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Content updated: 17-11-2020 11:06

The laws governing the financing of programmes and funds must not set a specific amount of state budget funds allocated to them

03-11-2020

By today’s ruling, the Constitutional Court has declared the following to be in compliance with the Constitution:

– Article 3 (as amended on 13 June 2019), Paragraphs 1, 2, 5, 6, 7, and 8 of Article 9 (as amended on 23 June 2020) and Paragraph 2 of Article 10 of the Law on the Financing of the Road Maintenance and Development Programme;

– Items 1–7, 9–13 of Article 3 (as amended on 11 September 2018) and Paragraph 1 of Article 4 of the Law on the Environmental Protection Support Programme;

– Paragraphs 2 and 3 of Article 34 (wording of 23 June 2015) of the Law on Waste Management;

– Paragraph 2 and Paragraph 3 (wording of 30 June 2018) of Article 10 of the Law on Financial Instruments for Climate Change Management;

– Paragraph 1 (wording of 30 June 2018) of Article 4 of the Law on the Cultural Support Fund;

– the provision “The funds earmarked for the administration of the Sport Support Fund must not exceed 4 per cent of the annual budget of the Sport Support Fund” of Paragraph 2 of Article 17 (wording of 12 December 2019) of the Law on Sport, and the provision “At least 10 per cent of the funds referred to in Paragraph 2 of Article 16 of this Law shall be allocated to projects for promoting the development of sport for persons with disabilities” of Paragraph 3 of the same article;

– the provision “In the context of planning each year the state budget appropriations for the implementation of sport projects, the Ministry of Education, Science and Sport shall receive funds in the amount specified in Paragraph 2 of Article 16 of this Law” of Paragraph 3 of Article 17 (wording of 12 December 2019) of the Law on Sport;

– Paragraph 5 (wording of 8 May 2014) of Article 15 of the Law on the Lithuanian National Radio and Television (hereinafter referred to as the Law on the LRT).

The Constitutional Court has declared the following to be in conflict with the provision of Item 14 of Article 67 of the Constitution that the Seimas approves the state budget, the provision of Item 4 of Article 94 thereof that the Government prepares a draft state budget, Article 129 thereof, the provision of Article 130 thereof that the Government prepares a draft state budget, the provision of Paragraph 1 of Article 131 thereof that the draft state budget is considered by the Seimas and is approved by law, and the provision of Paragraph 2 of the same article that the expenditure established by means of laws may not be reduced as long as these laws are not altered:

– Paragraph 1 of Article 4 and Paragraph 3 (wording of 16 May 2019, which came into force on 1 January 2020) of Article 9 of the Law on the Financing of the Road Maintenance and Development Programme;

– Item 8 (wording of 11 September 2018) of Article 3 of the Law on the Environmental Protection Support Programme;

– Item 1 of Paragraph 1 of Article 10 (wording of 13 November 2014) and Item 1 (wording of 25 June 2020) of Paragraph 1 of Article 12 of the Law on Pollution Tax;

– the provision “These deductions shall be included in the state budget revenue and used to finance general forestry needs and nature management measures in forests” of Paragraph 2 (wording of 10 December 2019) of Article 7 of the Law on Forestry, insofar as, according to that provision, state budget revenue from mandatory deductions from the income of forest managers for the sale of raw timber and uncut forest may be used only for general forestry needs and forest management measures in forests;

– Item 1 of Paragraph 1 of Article 3 of the Law on the Cultural Support Fund (wording of 18 September 2012), insofar as that item sets a specific (3 per cent) amount of excise revenue received for sold alcoholic beverages and manufactured tobacco, where the said amount constitutes the funds of the Cultural Support Fund; Item 2 of Paragraph 1 of Article 3 of the same law, insofar as that item sets a specific (10 per cent) amount of the preceding year’s actual income received from the tax on lotteries and games of chance, where the said amount constitutes the funds of the Cultural Support Fund; Item 1 of Paragraph 2 of Article 3 of the same law, insofar as that item sets a specific (3 per cent) amount of the preceding year’s actual income from excise revenue received from sales of alcoholic beverages and manufactured tobacco, which is envisaged for the Cultural Support Fund in the context of the planning of state budget appropriations for each year; Item 2 of Paragraph 2 of Article 3 of the same law, insofar as that item sets a specific (10 per cent) amount of the preceding year’s actual income received from the tax on lotteries and games of chance, which is envisaged for the Cultural Support Fund in the context of the planning of state budget appropriations for each year;

– Paragraph 2 of Article 16 of the Law on Sport (wording of 18 October 2018), insofar as that paragraph sets out specific (2, 2.5, or 3 per cent) amounts of funds (revenue) received from the preceding year’s actual excise income from sales of alcoholic beverages and manufactured tobacco and a specific amount of a part (10 per cent) of the tax on lotteries and games of chance, which are allocated in the context of the planning of state budget appropriations for the implementation of sport projects for each year.

The Constitutional Court has declared the following to be in conflict with Article 129 of the Constitution and the provision of Paragraph 2 of Article 131 thereof that the expenditure established by means of laws may not be reduced as long as these laws are not altered:

– Paragraph 2 of Article 4 of the Law on the Environmental Protection Support Programme;

– Item 3 of Paragraph 4 (wording of 30 June 2018) of Article 10 of the Law on Financial Instruments for Climate Change Management;

– Article 5 (as amended on 21 October 2014) of the Law on the Cultural Support Fund (wording of 18 September 2012), insofar as that article prohibits the transfer of the funds of the Cultural Support Fund to the state budget and insofar as the funds of that fund that have not been used during the calendar year remain on its account and are used in the following year;

– the provision “Funds of the Sports Support Fund must not be transferred to the state budget or used to finance other state needs, and the funds that are not used during the year are used to finance sports projects planned for the following year” of Paragraph 2 of Article 17 (wording of 12 December 2019) of the Law on Sport, insofar as that provision prohibits the transfer of the funds of the Sports Support Fund to the state budget, and the funds not used during the year are used to finance sports projects planned for the following year.

In this constitutional justice case, subsequent to a petition of the Government, the petitioner, the Constitutional Court examined the constitutionality of the provisions of the impugned laws currently in force in such aspects as:

– they determine the sources (funds) (constituting state budget revenue) and their amounts for financing programmes, funds, and the Lithuanian National Radio and Television (hereinafter referred to as the LRT);

– they identify the needs for which the sources (funds) (constituting state budget revenue), among others, in the amounts specified, are used for financing programmes and funds;

– they prohibit the use of sources (funds) (constituting state budget revenue) for financing programmes and funds for purposes other than those laid down in the impugned laws;

– according to them, the funds (constituting state budget revenue) of programmes and funds unused during the budget year are not returned to the state budget.

The petitioner maintains that the legal regulation laid down in the impugned provisions of the laws is to be assessed as establishing expenditure for performing the continuing functions of the state or financing the daily needs of society. Therefore, according to the petitioner, such a legal regulation does not comply with the constitutional concept of the laws, which are specified in Paragraph 2 of Article 131 of the Constitution, providing for certain expenditure and also creates the preconditions for negating the constitutional concept of a budget year, as well as a budget year’s duration, which is enshrined in Article 129 of the Constitution. In addition, in the opinion of the petitioner, the impugned legal regulation restricts the Government’s power, laid down in Item 4 of Article 94 and Article 131 of the Constitution, to prepare a draft state budget and the Seimas’ power, laid down in Item 14 of Article 67 and Paragraph 1 of Article 131 of the Constitution, to approve the state budget when taking into account the existing socio-economic situation, the needs and capacities of society and the state, the available and estimated financial resources, the obligations of the state, and other important factors; at the same time, Paragraph 2 of Article 5 of the Constitution and the constitutional principle of a state under the rule of law are thus violated.

The provisions of the Constitution and the official constitutional doctrine

The constitutional provisions relating to the state budget process and the official constitutional doctrine interpreting those provisions were the most significant in assessing the compliance of the impugned legal regulation with the Constitution.

The Constitutional Court noted that the constitutional principle of a state under the rule of law is related to the constitutional principle of the separation of powers, which is consolidated, among others, in Paragraph 2 of Article 5 of the Constitution, which provides that the scope of power is limited by the Constitution. According to the Constitution, the Seimas must not establish such a legal regulation that would restrict or deny the Government’s power, which is laid down in the Constitution, to prepare a draft state budget; the denial or restriction by law of the Government’s power, which is laid down in the Constitution, to prepare a draft state budget would violate the constitutional principle of the separation of powers, and thus Article 5 of the Constitution.

The Seimas’ power, which is entrenched in Item 14 of Article 67 of the Constitution, to approve a draft state budget is specified in Paragraph 1 of Article 131 of the Constitution; the Government’s power, which is entrenched in Item 4 of Article 94 of the Constitution, to prepare a draft state budget and submit it to the Seimas is specified in Article 130 of the Constitution. When a draft state budget is prepared and when the state budget is considered and approved, the Seimas, in exercising the said power, has a constitutional duty to take due account of the state functions enshrined in the Constitution, of the existing economic and social situation, of the needs and capacities of society and the state, of the available and estimated financial resources, of the international and other obligations of the state, as well as of other important factors.

In this ruling, the Constitutional Court has noted that, according to the Constitution, the Seimas, as the representation of the People, when performing the classical (legislative and budgetary) functions of the parliament of a democratic state under the rule of law, may establish priorities of state policy in various spheres of life and ways of their implementation, among other things, the sources of state funds necessary for the implementation of the said priorities and the needs financed by those sources. Taking into account the parliamentary republican form of government and the constitutional principle of the responsibility of the Government to the Seimas, the Government, as an executive authority ensuring the functioning of the state (when executing laws, preparing a draft state budget, and executing the state budget), must implement the priorities set by the Seimas for state policies in various spheres of life. This does not in itself invalidate the constitutional power of the Government to prepare a draft state budget. However, the laws establishing such priorities for state policy in various spheres of life and the ways of the implementation of the said priorities must be compatible with the constitutional concept of the state budget and the requirements arising from it.

The Constitutional Court has noted that, from the constitutional concept of the state budget and, specifically, from the provision of Article 129 of the Constitution that the budget year begins on 1 January and ends on 31 December, it follows that laws providing for certain expenditure must not establish such a legal regulation that would deny the constitutional right and duty of the Government to draw up the state budget for a relevant budget year and the constitutional right and duty of the Seimas to approve the state budget specifically for a relevant budget year.

The Constitutional Court has also noted that Paragraph 2 of Article 131 of the Constitution enshrines the concept of laws providing for certain expenditure: these are laws that create an obligation to ensure the succession of state budget relationships in various budget years, the continuity of financing in certain exceptional cases where addressing certain (special, long-term, strategic) societal and state needs requires more funds than can be allocated within one budgetary year. These laws must not provide for funds necessary for the performance of the continuing functions of the state or for funds necessary to finance the daily needs of society.

Of relevance to this constitutional justice case is also the prohibition, arising from the notion of the laws, which are entrenched in Paragraph 2 of Article 131 of the Constitution, providing for certain expenditure, where the said notion is interpreted together with a budget year’s concept, enshrined in Article 129 of the Constitution, on envisaging the use, in the state budget of the following year, of state budget funds unused in the preceding budget year for the performance of the continuing functions of the state (for financing the daily needs of society). Should this prohibition be disregarded, the constitutional concept of the budget year and the related constitutional right and duty of the Government to draw up the state budget for a relevant budget year and the constitutional right and duty of the Seimas to approve the state budget specifically for a relevant budget year would be denied.

The Constitutional Court stressed that the constitutional concept of the state budget and its process must be interpreted taking into account the constitutional concept of local self-government and the constitutional status of state authorities that must be independent of other state authorities. In this regard, the Constitutional Court noted that, according to the Constitution, among others, the imperatives, enshrined in Article 120 and Paragraph 1 of Article 121 thereof, to ensure the financing necessary for the full functioning of local self-government and the implementation of municipal functions, the legislature has a duty to establish such a legal regulation that provides for the adequate financing of municipal functions, among other things, by transferring certain taxes (part thereof) to the municipalities (taking into account the resources, as well as material and financial capacities, of the state and society) in proportion to the need for financing the functions performed by the municipalities. Therefore, such a model of state support to municipalities, under which a specific part established by law of state budget funds from state taxes would be allocated to financing municipal functions, does not in itself deny the constitutional power of the Government to prepare a draft state budget and the constitutional power of the Seimas to approve the state budget, even though the laws establishing such a model of state support for municipalities do not fall within the concept of laws providing for certain expenses, as entrenched in Paragraph 2 of Article 131 of the Constitution.

The Constitutional Court also noted that, taking into account the constitutional status of state authorities that must be independent of other state authorities, among others, of the Constitutional Court, courts, the Prosecution Service, the National Audit Office, under the Constitution, the legislature may establish their various financial independence guarantees, which ensure funding adequate for the scope of the functions performed by those authorities, preventing unjustified restrictions on their funding and, therefore, political pressure. Laws establishing such guarantees do not in themselves deny the constitutional power of the Government to prepare a draft state budget and the constitutional power of the Seimas to approve the state budget, although those laws do not fall within the concept of the laws, which are enshrined in Paragraph 2 of Article 131 of the Constitution, providing for certain expenditure.

The assessment of the impugned special laws governing the financing of programmes and funds

Taking into account the above-mentioned provisions of the Constitution and of the official constitutional doctrine, the legal regulation laid down in the impugned special laws governing the financing of programmes and funds, which determines the sources (constituting revenue of the state budget) of financing programmes and funds and the needs financed from those sources (without at the same time setting specific amounts of state budget funds for programmes and funds, where those amounts would be expressed as a percentage of a certain tax or of a compulsory payment) has been assessed by the Constitutional Court as setting out the necessary sources of state funds and the corresponding needs financed from those sources for implementing the state policy priorities – the development of the network of car roads, environmental protection, climate change management, waste management, forestry and the protection of forests, support for culture and art, as well as for sport – without preventing the Government from envisaging, and the Seimas from approving, a specific amount of those funds (whose receipt from those sources is estimated) allocated in the budget of each year to the implementation of those priorities (the needs related thereto). Such a legal regulation does not set a specific amount of expenditure for performing the continuing functions of the state (for the daily needs of society); therefore, it does not deny the constitutional right and duty of the Government to draw up the state budget for a relevant budget year and the constitutional right and duty of the Seimas to approve the state budget specifically for a relevant budget year.

These constitutional rights and duties of the Government and of the Seimas are also not denied by such a legal regulation under which the established distribution of funds among programmes and funds according to the most important priorities of the programmes and funds by envisaging a certain amount of funding from that programme or fund to be allocated to those priorities, rather than a specific amount of state budget funds allocated to the programme or fund as a whole.

On the basis of these criteria, those provisions of the Law on the Financing of the Road Maintenance and Development Programme, the Law on the Environmental Protection Support Programme, the Law on Waste Management, the Law on Financial Instruments for Climate Change Management, the Law on the Cultural Support Fund, and the Law on Sport that set out the respective sources of financing the programmes and funds and the needs financed from them (without determining their amounts), as well as the distribution of the funds of programmes and funds according to the most important priorities of the programmes and funds, were declared to be in compliance with the Constitution.

The Constitutional Court made a different assessment of the legal regulation laid down in the impugned laws on programmes and funds under which a specific amount of state budget funds from certain taxes (compulsory payments), expressed as a percentage (e.g. of excise revenue or income, pollution tax, tax on lotteries and games of chance), was set to finance the continuing functions of the state (the daily needs of society). Such a legal regulation disregards both the concept (entrenched in Paragraph 2 of Article 131 of the Constitution) of laws envisaging certain expenditure and the related prohibition on envisaging, by means of laws other than the law on the state budget, expenditure of a specific amount for performing the continuing functions of the state (for financing the daily needs of society). Since such a legal regulation deprives the Government of its right to envisage in each year’s draft state budget (and the Seimas of its right to approve in each year’s state budget) a different amount of planned state budget funds for the continuing functions of the state (the daily needs of society), this denies the Government’s constitutional right and duty, which arise from Article 129 of the Constitution, to draw up the state budget for a relevant budget year and the Seimas’ constitutional right and duty, which arise from Article 129 of the Constitution, to approve the state budget specifically for a relevant budget year, and this restricts the Government’s power, laid down in Item 4 of Article 94 and Article 130 of the Constitution, to prepare a draft state budget and the Seimas’ power, laid down in Item 14 of Article 67 and Paragraph 1 of Article 130 of the Constitution, to approve the state budget.

Based on these criteria, the Constitutional Court declared unconstitutional those provisions of the Law on the Financing of the Road Maintenance and Development Programme, the Law on the Environmental Protection Support Programme, the Law on Pollution Tax, the Law on Forestry, the Law on the Cultural Support Fund, and the Law on Sport under which a specific amount of state budget funds from certain taxes (compulsory payments) was set for financing the relevant programmes and funds (the daily needs of society).

Those provisions of the Law on the Environmental Protection Support Programme, the Law on Financial Instruments for Climate Change Management, the Law on the Cultural Support Fund, and the Law on Sport under which the respective funds of a programme or fund could not be transferred to the state budget, and the funds not used during a budget year were to be used for the relevant needs (measures or projects) of the programme or fund were also found unconstitutional. Such a legal regulation was assessed as being in breach of the prohibition, arising from Article 129 and Paragraph 2 of Article 131 of the Constitution, on envisaging the use, in the state budget of the following year, state budget funds unused in the preceding budget year for performing the continuing functions of the state (for financing the daily needs of society).

The assessment of the compliance of Paragraph 5 of Article 15 of the Law on the LRT with the Constitution

Assessing the constitutionality of Paragraph 5 of Article 15 of the Law on the LRT, which establishes the financing of the LRT by providing for a specific amount of state budget appropriations allocated to the LRT (1.5 per cent of personal income tax and 1.3 per cent of excise revenue), the Constitutional Court noted that, under Item 14 of Article 67, Item 4 of Article 94, Article 130, and Paragraph 1 of Article 131 of the Constitution, the Government, when preparing a draft state budget, and the Seimas, when approving the state budget, must take into account the constitutional status of the national public broadcaster; when preparing, considering, and approving the draft state budget, insofar as it is related to the allocation of state budget funds to the national public broadcaster, the Seimas and the Government must pay regard not exclusively to requirements, arising from the constitutional concept of the laws, which are specified in Paragraph 2 of Article 131 of the Constitution, providing for certain expenditure.

The Constitutional Court stressed in this ruling that the legislature, implementing its discretion to choose the financing model of the national public broadcaster, is bound by the imperative of the national public broadcaster’s independence, which is implied by its mission, arising from the Constitution, among others, Article 25 thereof. Whatever financing model of the national public broadcaster is chosen, adequate financing of the national public broadcaster must be ensured, so as to enable the national public broadcaster to fulfil its constitutional mission effectively.

In view of this, the Constitutional Court noted that, according to the Constitution, the legislature, having established such a model of the financing of the national public broadcaster under which the main source of the financing of the national public broadcaster is state budget funds, by prohibiting the national public broadcaster from receiving funds for broadcast advertising and without providing for other significant sources of funding (among others, special levies), must ensure that, when planning and approving the state budget appropriations for the fulfilment of the national public service broadcaster’s constitutional mission, the national public service broadcaster is not subjected to political pressure as a result of its activities, including its broadcasts and programmes. Otherwise, if the only significant source of financing the national public broadcaster were state budget funds and the Government, when preparing a draft state budget, and the Seimas, when approving the state budget, had wide discretion to decide on the amounts of state budget appropriations allocated to the national public broadcaster, the preconditions for violating the institutional and editorial independence of the national public broadcaster, thus also the interest of the public in being informed, which is enshrined in and protected and defended under the Constitution, as well as other constitutional values, for the implementation, promotion and protection of which the institution of the national public broadcaster is intended, would be created.

The Constitutional Court has assessed the legal regulation entrenched in Paragraph 5 of Article 15 of the Law on the LRT as laying down such a model of the financing of the national public broadcaster under which, having established that the main source of the financing of the national public broadcaster is state budget funds, it is ensured that, when planning and approving the state budget appropriations for the fulfilment of the national public service broadcaster’s constitutional mission, the national public service broadcaster is not subjected to political pressure as a result of its activities. The Constitutional Court stressed that such a legal regulation creates the preconditions for protecting the institutional and editorial independence of the national public broadcaster, thus also the interest of the public in being informed, which is enshrined in and protected and defended under the Constitution, as well as other constitutional values, for the implementation, promotion and protection of which the institution of the national public broadcaster is intended. Thus, although the LRT is allocated state budget appropriations to finance ordinary (daily) needs for public information purposes, such a legal regulation also has not denied the constitutional power of the Government to prepare a draft state budget and the constitutional power of the Seimas to approve the state budget, nor has it denied the respective duty of the Government and of the Seimas, when considering and approving the state budget, to take due account of the state functions enshrined in the Constitution, of the current economic and social situation, of the needs and capacities of society and the state, of the available and estimated financial resources, of the obligations of the state, and of other important factors.

Consequently, by the legal regulation laid down in Paragraph 5 of Article 15 of the Law on the LRT, the legislature implemented the imperative of the national public broadcaster’s independence, which is implied by its mission, arising from the Constitution, among others, Article 25 thereof, i.e. the requirements, stemming from the said imperative, for financing the national public broadcaster. In view of this, there are no grounds to state that the legal regulation laid down in Paragraph 5 of Article 15 of the Law on the LRT disregards the constitutional concept of the laws, which are specified in Paragraph 2 of Article 131 of the Constitution, providing for certain expenditure, restricts the Government’s power, laid down in Item 4 of Article 94 and Article 130 of the Constitution, to prepare a draft budget and the Seimas’ power, laid down in Item 14 of Article 67 and Paragraph 1 of Article 131 of the Constitution, to approve the state budget, or violates Paragraph 2 of Article 5 of the Constitution and the constitutional principle of a state under the rule of law.