Preserving Local Budgets: Concerns Raised by the Association of Ukrainian Cities

The Association of Ukrainian Cities (AUC) emphasizes the necessity of maintaining 64% of the personal income tax (PIT) in local budgets and the funds from reverse subsidies.

According to the AUC, this stance was articulated in light of the Cabinet of Ministers' submission of the State Budget draft for 2026 to the second reading, which, as noted by AUC representatives, overlooks the orders of the Verkhovna Rada and the needs of local self-governance.

The resolution of the Parliament dated October 22, 2025, clearly stated that 64% of the PIT should remain in the budgets of territorial communities. However, this provision was not reflected in the updated version of the state budget.

The AUC stresses that the removal of reverse subsidies could negatively impact the financial stability of rural and settlement communities. Therefore, the association demands that these funds be preserved locally.

Particular attention is drawn to the issue of educational subsidies. Local self-government representatives argue that all accumulated reserves should remain within the communities to meet their educational needs. Meanwhile, the 2026 state budget draft did not allocate 103.2 billion UAH in educational subsidies among communities, withdrew 150 million UAH for the "New Ukrainian School" program, and increased the funding for the "Raising the Prestige of Work in Education" program from 53.8 to 59.8 billion UAH.

Furthermore, the draft retains a provision allowing the state to manage the leftover funds of communities located in temporarily occupied territories. However, the AUC insists that these funds should be used by municipalities—local councils or military administrations—for housing construction for residents of those communities.

Before the second reading, the government proposed an additional subsidy of 13 billion UAH for 992 communities affected by the war, while maintaining all other inter-budget transfers agreed upon with the Association of Ukrainian Cities during the first reading.

According to the updated document, 982 communities will receive a basic subsidy in 2026 amounting to 23.3 billion UAH. Additionally, 203 communities will pay reverse subsidies totaling 15.5 billion UAH.

The AUC emphasizes that balanced financing of local self-government is the key to community development and the country's recovery amidst wartime conditions.

Recall that on October 22, 2025, the Verkhovna Rada of Ukraine approved in the first reading the draft law "On the State Budget of Ukraine for 2026", registered No. 14000, which instructed the Government of Ukraine to consider including 64% of PIT in local budget revenues as proposed by the Association of Ukrainian Cities.