Text consolidated by Valsts valodas centrs (State
Language Centre) with amending laws of:
5 September 1996 [shall
come into force from 22 November 1996];
23 November 2000 [shall come into force from 1 January
2001];
17 October 2002 [shall come into force from 14 November
2002];
20 October 2005 [shall come into force from 1 January
2006];
11 March 2010 [shall come into force from 7 April
2010];
3 April 2019 [shall come into force from 13 April
2019].
If a whole or part of a section has been amended, the
date of the amending law appears in square brackets at
the end of the section. If a whole section, paragraph or
clause has been deleted, the date of the deletion appears
in square brackets beside the deleted section, paragraph
or clause.
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The Saeima 1 has adopted
and the President has proclaimed the following Law:
On Local Government Budgets
Chapter I
General Provisions
Section 1. This Law prescribes the procedures for
drawing up and implementing the local government budgets in the
Republic of Latvia. It provides for the conditions for preparing
the independent local government budgets of the republic cities
and municipalities.
[23 November 2000; 11 March 2010]
Section 2. The purpose of the local government budgets
is to determine and substantiate the amount of funding necessary
to perform the statutory functions, tasks and voluntary
initiatives in the period for which these funds are intended.
Section 3.
[23 November 2000]
Section 4.
[23 November 2000]
Section 5.
[23 November 2000]
Section 6. The formulation of the local government
budgets and the process of use thereof shall be open. Pursuant to
Sections 16 and 17 of this Law the draft budget and budget of the
local government and also the report thereof on the financial
year concerning the implementation of the local government budget
must be accessible to the public in each relevant local
government.
[23 November 2000; 20 October 2005]
Chapter II
Local Government Budget Rights
Section 7. The local governments shall formulate,
approve and implement their budgets independently by complying
with the Law on Budget and Financial Management and the law On
Local Governments, and also other laws and Cabinet regulations.
State administrative bodies may not interfere with the
formulation and implementation of the local government budgets,
unless it is provided for in the Law.
[23 November 2000; 20 October 2005]
Section 8. Tax and duty payments into the local
government budgets shall be ensured and controlled by the State
Revenue Service and the local governments in accordance with the
law On Taxes and Duties.
Section 9. Local governments have the right to apply
tax relief to payments which are made into the local government
budgets in accordance with the procedures provided for in the
relevant tax law, and also to impose local government duties and
determine their rates in accordance with the procedures laid down
in the law On Taxes and Duties.
Chapter III
Local Government Budget Breakdown
Section 10. (1) For information purposes, the local
government budgets together with the State budget shall form the
consolidated general budget.
(2) For information purposes, also the local government budget
summary - the local government general budget and other
statistical summaries shall be formed.
[17 October 2002; 11 March 2010]
Section 11. Local government budgets shall have a
revenue part, an expenditure part and a financing part. Local
governments shall formulate their budgets in conformity with the
classification of budget revenues, expenditures and financing,
which is determined by the Cabinet.
[17 October 2002; 20 October 2005]
Section 12. The local government budgets shall consist
of a basic budget, donations, and gifts.
[3 April 2019 / See Paragraph 4 of Transitional
Provisions]
Chapter IV
Procedures for Drawing up and Approval of Local Government
Budgets
Section 13. At the initial stage of drawing up the
local government budgets, the Cabinet shall, on the basis of
calculations characterising the local government part in the
consolidated general budget and the need for State budget grants
within the possibilities of the State budget funds and the
overall assessment of the functions to be performed by the local
governments, coordinate with the local governments the total
amount of State budget grants for equalisation of the local
government finances to be planned within the financial year and
the total amount of the State budget and its breakdown among the
local governments to be planned within the financial year. In
formulating and conciliation process of the State budget, the
Cabinet shall be represented by the Minister for Finance or a
person authorised by him/her while the local governments shall be
represented by a Local Government Association which has been
established in accordance with the requirements of Section 96 of
the law On Local Governments. The negotiation results shall be
presented in the form of minutes. The negotiation minutes on
agreement or disagreement shall be attached to the relevant draft
laws which the Cabinet shall send to the Saeima.
[23 November 2000; 17 October 2002; 20 October 2005; 11
March 2010]
Section 14.
[23 November 2000]
Section 15. The chairperson of the local government
council shall be responsible:
1) for formulating the annual local government budget and
submitting it to the council for approval not later than two
months after the Annual State Budget Law has been announced;
2) for organising and managing the local government budget
implementation process in conformity with the Law on Budget and
Financial Management.
[17 October 2002; 20 October 2005; 11 March 2010]
Section 16. (1) The annual local government budget is a
document which shall be drawn up and approved by the local
government as binding regulations and it shall include
information on the following:
1) budget revenue according to the sources of revenue
determined in Chapter V of this Law and conditions of
classification of budget revenue for planning the budget;
2) budget expenditure according to the conditions of
classification of budget expenditure for planning the budget;
3) financing of the budget (including the data on the balance
of budget resources of the previous financial year) according to
the conditions of classification for planning the budget;
4) the amount of loans, guarantees, and long-term liabilities
of the local government in the current financial year and at
least in subsequent three years;
5) other information which the council deems necessary.
(2) Local government budgets may include funds for unforeseen
budget expenditure the amount of which shall not exceed two per
cent of the local government expenditure planned for the relevant
financial year. The decision on the use of funds for unforeseen
budget expenditure shall be adopted in accordance with the
procedures laid down by the local government council.
[3 April 2019 / See Paragraph 4 of Transitional
Provisions]
Section 17. (1) Concurrently with the draft budget of
the local government the explanations shall be prepared, and they
shall include:
1) an introductory report of the chairperson of the
council;
2) general information concerning the economic situation in
the local government;
3) information on the total amount of budget revenue and the
main sources of revenue;
4) information on the total amount of budget expenditure and
the main categories of expenditure;
5) information on the planned amount of liabilities of a local
government and the guarantees provided by it in the current
financial year;
6) other information which the council deems necessary.
(2) Concurrently with the draft amendments to the local
government budget the explanations shall be prepared wherein the
information on the nature of amendments, quantitative information
on the most significant changes to the sections on revenue,
expenditure, and financing, and also other information which the
council deems necessary shall be included.
(3) Following the approval of the annual local government
budget or amendments to the budget, the local government shall
publish the explanations on its website.
[3 April 2019 / See Paragraph 4 of Transitional
Provisions]
Section 18. If by the beginning of the financial year
the Annual State Budget Law has not come into force, the Minister
for Finance shall approve expenditure from the funds - grants and
earmarked grants for local governments - provided that:
1) the monthly expenditure does not exceed one twelfth of the
relevant funding for the previous year;
2) the authorisation granted under this condition terminates
as soon as the Annual State Budget Law comes into force.
[20 October 2005]
Section 19. If by the beginning of the financial year
the local government budget has not been approved, the local
government expenditure may not exceed the twelfth of the previous
year's expenditure per month provided that in comparison with the
previous year the amount of the functions to be performed is not
reduced for the local government.
Chapter V
Local Government Budget Revenue
Section 20. The budget revenues of the republic cities
and municipalities shall consist of deductions from State taxes
and duties, local government duties, State budget grants and
earmarked grants, grants from the local government financial
equalisation fund, settlements with the local government budgets,
payments for services, deductions from the profit of capital
companies, revenue from leasing (letting out for hire) the local
government property, from property sales and other statutory
revenues.
[17 October 2002; 20 October 2005; 11 March 2010]
Section 21. (1) In order to ensure similar conditions
for all local governments in performing their functions, a local
government financial equalisation fund shall be established. The
funds from the local government or State revenue shall be
transferred into the local government financial equalisation
fund, and also the amount of grants to be paid from the local
government financial equalisation fund shall be determined in
accordance with the procedures provided for in the laws and
regulations.
(2) In order to strengthen the regional economic base and
ensure the performance of State functions, grants and earmarked
grants for the performance of definite tasks may be appropriated
from the State budget. The grants and earmarked grants
appropriated from the State budget for the performance of
definite tasks shall not constitute a part of the local
government financial equalisation fund.
[17 October 2002; 20 October 2005]
Chapter VI
Local Government Loans and Guarantees
[23 November 2000]
Section 22. (1) The local governments, based on a
council decision, may take short-term and long-term loans and
undertake long-term liabilities. The decision of the local
government council by which the local government undertakes
long-term liabilities shall include also the funding sources for
performance of these liabilities. Within the meaning of this Law,
the long-term loans are loans whose repayment period exceeds the
framework of one financial year.
(2) Within the meaning of this Law, long-term liabilities are
liabilities which the local government undertakes when concluding
contracts on the purchase of goods or lease or the receipt of
services, or the performance of construction works to satisfy the
needs of the customer, and contracts providing for the use of the
local government budget for the implementation of definite
projects for which the local government does not provide the
total payment within twelve months from the moment of concluding
the contract.
(3) The total allowable increase in the local government loans
in the financial year shall be determined by the Annual State
Budget Law. The local governments may take loans in Latvia or
foreign countries by issuing securities or concluding loan
agreements.
(4) The loan funds are the local government funds which the
local government shall use only by appropriation on the basis of
the council decision.
(5) Local governments may not secure loans with properties
necessary for the performance of autonomous functions of local
governments.
[17 October 2002; 11 March 2010; 7; 3 April 2019]
Section 22.1 (1) Local governments shall
take loans entering into a loan agreement with the Treasury.
(2) The Minister for Finance may, by taking into account local
government applications for the implementation of definite
projects, confirm another lender if his/her loan conditions are
more favourable than the State budget lending conditions.
[17 October 2002; 20 October 2005]
Section 23. For the purposes of the budget and the
financial management, the local governments may take short-term
loans from the State budget to cover the short-term financial
deficit of the local government which must be repaid until the
end of the financial year in which they have been taken.
[23 November 2000; 20 October 2005]
Section 24. In order to implement economic and social
programs which need investments, local governments may take
long-term loans. Such loans may not be used for financing the
fixed (current) expenses of the local governments.
Section 25. (1) Local governments may not take
long-term loans or issue guarantees, if they have not:
1) submitted the reports laid down by the Treasury;
2) paid the taxes in accordance with the procedures provided
for in the law.
(2) Local governments which have not complied with the loan
agreement conditions concluded earlier shall be allowed to take
long-term loans and issue guarantees only with the permission of
the Minister for Finance.
(3) Local governments may not issue guarantees to such capital
companies which have not paid the taxes in accordance with the
procedures provided for in the law and which experience actual
insolvency and against which insolvency proceedings have been
initiated or which are declared insolvent.
[23 November 2000; 17 October 2002; 20 October
2005]
Section 26. (1) Local governments may issue guarantees
in accordance with the procedures provided for in this Law and
the Cabinet regulations. The total amount of the guarantees
issued by the local governments in the financial year shall not
exceed the maximum amount of increase in the guarantees issued
for in the Annual State Budget Law.
(2) Local governments may issue guarantees only to such
capital companies, in which the capital share of the local
government exceeds 50 per cent or to a capital company which has
been established by several local governments, in which the
capital share of the local governments exceeds 65 per cent.
(3) Only the local government council may, when taking a
decision, issue guarantees which are binding on the financial
resources of the local government if:
1) the council has received and reviewed the required
substantiation and liabilities in connection with the guarantees
proposed or already issued;
2) the local government budget expenditure for meeting the
guarantee liabilities are to be attributed to the local
government debt;
3) guarantees are not secured by a local government property
necessary for the performance of autonomous functions of the
local government;
4) the amount of the guarantee issued to a capital company
which has been established by several local governments shall
correspond to the percentage of the number of local government
capital shares in the relevant fixed capital.
(4) The local government may issue a guarantee for the debt
liabilities which a student undertakes in order to receive a
study loan and a student loan from a credit institution in
accordance with the Law on Institutions of Higher Education.
[23 November 2000; 17 October 2002; 20 October 2005; 11
March 2010; 3 April 2019]
Section 27. (1) The chairperson of the relevant council
who represents the local government in concluding all loan and
guarantee agreements shall be responsible for the implementation
of the provisions laid down in Chapter VI of this Law.
(2) All loan and guarantee agreements concluded by the local
government shall be available to the public in each relevant
local government.
[23 November 2000; 11 March 2010]
Chapter VII
Implementation of Local Government Budgets
Section 28. The local government council shall, based
on the laws and regulations in force, organise the implementation
of the local government budget, ensure the collection of taxes
and rational use of resources.
[20 October 2005; 11 March 2010]
Section 29. Local government budget allocations can be
made only for the objectives provided for in the budget approved
by the council. The allocations should not exceed the amounts
provided for in the budget.
[11 March 2010]
Section 30. In the course of implementation of the
local government budget in accordance with the procedures laid
down in the law On Local Governments and this Law, the council is
entitled to amend the local government budget, also to suspend
the allocations, increase or reduce the amounts for financing the
tasks and intend the funding of new tasks.
[11 March 2010]
Section 31. A relevant local government shall deal with
the free asset balances of the local government budget at the
beginning of the financial year, and also with the sum of any
excess revenue over expenditure, providing for the use of
resources in accordance with the appropriation procedures. If
after covering the expenses provided for in the budget a balance
of resources is formed, it shall constitute the current assets of
the cash office which may be used within a year by the local
government for covering the temporary cash gap which must be
renewed until the end of the year in the amount set by the local
government when it approves the budget.
Chapter VIII
Accounting and Report on the Financial Year Regarding
Implementation of the Local Government Budget
[20 October 2005]
Chapter IX
Responsibility and Sanctions
Section 35. Responsibility for failing to comply with
the procedures for drawing up and use of the local government
budgets laid down in the laws and Cabinet regulations and
sanctions for breaching these procedures shall be prescribed by
laws.
Section 36. (1) At least once a year the compliance of
the drawing up and use of the local government budget with the
laws, Cabinet regulations and council decisions shall be
controlled by a sworn auditor or commercial company of sworn
auditors invited by the council. The local government Audit
Committee, if the council has established it, shall carry out
such control in conformity with the by-laws approved by the
council.
(2) The State Audit Office shall carry out the control
referred to in Paragraph one of this Section in accordance with
the State Audit Office Law.
[11 March 2010]
Chapter X
Local Government Budgets After the Merger of Local Governments
Within the Framework of the Administrative-Territorial
Reform
[11 March 2010]
Transitional Provision
1. With the coming into force of this Law, the law On The
Budget Rights of the Republic of Latvia (Latvijas Republikas
Augstākās Padomes un Valdības Ziņotājs, 1990, No. 29; 1992,
No. 29/31) is repealed.
2. [20 October 2005]
3. Until the day of coming into force of a new Cabinet
Regulation, but not later than until 1 January 2003, Cabinet
Regulation No. 366 of 7 August 2001, Regulations Regarding Local
Government Borrowings and Guarantees, shall be applied in so far
as it is not in contradiction with this Law.
[17 October 2002]
4. Amendments to Sections 12, 16, and 17 of this Law shall be
applicable when drawing up the budget for 2020 and for subsequent
years.
[3 April 2019]
This Law has been adopted by the Saeima on 29 March
1995.
President G. Ulmanis
Riga, 18 April 1995
1 The Parliament of the Republic of
Latvia
Translation © 2020 Valsts valodas centrs (State
Language Centre)