【Text/Observer Network Wang Kaiwen Editor/Ma Xue】
Hegang, a small city in Heilongjiang that was once burned by the "cabbage house price", has recently been pushed to the forefront again due to a notice from the Municipal Human Resources and Social Security Bureau.
The circular mentioned that because of the "implementation of the financial reorganization plan, the open recruitment of government grass-roots workers was cancelled." ”
Fiscal reorganization first appeared in the "Emergency Disposal Plan for Local Government Debt Risks" issued by the General Office of the State Council. It is proposed that if the annual general debt interest payment expenditure of the city and county government exceeds 10% of the general public budget expenditure of the current year, or the special debt interest payment expenditure exceeds 10% of the budget expenditure of the government fund in that year, the debt management leading group or the debt emergency leading group must start the financial reorganization plan.
In short, local finances are "extremely difficult" and need to be disposed of in advance to prevent "bankruptcy".
Ten years of population decline of 15.81%, the current only 890,000 people in Hegang, the annual public revenue is only more than 2 billion, public financial expenditure has exceeded 10 billion, relying heavily on higher-level fiscal transfer payments; by the end of 2020, the balance of local government debt in Hegang City reached 13.11 billion yuan.
Hegang has become the first prefecture-level city in China to implement financial reorganization. However, the 10% red line is not the only trigger condition, because the relevant data information of Hegang is incomplete, and the specific proportion is unknown.
This reorganization will be carried out through a series of measures such as "open source", "throttling" or disposal of government assets, so that the scale of debt and solvency will be consistent, and the fiscal balance of payments will be restored.
Last Monday (December 27) held a national financial work video conference also paid attention to related issues, the meeting proposed to promote financial resources to the grass-roots level, continue to make good use of the direct financial fund mechanism, and effectively prevent grass-roots financial operation risks. The meeting also proposed to increase the transfer payments from the central government to local governments and firmly adhere to the bottom line of the "three guarantees" at the grass-roots level.
Jia Kang, founding president of the Huaxia New Supply Economics Research Institute and a researcher at the China Academy of Fiscal Sciences, told the Observer Network, "The emergence of such extreme cases in local governments will lead to their very passive, and other places should take it as a warning." ”
Stills from the movie "Hammer and Sickle All Rest" set in Hegang
"The fiscal situation is extremely grim"
Hegang, together with Jixi, Shuangyashan and Qitaihe, is known as the "Four Major Coal Cities of Heilongjiang", which is an important old industrial base in Northeast China and a typical coal resource-based city. In recent years, with the gradual depletion of coal resources and the decline of the coal industry, this traditional coal city with coal resources as the economic pillar has fallen into development difficulties.
In 2011, Hegang was listed by the National Development and Reform Commission as the third batch of resource-depleted cities. According to the data of the seventh national census of Heilongjiang City, as of November 1, 2020, the resident population of Hegang 891271 people, a ten-year population decline of 15.81%.
According to the statistical communiqué of the national economic and social development of Hegang City in 2020, the preliminary accounting of the city's regional gross domestic product (GDP) was 34.02 billion yuan, an increase of 0.3% over the previous year at comparable prices; Hegang City announced that it achieved full-caliber fiscal revenue of 3.88 billion yuan, down 10.3% from the previous year, of which public financial revenue was 2.3 billion yuan, down 7.8%; full-caliber fiscal expenditure was 15.77 billion yuan, an increase of 0.3% over the previous year.
On December 23, 2021, the Hegang Municipal Bureau of Human Resources and Social Security issued the Notice on Canceling the Public Recruitment plan for government grassroots workers:
Please understand that due to the implementation of the financial reorganization plan by the Hegang Municipal Government and the major changes in the financial situation, it has been decided to cancel the plan for the open recruitment of government grass-roots staff.
Screenshot of the notice of Hegang Municipal Human Resources and Social Security Bureau
At present, the hegang Municipal People's Government website can no longer search for this notice, but the relevant content continues to arouse heated discussion in public opinion.
Observer Network noted that on July 26 last year, Wang Xingzhu, deputy secretary of the Hegang Municipal Party Committee and mayor, presided over the 72nd executive meeting of the 16th municipal government to analyze and reflect on the economic situation in Hegang City in the first half of 2021, and reported on the implementation plan of the Hegang City Financial Restructuring Plan, the budget adjustment and the revitalization of special funds.
The Meeting emphasized:
At present, the financial situation of Hegang City is extremely severe, Hegang City will launch a financial reorganization plan, to gather work together, firmly establish the idea of "one game of chess", strengthen confidence, tide over difficulties together, and promote financial operation to gradually return to normal through effective measures such as open source and cost reduction, finding out the family foundation, and supervising in place.
How will the finances be reorganized?
Fiscal reorganization refers to the implementation of relevant procedures in areas with high risk of debt on the basis of ensuring the necessary basic people's livelihood expenditures and the effective operation expenditure of the government, and through the implementation of a series of short-term and medium- and long-term measures and arrangements such as increasing income, saving expenditure, and disposing of assets, so that the scale of debt and the ability to repay debts are consistent, and the balance of fiscal revenue and expenditure is restored.
The implementation of fiscal restructuring in areas with high risk of debt is an important part of the emergency disposal of local government debt, and it is also a common practice in all countries in the world.
However, Jia Kang, founding president of the Huaxia New Supply Economics Research Institute and a researcher at the China Academy of Fiscal Sciences, said that fiscal restructuring cannot be understood as the "bankruptcy of the government" of the United States and other countries.
Jia Kang told the Observer Network on January 4 that fiscal restructuring is to comprehensively and systematically consider how to overcome the difficulties faced by local governments, "Which of course includes local governments trying to transfer funds and alleviate difficulties, but it must be inseparable from the help of higher-level governments." It must be very difficult for local governments to explicitly declare fiscal reorganization, and it is obviously not enough to rely on their own strength. ”
In December 1994, Orange County, California, filed for bankruptcy protection
The "Chinese version" of fiscal restructuring first appeared in the Emergency Disposal Plan for Local Government Debt Risks (hereinafter referred to as the "Plan") issued by the General Office of the State Council in November 2016.
According to the "Plan", the main measures for fiscal reorganization include: first, broaden the channels of financial resources; second, optimize the expenditure structure; third, dispose of government assets; fourth, apply for provincial-level assistance; fifth, strengthen budget review; and sixth, improve financial management.
Specifically, it is necessary to strengthen tax collection and management in accordance with the law, increase the intensity of clearing and paying taxes and arrears, and ensure that all receivables are collected. Implement the system of paid use of state-owned resources and increase the income of government resources. In addition to the preferential fiscal and taxation policies stipulated by laws, administrative regulations and the State Council, other fiscal and tax preferential policies may be suspended and resumed after the crisis is lifted.
During the fiscal reorganization period, in addition to the necessary basic people's livelihood policy expenditure and the government's effective operation expenditure, depending on the debt risk level, other fiscal expenditures of the government at the same level should maintain "zero growth" or vigorously reduce, mainly involving:
1, reduce capital construction expenditure; 2, reduce government public funds; 3, control personnel welfare expenditure; 4, clean up all kinds of subsidies to enterprises and institutions; 5, adjust excessive expenditure standards; 6, suspend the land transfer income of various policy provisions.
Designated institutions may uniformly take over all kinds of operating assets, administrative business assets, state-owned equity, etc. owned by the government and its departments, realize them in light of market conditions, and raise funds through multiple channels to repay debts.
After taking the above measures, if the fiscal revenue and expenditure of the risk area is still difficult to balance, it may apply to the provincial government for temporary assistance, including but not limited to: compensating part of the government debt, increasing the intensity of fiscal transfer payments, and reducing or waiving some special transfer payment supporting funds. After the implementation of the fiscal reorganization plan is completed, the provincial government shall decide whether to recover the relevant funds at its own discretion.
Jia Kang said that Hegang's cancellation of the recruitment of government grass-roots workers is one of the financial restructuring measures, "Since it is so difficult, we must now do everything possible to reduce expenditure and no longer expand the recruitment of civil servants." But this is only the meaning of suspension, and when the government needs to solve the staffing problem in the future, it will still find a way to solve it. Now that so many difficulties are piled up, it is reasonable that there are no new recruits at present. ”
June 18, 2019, Hegang, a construction site Source: Visual China
Why did Hegang start a fiscal reorganization?
Regarding the conditions for initiating fiscal reorganization, the "Plan" clearly states:
Where the annual general debt interest payment expenditure of the city and county government exceeds 10% of the general public budget expenditure of the current year, or the special debt interest payment expenditure exceeds 10% of the budget expenditure of the government fund in that year, the debt management leading group or the debt emergency leading group must start the financial reorganization plan.
According to the final accounts of the general public budget revenue and expenditure of Hegang City in 2020, the general public finance expenditure in that year was 13.68 billion yuan, of which the debt interest payment expenditure was 140 million yuan, accounting for only 1.02%; in 2019, the general public finance expenditure was 14.3 billion yuan, of which the debt interest payment was 108 million yuan, accounting for only 0.76%.
The final accounts of Hegang City in 2021 have not yet been made public, but according to the 2021 general public budget expenditure released by the Hegang Municipal Government in February last year, the local government's general debt interest payment expenditure is 230 million yuan, and the total public budget expenditure is 6.77 billion yuan, accounting for about 3.4% of the former.
In addition, the column of special debt interest payment expenditure in Hegang City in 2019 and 2020 is blank.
Through the above data, it is not possible to judge whether the reason for the initiation of fiscal restructuring in Hegang City is due to its annual general or special debt interest payment expenditure exceeding the red line of 10%.
However, the 2020 Hegang Municipal Financial Final Accounts Strong Review Note mentions that Hegang City is unable to pay the debt/special debt interest payment funds due to insufficient financial resources, all of which are listed in the temporary payment account, and are not reflected in the interest payment expenditure/special debt interest payment expenditure, resulting in insufficient expenditure ratio.
Screenshot from "2020 Hegang City Financial Final Accounts Mandatory Review Instructions"
It is important to note that the "10%" red line is not the only condition for triggering fiscal restructuring. The "Plan" also stipulates that the city and county debt management leading groups or the debt emergency leading groups may start the financial reorganization plan when they deem it really necessary.
In recent years, the fiscal revenue of Hegang City has declined year after year, and the contradiction between fiscal revenue and expenditure is prominent.
In 2018, 2019 and 2020, the public finance revenue of Hegang was 2.52 billion yuan, 2.49 billion yuan and 2.3 billion yuan respectively, while the public financial expenditure reached 11.57 billion yuan, 14.3 billion yuan and 13.68 billion yuan respectively.
According to the "Hegang City 2020 Final Account Analysis Report", the city's public financial revenue reached 2.3 billion yuan in 2020, down 7.8% year-on-year and 89.4% of the annual budget.
In 2020, the tax revenue of Hegang City reached 1.33 billion yuan, completing 83.2% of the annual budget, and reducing revenue by 173 million yuan, down 11.5% year-on-year. From the perspective of taxes, the 15 taxes that realize tax revenue, except for resource tax, real estate tax, stamp tax, arable land occupation tax and deed tax, the other 10 taxes all show a negative growth situation.
In addition to taxation, the income from the transfer of state-owned land use rights (which belongs to the government fund income) is often an important source of income for local governments, but in Hegang, this part of the income is very limited. In 2020, the income of hegang government fund is only 210 million yuan, and the income from the transfer of China's land use rights in China is 150 million yuan.
On the one hand, the fiscal revenue continues to run at a low level, and on the other hand, Hegang City has entered the "peak period of debt repayment".
In January 2019, the Hegang Municipal Finance Bureau made a report at the third session of the 16th People's Congress of Hegang City, pointing out that in 2018, Hegang City has entered the peak period of debt repayment, the debt repayment pressure has increased, and the task of risk prevention is extremely arduous.
In December 2019, the Hegang Municipal Finance Bureau once again pointed out in its report that local government debt has entered the peak period of debt repayment, and the debt repayment expenditure required by local governments this year (2019) has reached 3.15 billion yuan, and in the case of local financial constraints, it has been repaid by vigorously reducing expenditure, revitalizing existing funds, and repaying old debts with new and borrowing accounts, in order to fully safeguard the integrity of the government.
The report pointed out that the debt repayment expenditure due next year (2020) will be greater, which will become more and more severe under the framework of the country's strict control of financing and borrowing, and the situation facing local finances will become more and more severe.
At the end of 2020, the balance of local government debt in Hegang City was 13.11 billion yuan (of which general debt was 10.99 billion yuan and special debt was 2.17 billion yuan), an increase of 1.59 billion yuan over the previous year (of which general debt increased by 880 million yuan and special debt increased by 700 million yuan).
The imbalance between local fiscal revenue and expenditure makes Hegang heavily dependent on higher-level fiscal transfer payments. According to the "Report on the Implementation of the 2020 Budget and the 2021 Budget (Draft)" released in January 2021, the transfer payment income of Hegang City will reach 10.47 billion yuan in 2020.
Jia Kang pointed out that the above figures show that Hegang's finances have been "extremely difficult", "the emergence of such extreme cases of local governments will lead to their very passive, other places should take a warning, as far as possible in the process of their own debt to take a prudent attitude, to avoid slipping into such a crisis situation." ”
How to avoid the "next Hegang"?
Hegang is not the first region in China to initiate fiscal restructuring.
In February 2017, the Sichuan Provincial Government issued the Notice on Further Strengthening the Management of Government Debt and Financing, proposing that "for areas that meet the conditions for initiating a local government fiscal restructuring plan, they should perform the relevant procedures to start the local government fiscal reorganization plan in accordance with the law".
In 2018, Yanjiang District and Anyue County of Ziyang City, Sichuan Province, successively implemented financial reorganization plans. In May 2020, the Sichuan Provincial Department of Finance's "Report on the Implementation of the 2018 Budget of Sichuan Province and the Draft Budget for 2019" pointed out that in 2019, "the debt risk in the fiscal restructuring area has been significantly reduced, and the debt risk has been fully withdrawn from the reorganization, and the debt risk is generally controllable".
The Emergency Disposal Plan for Local Government Debt Risks issued by the General Office of the State Council in 2016 clearly states:
The risk of local government debt is alleviated and controlled, and local governments achieve the goal of fiscal reorganization, and terminate emergency measures with the consent of the higher-level government debt management leading group or debt emergency leading group.
Jia Kang said that hegang's financial reorganization needs to have a comprehensive, reasonable, and high-level planning as much as possible, and it must be designed in conjunction with the entire supporting reform and comprehensive development of the city. "We must mobilize our own internal potential as much as possible, do a good job in the construction of financial resources, and find some feasible ways to alleviate the pressure of the original debt as much as possible.
The observer network noted that the 2021 budget report released by Hegang City at the beginning of the year put forward three major requirements for the main financial work of that year: "go all out to strive upwards", "vigorously grasp the management of fiscal revenue and expenditure", and "fully implement budget performance management".
The report points out that it is necessary to fully understand the actual difficulties and grim situations facing the organization's income, actively coordinate with the taxation departments to continuously improve the collection and management measures, and while continuing to be optimistic about managing key tax source enterprises and urging them to collect all their dues, it is also necessary to improve the means and measures for collecting and managing scattered tax sources in a timely manner, and effectively increase the revenue collection rate of tax revenue. Firmly establish the idea of "tight days, hard days, and difficult days", optimize the structure of budget expenditure, resolutely reduce inefficient and ineffective funds, and make limited funds play a greater role. To spend money must be effective, ineffective must be accountable, inefficient and more pressure reduction, effective more arrangements.
June 18, 2019, Hegang, Tianshui Lake Park Source: Visual China
In order to alleviate the local financial difficulties, Hegang launched a fiscal reorganization and cut expenditure by eliminating measures such as recruiting government grass-roots workers. Not long ago, Bazhou City, Hebei Province, was notified by the State Office Inspection Office for "increasing income" for large-scale fines.
The circular pointed out that in October 2021, in order to make up for the gap caused by financial constraints and unreasonable expenditures, Bazhou City, having completed a non-tax revenue budget of 700 million yuan in June, decomposed and issued a non-tax revenue task of 304 million yuan to 15 townships (streets and development zones) under its jurisdiction.
According to incomplete statistics, from October 1 to December 6, the income from 15 townships (streets and development zones) in Bazhou City was 67.1837 million yuan, which was 11 times the income from january to September (5.9659 million yuan). In November, there were obvious sport-style law enforcement in 13 townships (streets and development zones), and the income from fines and forfeitures in the warehouse in that month was 47.2957 million yuan, which was 80 times the average monthly fine and forfeiture income from January to September.
The State Office of Supervision pointed out that the occurrence of these problems in Bazhou City has exposed that some places have "not really established the concept of living too tightly in the face of new economic downward pressure and fiscal tight balance, and the impulse to rely on non-tax revenue, especially fines and forfeiture income, to make up for the fiscal gap is still strong." ”
According to data from the Ministry of Finance, from January to November last year, the national general public budget revenue 191252 billion yuan, an increase of 12.8% year-on-year; the national general public budget expenditure 213924 billion yuan, an increase of 2.9% year-on-year. Nationwide, the general public budget revenue has returned to the level before the epidemic, but the contradiction between fiscal revenue and expenditure in some regions is still prominent.
On the other hand, Vice Minister of Finance Xu Hongcai said in December last year that from the national summary, China's debt ratio indicator at the end of 2020 was 45.8%, lower than the internationally accepted 60% warning line, and the risk was generally controllable; at the end of 2020, the local government debt ratio was 93.6%, while the international standard was between 100% and 120%, and overall, the debt ratio of local governments in China was not high. Xu Hongcai pointed out that the long-term trend of China's economy will not change, but the risks in local areas cannot be ignored, and there is still a hidden debt problem, "We are also actively taking measures to prevent and resolve."
The national financial work video conference held on December 27, 2021 proposed to promote the tilt of financial resources to the grass-roots level, continue to make good use of the direct mechanism of financial funds, and effectively prevent the risks of grass-roots financial operation. Cooperate with prevention and resolution of financial risks.
The meeting mentioned that it is necessary to increase the transfer payments from the central authorities to the localities, firmly adhere to the bottom line of the "three guarantees" at the grass-roots level, and persist in the party and government organs to live too tightly and run all undertakings frugally.
The meeting also stressed that it is necessary to improve the mechanism for local governments to borrow appropriately in accordance with the law, prevent and resolve local government debt risks, resolutely curb new local government hidden debts, and keep economic operation within a reasonable range.
On December 27, the 2021 National Financial Work Video Conference was held in Beijing Image source: Ministry of Finance website
Jia Kang said that local governments rely on top-down transfer payments to "get by", which is a common situation at present, "under the framework of the tax-sharing system, the central government raises funds that are higher than the needs of expenditure at this level, and transfers the extra funds to adjust the imbalance of regional development, maintain national unity and national unity, which is not only an economic issue, but also an overall coordination and political issue." ”
"There are some misunderstandings in society about this, believing that the central government has too much financial resources and the localities are too difficult. This is a lack of specific understanding of the mechanism inherent in the financial system to solve the 'horizontal imbalance' between the central and local fiscal 'vertical imbalances' between the central and local governments. This situation in which the central level has more financial resources than it needs to spend at its own level is common to both federal and unitary countries, the United States, Japan, or China. ”
"As for whether the central government can take a little less, this can be adjusted flexibly." Jia Kang introduced, "When China first established the framework of the tax-sharing system, the central government got 55% of the financial 'plate', which has dropped to about 45% in recent years. ”