Public Finance: Revenue, Spending, and Debt

• Public finance encompasses processes related to collecting and allocating public funds, as described in Article 3 of the Public Finance Act of August 27, 2009.
• The collection of public revenues and income is part of public finance.
• The spending of public funds is included in public finance.
• Financing the borrowing needs of the state budget falls under public finance.
• Incurring liabilities that involve public funds is included in public finance.
• The management of public funds is a component of public finance.
• Public debt management is part of public finance.
• Settlements with the European Union budget are included in public finance.

Entities Forming the Public Finance Sector

• Public authorities, including government administration, state control and legal protection bodies, courts, and tribunals.
• Social Insurance Institution (ZUS) and Agricultural Social Insurance Fund (KRUS), including their managed funds.
• Local government units and their associations.
• National Health Fund (NFZ).
• Budget units.
• Independent public healthcare facilities.
• Budgetary establishments.
• Public universities.
• State-run economic institutions.
• Polish Academy of Sciences and its organizational units.
• Executive agencies.
• State and local government cultural and film institutions.
• State special purpose funds.
• Other state or local government legal entities established under separate laws to perform public tasks, excluding enterprises, research institutes, banks, and commercial law companies.

Basic Organizational and Legal Forms for Performing Public Tasks

• Budget unit (state or local government): Provides services free of charge or partially free, transfers collected revenues to the budget, and finances its expenditures from the budget, examples include the Chancellery of the Sejm and municipal offices.
• Local government budgetary establishment: Performs tasks for payment, covering the costs of operations from its own revenues; able to perform certain public tasks, such as water supply, sewage, waste management, and sports facilities.
• Executive agency: Performs state tasks for payment, covering its costs from revenues; example of this is the Governmental Strategic Reserves Agency.
• Budget management institution: Performs certain state tasks for payment, covering operating costs and liabilities from revenues; example of this is the Center for Service of the Chancellery of the President.
• State special-purpose fund: Operates a bank account managed by a designated minister, its revenues come from public funds, and costs cover specific state tasks; the Labor Fund is an example.
• State legal entity: Performs specific state tasks for payment, covering its costs from revenues; the Office of the Committee for Financial Supervision is an example.

State Budget

• The state budget is a plan that forms the basis for managing the state's finances, including a detailed list of the income and expenses, revenue and expenditure of authorities, and government administration.
• The state budget must be approved annually by the Sejm in the form of a budget act, according to Article 110 of the Act of August 27, 2009, on Public Finances and Article 219 of the Constitution of the Republic of Poland of April 2, 1997.
• The Minister of Finance establishes spending limits by May 15.
• Spending limits are distributed by the administrators of the budget.
• The Minister of Finance verifies received spending plans.
• The Minister of Finance develops the budget and includes income and expenses.
• The Chancellery of the Sejm, Senate, etc also contribute to the budget.
• The draft budget is submitted to the Council of Ministers.
• Potential changes to the budget are proposed by the Council of Ministers in the form of a resolution.
• The draft budget is submitted to the Sejm.
• The first reading of the budget takes place in the Sejm.
• The Public Finance Committee contributes to the budget.
• The final version of the budget bill is read.
• The second reading of the budget including amendment corrections occurs in the Sejm.
• The third reading is in the additional report from the Public Finance Committee.
• The budget is voted on.
• The approved resolution is sent to the Sejm and the President.
• The resolution is signed by the president.

Public Funds

• Public funds consist of public revenues and income.
• Public funds consist of public expenditures and expenses.

Functions of the State Budget

• Fiscal Function
• Economic Function
• Allocation
• Redistribution
• Stabilization
• Control Function
• Credit Function
• Political Function
• Systemic
• Democratic
• Legal

Technical and Budget Principles

• Equilibrium
• Completeness and universality
• Budget dualism
• Unity
• Transparency
• Clarity
• Economy
• Reality
• Detail
• Annuality
• Operationality in the subject arrangement
• Priority

Budget Revenues

Revenues

• Taxes
• Non tax revenues
• Revenues from privatization
• Foreign income

Expenditures

• Cost of subsidies
• Public debt service
• Budget sector service
• Subsidies to municipalities

Budget Income

• VAT Tax
• Excise tax
• Gaming tax
• PIT
• CIT
• Fees
• Duties
• Payments from NBP profit
• Fines, penalties and mandates
• Dividends
• Remaining

Budget borrowing Pożyczki Kredyty bankowe Lokaty instytucji finansowych

Expenditure Criterion

Expenditure examples:

• Defense
• Education
• Administration
• Health Care
• Judiciary
• Social Security
• Infrastructure
• Agriculture
• Environment
• Other

Expenditure type Criterion

Expenditure examples:

• Subsidies to companies

• National debt service

• Grants to communal entities

• Social Insurance

• Subsidies for municipalities

• EU funds

• Service of foreign debt

• Investments

Allocation of 100 PLN in the State Budget

The following allocations can be made as of the given date in 2024:

• Social insurance: 16 zł

• General subsidies for local government units (JST): 14.9 zł

• National defense: 10.7 zł

• "Family 500+" program: 7.5 zł

• Servicing the State Treasury debt: 6.6 zł

• Contribution to the European Union: 5.2 zł

• Science and higher education: 5.2 zł

• Public safety and fire protection: 4.5 zł

• Justice: 3.3 zł

• Transport and communications: 2.9 zł

• Healthcare: 2.6 zł

• Agriculture: 2 zł

• Co-financing projects with EU funds: 1.6 zł

• Remaining tasks: 16.9 zł

• The budget deficit and surplus of the government and local government institutions was -184,000 in 2024.

• In 2024, from January to September the draft state budget was: revenue - 460.196.2 million zl, expenditure - 567.481.0 million zl, and deficit - 107.284.8 million zl.

Deficit and Debt in the EU

• Several EU countries, including Italy (-7.4%), Hungary (-6.7%), Romania (-6.6%), France (-5.5%), Poland (-5.1%), Slovakia (-4.9%), and Belgium (-4.4%), are subject to the excessive deficit procedure.
• The excessive deficit procedure is meant to ensure that member countries sustain a high level of budget discpline.
• EU member states must limit their deficit at 3% of the GDP and their debt to 60% of the GDP.
• The draft budget bill for 2025 was adopted by the Council of Ministers on September 28, 2024, and submitted to the Sejm of the Republic of Poland. Priorities:
• Assistance to flood victims is a priority of the government.
• Funds for preventing and eliminating the effects of natural disasters increased to 3.191 billion zł.
• The 2025 budget secures funds to support citizens, their safety, and Poland’s economic development but it also provides solutions for long term development related to demography.
• The Council of Ministers adopted amendments to the 2025 budget bill on September 28, 2024.
• Revenues are expected to increase by 230 million zl reaching 632.8482 billion zl.
• Total expenditures will remain the same at 921.6182 billion zł.
• The budget deficit will be lower by 230 million zł amounting to 288.770 million zł.

Assumptions for 2025 (May 2024)

Key economic indicators forecast:

• GDP growth: 3.7%
• Average annual inflation: 4.1%
• Average gross wage: 8,579
• Registered unemployment rate (end of period): 4.9%
• USD/PLN exchange rate: 4.02
• EUR/PLN exchange rate: 4.34

State Budget

• For 2025, 90.2% is tax revenue, 9.2% is non-tax revenue, and 0.7% is from EU funds.

• For 2024, 88.8% is tax revenue, 10.6% is non-tax revenue, and 0.6% is from EU funds.

• Of the 2025 tax revenue, 61.24% is from the tax on goods and services; 17.19% is from tax revenue from individuals.

• Of the 2023 tax revenue, 52.5% is from the tax on goods and services; 16.2 is from tax revenue.

• Public debt includes obligations of the public finance sector resulting from the issued securities.

• The debt of the government to the public sector in 2024 is 58.4.

Taxes

• Are mandatory, non-cash payments collected by the state or a local government unit.
• Lacking a direct reciprocal service.
• Features
• Mandatory
• Unpaid
• Irrevocable
• General