Abstract

The municipal finance system in Bulgaria is in crisis. The problems have structural nature and result from the lack of correspondence between the expenditure needs for providing the legally regulated municipal services and the financial resources received by the municipalities and the local powers to influence these resources. The local budgets become more and more difficult to understand, intransparent and create unclear picture for the financial situation of municipalities. Changes towards decentralization and improvement of budgetary process are urgently needed. The article makes analysis and evaluation of the financial situation of all 262 Bulgarian municipalities for the period 1999-2001. For this purpose, the municipalities have been divided into groups based on their functional role in the provision of local public services. On this basis 5 municipality groups have been formed: group 1 – Sofia; group 2 – the municipalities – regional centers; group 3 – the municipalities – secondary centers (former okolia centers); group 4 – municipalities paying contributions to central budget (excluding the ones from group 2); group 5 – all the rest municipalities (small and underdeveloped municipalities).