Financial Stability of Local Budgets: The Position of the Association of Ukrainian Cities
The Association of Ukrainian Cities (AUC) emphasizes the importance of retaining 64% of personal income tax (PIT) in local budgets and reverse subsidies.
This information was released by the AUC.
The organization expressed this position in connection with the Cabinet of Ministers of Ukraine submitting the draft State Budget for 2026 to the second reading, which, according to AUC representatives, ignored the directives of the Verkhovna Rada and the needs of local self-government.
The resolution of the parliament dated October 22, 2025, clearly stated that 64% of PIT should remain in the budgets of local communities. However, this norm was not taken into account in the updated version of the state budget.
The AUC emphasizes that the removal of reverse subsidies will negatively affect the financial stability of rural and village communities. Therefore, the association demands that these funds be retained at the local level.
The organization also draws attention to the issue of educational subsidies. In the opinion of local self-government representatives, all accumulated balances should remain in communities to cover their educational needs. At the same time, in the draft state budget-2026, the government did not allocate 103.2 billion UAH of educational subsidies among communities, withdrew 150 million UAH for the "New Ukrainian School" program, and increased funding for the "Enhancing the Prestige of Work in Education" program from 53.8 to 59.8 billion UAH.
Additionally, the draft retains the norm whereby the balances of funds from communities located in temporarily occupied territories are managed by the state. However, the AUC insists that these funds should be used by municipalities - local councils or military administrations - specifically for building housing for residents of such communities.
For the second reading, the government provided for an additional subsidy of 13 billion UAH for 992 communities affected by the war, as well as retained all other inter-budget transfers agreed with the Association of Ukrainian Cities in the first reading.
According to the updated document, 982 communities will receive a basic subsidy in 2026 amounting to 23.3 billion UAH. Reverse subsidies are to be paid by 203 communities, including 130 rural and village ones, totaling 15.5 billion UAH.
The AUC stresses that balanced funding for local self-government is key to the development of communities and the recovery of the country during the war.
Recall that on October 22, 2025, the Verkhovna Rada of Ukraine approved in the first reading the draft Law of Ukraine "On the State Budget of Ukraine for 2026", registry No. 14000, which instructed the Government of Ukraine to take into account in the project 64% of PIT as part of the revenues of local budgets, as proposed by the Association of Ukrainian Cities.
