations are allocated from the independent state budget, therefore, the Seimas also establishes the conditions upon which municipalities are entitled to use the said state budget appropriations. This legal provision requires that municipalities return the approved state budget appropriations to the state budget upon certain conditions, however, it does not require that the appropriations approved for municipal budgets under common procedure be returned. In the opinion of the representative of the party concerned, such a provision of the law does not violate the independence of municipal budgets. Therefore, on 21 October 1997, the Seimas adopted the Law on an Amendment to the 1997 State Budget and Municipal Budgets. Article 6 thereof, taking account of Paragraph 2 of Article 1 and Article 32 of the Law on Budgeting, provided that unused appropriations of 1996 to finance capital investments (the estimate value of which exceeds 5000 thousand litas) and environment protection objects shall be returned from municipal budgets to the state budget to the extent that the factual revenues of 1997 of these municipal budgets are larger than the revenues established on the approval of deduction rates to municipal budgets.

The representative of the party concerned is of the opinion that Article 6 of the Law on an Amendment to the 1997 State Budget and Municipal Budgets is in compliance with Paragraph 1 of Article 127 of the Constitution.

IV

In the course of the preparation of the case for the Constitutional Court hearing, written explanations concerning the arguments of the petitioner were submitted by L. Sabutis, Head of the Seimas Public Administration and Municipalities Committee, J. Rudalevičius, Minister of Administration Reforms and Municipal Affairs of the Republic of Lithuania, G. Švedas, Vice-Minister of Justice, and S. Šiupšinskas, Director of the Association of Municipalities of Lithuania.

The Constitutional Court

holds that:

1. On 21 October 1997, the Seimas adopted the Republic of Lithuania’s Law on an Amendment to the 1997 State Budget and Municipal Budgets. Article 6 of the Law provides: “Unused appropriations of 1996 to finance capital investments (the estimate value of which exceeds 5000 thousand litas) and environment protection objects shall be returned from municipal budgets to the state budget to the extent that the factual revenues of 1997 of these municipal budgets are larger than the revenues established on the approval of deduction rates to municipal budgets.”

Taking account of the petition of the petitioner, the Constitutional Court will investigate the compliance of the provision of Article 6 of the Law that unused appropriations of 1996 to finance environment protection objects shall be returned from municipal budgets to the state budget to the extent that the factual revenues of 1997 of these municipal budgets are larger than the revenues established on the approval of deduction rates to municipal budgets with the Constitution.

2. Paragraph 1 of Article 127 of the Constitution provides: “The budgetary system of the Republic of Lithuania shall consist of the independent State Budget of the Republic of Lithuania and the independent municipal budgets.”

Under Paragraph 1 of Article 127 of the Constitution, municipal budgets are independent and at the same time they are a part of the indivisible budgetary system of Lithuania. Systematic interpretation of this provision, while taking into consideration the other provisions of Article 127 as well as those of Articles 121 and 131 of the Constitution, makes it possible to state that municipalities, in accordance with the Constitution and laws, independently dispose of appropriations provided for by law.

3. Municipal budgets accrue funds to finance social, economic and other needs, to maintain municipal institutions. Municipal budgets may also provide for appropriations for capital investments, environment protection objects, and other programmes having specific purposes.

4. It is established in the impugned provision of Article 6 of the Law that: unused appropriations of 1996 to finance environment protection objects must be returned from municipal budgets to the state budget; the said appropriations must be returned from the 1997 municipal budgets; the said unused appropriations must be returned to the state budget to the extent that the factual revenues of 1997 of these municipal budgets are larger than the revenues established on the approval of deduction rates to municipal budgets.

5. The consideration of the legal regulation established in Article 6 should be based on the fact that Annex 5 of the Law “On the Republic of Lithuania’s 1996 State Budget and the Deduction Rates and Subsidies to Municipal Budgets” of 7 December 1995 established concrete appropriations to particular municipalities for financing certain environment protection objects. Besides, Article 3 of the said law established that remaining appropriations unused for their purpose had to be returned to the state budget. Thus, the appropriations established in the said law had to be used according to their purpose only.

The Constitutional Court notes that the provision of Paragraph 1 of Article 127 of the Constitution that municipal budgets are independent does not mean that appropriations for financing environment protection objects, established in laws, may be used not according to their purpose, or that the remaining appropriations unused according to their purpose may not be returned to the state budget. Thus, the requirement of Article 6 to return the unused appropriations designated for financing environment protection objects from municipal budgets to the state budget in itself does not deny the principle of independence of municipal budgets established in the Constitution.

6. Article 6 contains a wording “unused appropriations”. The content of this wording is not disclosed in the Law. Finance law of Lithuania defines appropriations as an amount of money established in the Law on the Establishment of the Financial Indicators of the State Budget and Municipal Budgets. The holder of appropriations has the right to receive such appropriations from the funds accrued in the budget. The Constitutional Court notes that the wording “unused appropriations <...> for financing environment protection objects” should be construed as including the appropriations which had been received to finance environment protection objects but used for other purposes and also appropriations which had been received but were not used at all.

7. As mentioned before, under Article 6 of the Law, the unused 1996 appropriations for financing environment protection objects must be returned to the state budget from the funds of the municipal budgets of 1997. The reason of this obligation of municipalities is that in the course of the execution of the 1996 budget the appropriations provided for in municipal budgets for financing environment protection objects were not used according to their purpose. Therefore, the legal relations regulated by Article 6 of the Law occur provided, in 1996, the municipalities did not use the appropriations for financing environment protection objects and did not fulfil the obligation established in Article 3 of the Law “On the Republic of Lithuania’s 1996 State Budget and the Deduction Rates and Subsidies to Municipal Budgets” to return the unused appropriations to the state budget. Thus, it may be concluded that the impugned legal regulation that provides that the unused appropriations of 1996 shall be returned from the municipal budgets funds of 1997 does not deny the independence of municipal budgets established in the Constitution.

8. Under Article 6 of the Law, the unused appropriations of 1996 for financing environment protection objects shall be returned from municipal budgets to the state budget only to the extent that the factual revenues of 1997 of these municipal budgets are larger than the revenues established on the approval of deduction rates from municipal budgets. The regulation establishes the size of the appropriations that must be returned. Such establishment of the size of the unused appropriations which must be returned does not deny the independence of municipal budgets.

9. The impugned legal regulation established in Article 6 of the Law does not create any new obligations to municipalities, but gives more concrete expression of the legal regulation established in the Law “On the Republic of Lithuania’s 1996 State Budget and the Deduction Rates and Subsidies to Municipal Budgets” of 7 December 199,5 i.e., it points out the size of amounts, as well as concrete finances from which the said amounts must be taken, that must be returned to the state budget in order to fulfil the obligation established in Article 3 of the said law of 7 December 1995.

Taking into consideration the above-mentioned arguments, it should be concluded that the provision of Article 6 of Republic of Lithuania’s Law on an Amendment to the 1997 State Budget and Municipal Budgets adopted on 21 October 1997 that unused appropriations of 1996 to finance environment protection objects shall be returned from municipal budgets to the state budget to the extent that the factual revenues of 1997 of these municipal budgets are larger than the revenues established on the approval of deduction rates to municipal budgets is in compliance with Paragraph 1 of Article 127 of the Constitution.

Conforming to Article 102 of the Constitution of the Republic of Lithuania and Articles 53, 54 and 56 of the Law on the Constitutional Court of the Republic of Lithuania, the Constitutional Court of the Republic of Lithuania gives the following

ruling:

To recognise that the provision of Article 6 of the Republic of Lithuania’s Law on an Amendment to the 1997 State Budget and Municipal Budgets that unused appropriations of 1996 to finance environment protection objects shall be returned from municipal budgets to the state budget to the extent that the factual revenues of 1997 of these municipal budgets are larger than the revenues established on the approval of deduction rates to municipal budgets is in compliance with the Constitution of the Republic of Lithuania.

This ruling of the Constitutional Court is final and not subject to appeal.

The ruling is pronounced in the name of the Republic of Lithuania.

Justices of the Constitutional Court:

 

Egidijus Jarašiūnas      Egidijus Kūris      Zigmas Levickis

 

Augustinas Normantas      Vladas Pavilonis       Jonas Prapiestis

 

Vytautas Sinkevičius      Teodora Staugaitienė