The Georgian Government undertook to fund the municipality of Tbilisi’s social security and medical insurance programmes by decrees #432, #433, #434 on October 19, 2012. These were signed into law  by the then acting prime minister Vano Merabishvili in direct violation of Article 40 of the Budget Code, which requires that:  

• changes to the budget be reflected in the budget law;
• mid-term macroeconomic and fiscal forecasts be attached to draft amendments. A fresh commitment by the central government of GEL 100 million in 2012-2013 clearly required a justification;
• Parliament provides the Government with an assessment of the changes to the law within 7 days from submission of the bill;
• the Government submits the revised bill to the Parliament no later than 5 days from receipt of the bill;
• Parliament examines the proposed amendments to the bill in accordance with the Law on the State Budget no later than 5 days from submission of the revised bill by the Government.

On October 20, 2012 the Tbilisi legislature redistributed the funds that it had previously allocated to the social security and medical insurance programmes across other municipal programmes.

The then government of Georgia failed to comply with due procedure. A line item reshuffle within a given programme is the only change to the state budget that can be made without amending the budget law. If the government had intended to free up these resources through a line item reshuffle, it should have indicated thus in its acts dated October 19, 2012, which they did not. The government, therefore, did not intend to fund this new commitment through a line item reshuffle. Shifting this commitment of about GEL 100 million in 2012-2013 (social security of GEL 13.3 million, public transit discounts of GEL 50 million, municipal insurance of GEL 15.3 million) from Tbilisi budget to the central budget freed up about GEL 100 million in 2012-2013 Tbilisi budget.

When a spending institution needs to increase its expenditures it has to justify the increase. The Tbilisi government divested itself of a commitment of approximately GEL 21.9 million and GEL 78.6 million in 2012 and 2013 respectively without offering any explanation for such a change. This and the subsequent redistribution of the freed-up funds across other municipal programmes by the Tbilisi legislature effectively increased the Tbilisi budget, while neither Tbilisi nor the central government complied with due procedure.

This serious lack of compliance renders budgeting unpredictable. Shifting responsibility to a different level of government to later redistribute the freed-up resource is effectively an increase in funding and should be presented as such rather than something else. Such fiscal manoeuvring is not permitted under the Georgian budgetary legislation. Further, this breach has jeopardized municipal health care and social security programmes. The former decreased by GEL 4 million from GEL 30.1 million to GEL 26.1 million, while the budget of the latter decreased by GEL 10.9 million (from GEL 55.1 million to GEL 44.2 million). The health care programmes included funding for ambulances, malignant tumours, eye diseases and related surgeries and drug replacement therapy, while the social security programmes provided assistance to poor families, public transit discounts, supported a day centre for single elderly people and veterans of the second world war.

On October 31, 2012 the Georgian government repealed its decrees of October 19, 2012.This step was clearly warranted by the procedural violations described above.

At this stage, a subsequent step must be either to:

1. repeal the October 20 Act passed by the Tbilisi legislature, which redistributed the freed-up resource across other municipal programmes
2. provide a plausible explanation of why fiscal responsibility must remain with the central rather than the municipal government. We believe there is no other way the  municipal social security and health care programmes can be funded.

We believe public officials must be held accountable for their actions that led to this impasse, which will have severe repercussions for many thousands of Tbilisi’s most vulnerable residents. In order to avoid a repetition of such events in the future  we believe that it is fundamental that the municipal and the central government comply with due procedure as set out in the  budgetary code.