On the basis of a request of the Municipality of Trbovlje, the Constitutional Court reviewed the constitutionality of Article 13 of the Financing of Municipalities Act. The challenged provision regulates the formula for calculating the appropriate expenditure of an individual municipality in an individual budget year. The legislature determined a formula that takes into account the objective differences between individual municipalities (i.e. natural or social conditions). In addition to the lump sum of estimated per capita costs, the number of residents, and the size of a municipality, the formula that is used to calculate the appropriate expenditure of an individual municipality also takes into account the length of municipal roads (local roads and public paths) and the number of residents according to age group.
The applicant alleged that by defining the formula determined by Article 13 of the Financing of Municipalities Act, the legislature failed to take into consideration the differences between individual municipalities in an appropriate manner.
The Constitutional Court reviewed the challenged provision from the perspective of the exercise of local self-government (Article 138 of the Constitution) and the financial autonomy of local communities (Article 142 of the Constitution). The Constitutional Court held that one of the fundamental conditions for the exercise of the constitutional principle of local self-government is to ensure municipalities sufficient financial resources of their own for the financing of their original powers. The legislature must therefore regulate the system of the financing of municipalities in such a manner that the residents of a municipality may exercise local self-government. A statutory regulation that does not provide an individual municipality a sufficient amount of funds to carry out its constitutional and statutory duties entails that its residents cannot exercise their right to local self-government. The Constitutional Court stressed that, when regulating the system of financing, the legislature must also take into consideration the principle of a social state and the principle of equality. In accordance with these constitutional principles, the state must determine corrective measures within the system of the financing of municipalities that will mitigate the objective differences between municipalities in order to ensure to all residents, regardless of the municipality of their residence, the goods and services constituting their constitutional and statutory rights that have to be provided by municipalities. The legislature must base the assessment of the appropriateness of a certain system of the financing of local communities on the characteristics of an “abstract” municipality rather than on an individual municipality and ensure that the system corresponds to the majority of municipalities. The Constitutional Court could only establish an unconstitutional interference with the financial autonomy of municipalities in the event of an established imbalance between the revenue of municipalities, including revenue from allocated appropriate expenditure, and the costs of the performance of the duties stemming from their original powers.
The Constitutional Court adopted the position that when reviewing the constitutionality of the challenged provision it must take into consideration the system of financing municipalities as a whole. It also emphasised that the legislature enjoys a broad margin of appreciation when regulating the manner of financing municipalities. The legislature must, however, follow demographic and social developments and adapt the system of financing municipalities in a manner that will ensure the better adaptation of the system of appropriate expenditure to the objective characteristics of individual municipalities. In this respect, it is important that, when regulating the system of the financing of municipalities, the legislature also take into consideration the recommendations of the Court of Audit as the highest authority for monitoring public spending.
However, the fact that, due to different objective circumstances, municipalities must allocate a different share of their budgets for the costs of specific types of their mandatory duties does not entail that such statutory regulation jeopardises the exercise of local self-government (Article 138 of the Constitution) or that the legislature regulated the manner of the financing thereof contrary to the requirements determined by Article 142 of the Constitution. The Constitutional Court is namely not competent to assess whether the challenged provision ensures the best possible (i.e. optimal) manner of calculating the appropriate expenditure of an individual municipality. The Constitutional Court could establish the unconstitutionality of the statutory provision that regulates the manner of considering the objective circumstances influencing the amount of costs relating to the performance of a municipality’s mandatory duties only if the legislature completely disregarded one group of municipalities with common characteristics or if it determined that the relations between the individual objective circumstances are manifestly disproportionate to the influence of a specific circumstance on the amount of costs, taking into consideration the average costs that an abstract, average municipality would incur when performing its concrete duties.
The Constitutional Court also adopted the position that the right of the residents of individual municipalities to the same scope and quality of services entails that in the framework of a local community all residents must be ensured those public services that municipalities must ensure on the basis of law and in the scope determined by law.
The Constitutional Court held that Article 13 of the Financing of Municipalities Act is not inconsistent with Articles 138 and 142 of the Constitution.
