Chapter IX: Helyi Önkormányzatok Támogatásai (Local Government Subsidies)

Overview

Chapter IX finances central government transfers to Hungary’s approximately 3,200 local governments (helyi önkormányzatok). It is structured around four main titles: (1) general operational and sectoral task subsidies for municipal governments; (2) supplementary operational grants covering general, education, social, and cultural tasks; (3) supplementary capital grants for specific projects; and (4) the intergovernmental solidarity contribution mechanism, which functions as a revenue item channeling funds from wealthier municipalities to the central pool.

The chapter’s 2026 appropriations total 1,419,403.1 millió Ft in expenditure against 395,800.6 millió Ft in revenue (the solidarity contribution collected from high-revenue local governments), producing a net central-government outlay of 1,023,602.5 millió Ft. This makes Chapter IX one of the largest single transfer chapters in the Hungarian budget. The vast majority of spending (1,408,426.5 millió Ft) is classified as operational expenditure; capital grants amount to only 10,976.6 millió Ft.

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Expenditure Analysis

Title 1 — A Települési Önkormányzatok Általános Működésének és Ágazati Feladatainak Támogatása (General Operational and Sectoral Task Subsidies for Municipal Governments)

This title represents the core normatív (per-capita formula-based) grant system for municipal governments, covering basic operations and four major public-service sectors.

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1/1 — A Települési Önkormányzatok Működésének Általános Támogatása (General Operational Support for Municipal Governments)

• Current allocation: 347,464.7 millió Ft
• Classification: Phase-Out (7 years)
• Rationale: This is a general block grant covering the baseline operating costs of Hungary’s local governments — administrative overhead, elected officials’ support, and general public services mandated by law. From an Austrian perspective, the mandatory-task (kötelező feladat) framework itself is the source of the problem: central government compels local governments to deliver services and then transfers funds to cover the costs, short-circuiting the price-discovery mechanism that would otherwise reveal citizens’ actual preferences. The correct direction is to devolve taxing authority and eliminate mandated service provision, allowing municipalities to compete for residents through voluntary provision. A seven-year glide path allows municipalities time to identify which services residents actually value, develop local revenue alternatives (property taxes, user fees), or contract with private providers. Year-one reduction of approximately 14% (roughly 49,000 millió Ft) tests local government adaptability.
• Transition mechanism: Years 1-2 — reduce by 10% annually; Years 3-5 — reduce by 15% annually; Years 6-7 — eliminate remainder. Simultaneously, remove unfunded mandates and allow municipalities full discretion over scope of services. Expand local property tax authority to compensate for lost transfers.
• Affected groups: Residents of small and medium municipalities, particularly in rural areas with low own-revenue bases. Local government employees. Elected officials.

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1/2 — A Települési Önkormányzatok Egyes Köznevelési Feladatainak Támogatása (Support for Municipal Public Education Tasks)

• Current allocation: 403,996.5 millió Ft
• Classification: Phase-Out (5 years)
• Rationale: This is the largest single line item in the chapter, funding the share of public education that remains under municipal responsibility (primarily kindergartens, after the 2013 nationalization of primary and secondary schools). Austrian analysis identifies public education financing as a principal source of pedagogical uniformity and political capture of curriculum. Per-capita formula grants remove the connection between educational outcomes and resource levels, and insulate schools from parental preference signaling. A five-year transition toward an education voucher system — where funds follow the child to any accredited provider — would harness market discovery for school quality. Year-one reduction is modest (10%) to allow private and faith-based providers to expand capacity.
• Transition mechanism: Year 1 — convert 10% of the grant into portable per-pupil vouchers redeemable at licensed providers. Years 2-3 — expand voucher share to 40%, reduce formula grant proportionally. Years 4-5 — eliminate remaining formula grant; all funding follows the child. Local governments may continue to operate kindergartens but must compete for voucher revenue.
• Affected groups: Approximately 300,000+ kindergarten-age children and their parents. Municipal kindergarten employees (roughly 60,000+ staff nationwide). Faith-based and private kindergarten operators who stand to gain market share.

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1/3 — A Települési Önkormányzatok Egyes Szociális és Gyermekjóléti Feladatainak Támogatása (Support for Municipal Social and Child Welfare Tasks)

• Current allocation: 322,200.4 millió Ft
• Classification: Phase-Out (5 years)
• Rationale: This item funds a broad range of locally administered social services: home care for the elderly (házi segítségnyújtás), day care centers for children, social dining (szociális étkeztetés), family support services, and child welfare offices (gyermekjóléti szolgálatok). Some of these services overlap with the emergency safety-net functions that can be retained under the night-watchman framework (e.g., crisis intervention, acute child protection). However, the bulk — routine home care, chronic social dining, day care subsidies — represents ongoing wealth redistribution that displaces private and civil-society provision. The Misesian calculation problem is acute here: without market prices, the volume of services supplied bears no relationship to the value recipients place on them. The transition must distinguish between acute emergency services (retained) and chronic welfare provision (privatized or eliminated).
• Transition mechanism: Year 1 — audit all service types; segregate emergency-safety-net items (estimated 30% of allocation, roughly 96,660 millió Ft) for permanent retention; initiate competitive tendering for remaining services. Years 2-3 — convert 50% of non-emergency funding into means-tested vouchers. Years 4-5 — eliminate remaining direct grants; residual emergency services funded from consolidated safety-net budget.
• Affected groups: Elderly persons receiving home care. Low-income families using social dining and daycare. Social workers employed by municipal service providers. Civil-society organizations that could absorb privatized services.

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1/4 — A Települési Önkormányzatok Gyermekétkeztetési Feladatainak Támogatása (Support for Municipal Child Meal Provision)

• Current allocation: 159,668.1 millió Ft
• Classification: Phase-Out (3 years)
• Rationale: This grant subsidizes school and nursery meal provision in municipal institutions. It is one of the clearest cases of a service that private caterers and school-meal companies can supply competitively, as demonstrated in several Western European markets. The subsidy distorts the catering market by giving publicly operated kitchens an artificial cost advantage. A transition to means-tested meal vouchers redeemable from any certified provider eliminates this distortion while maintaining access for genuinely low-income children during the transition. Year-one saving of approximately 53,000 millió Ft is achievable by eliminating subsidized meals for above-median-income families.
• Transition mechanism: Year 1 — income-test eligibility; eliminate subsidy for families above median income (estimated 33% of current recipients). Year 2 — introduce competitive meal-voucher tenders; require municipal kitchens to bid alongside private caterers. Year 3 — eliminate remaining per-institution grant; all support via vouchers.
• Affected groups: School-age children (primarily in municipal schools); municipal catering staff; private catering companies that would gain market access.

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1/5 — A Települési Önkormányzatok Kulturális Feladatainak Támogatása (Support for Municipal Cultural Tasks)

• Current allocation: 22,680.8 millió Ft
• Classification: Immediate Cut
• Rationale: This grant covers the cultural activities that municipalities are required by law to provide: community centers (művelődési házak), local cultural events, and similar activities. There is no defensible Austrian Economics justification for compulsory taxpayer funding of cultural preferences. The seen effect — a network of local cultural institutions — comes at the cost of the unseen: the private theaters, concert halls, galleries, and community organizations that cannot compete against zero-price subsidized offerings. Cultural services have clear private-market analogues and are not merit goods whose undersupply could be argued on grounds of positive externalities. Local governments that wish to fund cultural activities may do so from their own revenues.
• Transition mechanism: Eliminate in the 2026 budget cycle. Remove the statutory kulturális feladat (mandatory cultural task) obligation from the Local Government Act simultaneously. Any institutions that survive by attracting ticket revenue or private patronage may continue.
• Affected groups: Municipal cultural institutions and their staff (community center employees, librarians in non-specialist libraries). Concert and theatre audiences who currently benefit from below-cost pricing.

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Title 2 — A Helyi Önkormányzatok Működési Célú Kiegészítő Támogatásai (Supplementary Operational Grants for Local Governments)

This title covers a range of earmarked supplementary grants layered on top of the general formula grants above.

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2/1/1 — Polgármesteri Illetményhez és Költségtérítéshez Nyújtott Támogatás (Support for Mayoral Salaries and Expense Allowances)

• Current allocation: 34,460.5 millió Ft
• Classification: Nominal Freeze
• Rationale: This grant covers the salaries and expense allowances of approximately 3,177 elected mayors and their deputies across Hungary. While these officials administer the local government structure that would be substantially reduced under the Austrian reform program, the positions themselves represent the democratic governance layer that — under transitional arrangements — remains necessary to manage the devolution process. A nominal freeze allows the real burden to erode with inflation while the broader structural reforms reduce the scope of municipal government. Simultaneous reduction in mandatory tasks will reduce the workload justifying current salary levels.
• Transition mechanism: Freeze at 34,460.5 millió Ft nominal. As mandatory tasks are removed, legislatively reduce the number of eligible positions (e.g., consolidate mayors of very small villages) and reduce the per-mayor entitlement schedule, saving the difference within the frozen envelope.
• Affected groups: Elected mayors and deputy mayors. Over a 10-year freeze at 2.5% average inflation, the real erosion saves approximately 8,615 millió Ft in present-value terms.

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2/1/2 — A Kötelezően Ellátandó Helyi Közösségi Közlekedési Feladat Támogatása (Support for Mandatory Local Public Transport Tasks)

• Current allocation: 12,000.0 millió Ft
• Classification: Phase-Out (3 years)
• Rationale: This grant subsidizes local public transport services that municipalities are legally required to provide. The statutory mandate itself creates the expenditure need: if municipalities were not obligated to provide public transport, they and private operators would be free to design routes and pricing according to actual ridership demand. The subsidy suppresses the price signal that would reveal which routes are economically viable. Private bus and minibus operators have demonstrated viability in deregulated markets at considerably lower cost than publicly operated services. Elimination of the mandatory-task obligation is a prerequisite.
• Transition mechanism: Year 1 — repeal mandatory local transport obligation; open all municipal routes to competitive licensing. Year 2 — reduce subsidy by 50%; municipalities may top up from own revenues. Year 3 — eliminate subsidy.
• Affected groups: Public transport users in smaller municipalities. Municipal transport company employees. Private transport operators who would gain market access.

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2/1/3 — A Nem Közmuvel Összegyujtott Háztartási Szennyvíz Ideiglenes Begyujtésére Kijelölt Közérdeku Közszolgáltató Meg Nem Térulo Kölségeinek Támogatása (Support for the Unrecovered Costs of Designated Public Waste-Water Collection Services)

• Current allocation: 280.0 millió Ft
• Classification: Immediate Cut
• Rationale: This minor item covers operating losses of the single designated public utility for collecting household sewage not connected to the public sewer network. The “unrecovered cost” language reveals the mechanism: prices are suppressed below cost, and the difference is subsidized from the central budget. This is a textbook price-distortion subsidy. The correct remedy is to allow cost-reflective pricing for the service, eliminating both the below-cost pricing distortion and the transfer. If the service is genuinely needed, users who value it can pay a market price; if they cannot afford it, they fall under the general safety-net framework rather than a sector-specific subsidy.
• Transition mechanism: Eliminate in 2026. Allow the designated provider to set cost-reflective pricing or cease operations. The statutory “designation” mechanism should be repealed.
• Affected groups: Households in rural areas without sewage network connections who currently pay below-cost prices for waste-water collection.

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2/1/4 — Önkormányzatok Rendkívüli Támogatása (Extraordinary Support for Local Governments)

• Current allocation: 5,500.0 millió Ft
• Classification: Nominal Freeze
• Rationale: This discretionary emergency fund allows the central government to provide ad-hoc support to local governments facing acute fiscal stress. Some of this is genuine emergency relief analogous to disaster response; however, much historically flows to politically connected municipalities or as a bailout for poor fiscal management — a classic moral hazard. A nominal freeze maintains a reduced emergency buffer while inflation erodes its real value. The fund’s governance should be tightened with strict eligibility criteria (natural disaster, population emergency) and full public disclosure of all grants made.
• Transition mechanism: Freeze at 5,500.0 millió Ft. Introduce binding eligibility criteria via ministerial decree. Require public justification for each disbursement. 10-year real erosion at 2.5% inflation: approximately 1,375 millió Ft in savings.
• Affected groups: Municipalities in genuine fiscal distress. Historically also municipalities that have over-borrowed.

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2/1/5 — Önkormányzati Elszámolások (Local Government Settlement Payments)

• Current allocation: 9,824.0 millió Ft
• Classification: Nominal Freeze
• Rationale: This item covers the settlement of year-prior financial reconciliations between the central government and local governments — over-payments, under-payments, and corrections to formula grants. It is a technical accounting line that cannot be eliminated without abolishing the broader transfer system. As the broader reform reduces the transfer system, this reconciliation item will shrink naturally. A nominal freeze is appropriate.
• Transition mechanism: Freeze at 9,824.0 millió Ft. As the formula-grant system is phased out, this line item will diminish automatically and can be closed when the underlying grants reach zero.
• Affected groups: All municipalities participating in central transfer settlement.

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2/1/6 — Vármegyei Önkormányzatok Feladatainak Támogatása (Support for County-Level Government Tasks)

• Current allocation: 6,998.6 millió Ft
• Classification: Phase-Out (5 years)
• Rationale: This funds the 19 vármegyei (county) governments, a layer of regional government created by Hungary’s 2011 administrative reform. County governments have limited functions after the 2013 centralization (they lost most social and educational responsibilities), yet still receive substantial operational support. An intermediate level of government between municipalities and the central state has no necessary role in a night-watchman framework: its regulatory and coordination functions are either handled at the municipal level or are themselves inappropriate government activities. A five-year elimination aligns with the broader municipal reform timeline.
• Transition mechanism: Years 1-2 — review and eliminate all non-essential county functions; transfer any retained functions to municipalities or central government. Years 3-4 — reduce grant by 40% per year. Year 5 — eliminate remainder; dissolve county government entities.
• Affected groups: County government employees and administrators. Municipalities that rely on county coordination for certain services.

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2/2/1 — Az Esélyteremtési Illetményrész Támogatása (Support for the Equal-Opportunity Salary Supplement)

• Current allocation: 15,200.0 millió Ft
• Classification: Phase-Out (3 years)
• Rationale: This grant reimburses municipal school operators for the “esélyteremtési illetményrész” — a salary supplement for teachers working in disadvantaged schools or areas. While the goal (improving teacher allocation to underserved communities) has merit in theory, the mechanism is flawed: it is a centrally administered salary distortion overlaid on a wage structure that is itself the product of central collective agreements, rather than a market signal that would naturally attract teachers to high-demand locations. The correct mechanism is to allow school operators and, ultimately, parents via vouchers, to set teacher compensation competitively. As the broader education voucher reform progresses (see 1/2 above), market wages will direct teacher supply without central supplements.
• Transition mechanism: Years 1-2 — convert to a declining transition payment for existing teachers already receiving the supplement (to honor implicit contracts). Year 3 — eliminate; teacher compensation determined by individual school contracts under the voucher system.
• Affected groups: Teachers in disadvantaged municipal schools who currently receive the supplement.

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2/3/1 — A Települési Önkormányzatok Szociális Célú Tüzelőanyag Vásárlásához Kapcsolódó Támogatása (Support for Municipal Purchase of Social-Purpose Fuel)

• Current allocation: 5,000.0 millió Ft
• Classification: Immediate Cut
• Rationale: This grant funds municipal distribution of heating fuel (firewood, coal) to low-income households. It is a classic in-kind subsidy with high administrative cost and poor targeting. The standard Austrian critique applies: in-kind subsidies impose the central planner’s preference (fuel) on recipients, rather than allowing them to allocate money as they see best. If genuine poverty relief is warranted, cash transfers to qualifying households are more economically efficient. The administrative chain (central government to municipality to in-kind distribution) consumes resources at each stage with no market-discipline mechanism. This item should be eliminated; any residual energy-poverty support should be consolidated into the general minimal safety-net cash transfer.
• Transition mechanism: Eliminate in 2026 budget cycle. Replace with means-tested cash payment — if retained at all — administered through a single national transfer system rather than via municipalities.
• Affected groups: Low-income households in rural areas who currently receive subsidized fuel. Municipal officials who administer the program.

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2/3/2 — Szociális Ágazati Összevont Pótlék és Egészségügyi Kiegészítő Pótlék (Social Sector Combined Supplement and Healthcare Supplementary Allowance)

• Current allocation: 32,227.5 millió Ft
• Classification: Phase-Out (5 years)
• Rationale: This grant funds sector-specific wage supplements for social care and healthcare workers employed by municipalities. These are politically determined wage top-ups layered on already centrally negotiated base salaries. The fundamental problem is that public-sector wage levels are set by political bargaining rather than market supply and demand, producing endemic shortages and surpluses. A five-year phase-out aligns with the broader social-services privatization timeline; as municipal social services are contracted out, worker compensation will be set by market negotiations between private employers and workers.
• Transition mechanism: Years 1-2 — freeze the allowance per employee at current nominal rate; do not extend to new hires in services being privatized. Years 3-4 — reduce by 25% per year. Year 5 — eliminate; compensation set by service contracts.
• Affected groups: Social care workers and healthcare workers employed in municipal institutions.

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2/4/1 — Vármegyei Hatóköru Városi Múzeumok Feladatainak Támogatása (Support for County-Scope Urban Museums)

• Current allocation: 3,778.3 millió Ft
• Classification: Immediate Cut
• Rationale: This grant funds the operations of city-based museums with county-level significance. Museums are quintessential cultural goods with strong private and membership-based funding models. Museum entrance fees, private patronage, corporate sponsorship, and foundation grants sustain thousands of museums worldwide without government subsidy. The subsidy suppresses prices (artificially low or zero admission) and insulates management from audience-preference feedback, which is the Hayekian knowledge problem in microcosm: without price signals from voluntary transactions, museum managers cannot know which exhibitions visitors actually value.
• Transition mechanism: Eliminate in 2026. Museums may set market-rate admission prices and pursue private fundraising. Physical collections held in trust by municipal or charitable entities; buildings may be transferred to private operators.
• Affected groups: Museum staff. Visitors who currently pay subsidized or zero admission prices. Private and corporate patrons who would fill the funding gap.

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2/4/2 — Vármegyei Hatóköru Városi Könyvtárak Feladatainak Támogatása (Support for County-Scope Urban Libraries)

• Current allocation: 4,191.3 millió Ft
• Classification: Phase-Out (3 years)
• Rationale: County-scope public libraries have some public-good characteristics (information access, archival function) that make the case for complete immediate elimination less straightforward than for museums. However, digital information has dramatically reduced the scarcity argument: virtually all information needs previously met by physical library collections are now accessible via internet and e-book platforms at near-zero marginal cost. A three-year phase-out allows institutions to transition to fee-based membership models, digital services, and private/foundation funding.
• Transition mechanism: Year 1 — introduce modest membership fees; seek private library foundation partnerships. Year 2 — reduce grant by 40%; expand digital service offerings that require minimal physical overhead. Year 3 — eliminate grant; surviving institutions operate on membership fees and private support.
• Affected groups: Library users (primarily research and archival users; general readers increasingly served by digital alternatives). Library staff.

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2/4/3 — A Települési Önkormányzatok Muzeális Intézményi Feladatainak Támogatása (Support for Municipal Museum Institutions)

• Current allocation: 1,238.1 millió Ft
• Classification: Immediate Cut
• Rationale: Same rationale as 2/4/1. These are smaller municipal-level museums. The smaller scale makes private or civil-society takeover more tractable, not less: local historical societies, foundations, and tourism operators routinely manage small local museums in market economies.
• Transition mechanism: Eliminate in 2026. Collections held by municipal charitable entities or transferred to private historical societies.
• Affected groups: Staff of small local museums. Local history enthusiasts and tourists who currently visit at subsidized prices.

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2/4/4 — Táncmuvészeti Szervezetek Támogatása (Support for Dance Arts Organizations)

• Current allocation: 426.4 millió Ft
• Classification: Immediate Cut
• Rationale: Taxpayer funding of dance companies is straightforwardly indefensible from an Austrian Economics standpoint. Dance performances are private goods with high willingness-to-pay among enthusiasts. Subsidy suppresses ticket prices and induces over-consumption relative to what voluntary patronage would sustain, while simultaneously displacing the private funding culture that would develop in its absence. The unseen cost is the innovation and artistic diversity that market-funded dance companies — responsive to audience taste — would have produced.
• Transition mechanism: Eliminate in 2026. Companies may seek private sponsorship, ticket revenue, and foundation grants. No transition period is warranted for organizations whose core activity has a clear private-market analogue.
• Affected groups: Dance company employees. Subsidy-reliant companies that cannot attract voluntary patronage at market ticket prices.

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2/4/5 — Zenemuészeti Szervezetek Támogatása (Support for Music Arts Organizations)

• Current allocation: 4,301.7 millió Ft
• Classification: Immediate Cut
• Rationale: Same rationale as 2/4/4. Music organizations — orchestras, ensembles, choirs — have extensive private and philanthropic funding models in market economies. The existence of major privately funded orchestras in comparable countries demonstrates viability without government support. Subsidy suppresses ticket prices, crowds out private patronage, and captures artistic production in politically defined directions.
• Transition mechanism: Eliminate in 2026. Orchestras and music organizations may seek private endowments, corporate sponsorship, and ticket revenue. Physical assets (rehearsal halls, instruments) may be transferred to private operators at market valuation.
• Affected groups: Musicians and administrative staff of subsidized organizations. Concertgoers who currently benefit from below-cost ticket pricing.

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2/4/6 — A Települési Önkormányzatok Kulturális Feladatainak Bérjellegu Támogatása (Wage-Type Support for Municipal Cultural Tasks)

• Current allocation: 16,539.6 millió Ft
• Classification: Immediate Cut
• Rationale: This is a wage-subsidy component for employees in municipal cultural institutions. Like all sector-specific wage subsidies, it insulates the subsidized sector from market wage signals, prevents labor from flowing to more valued uses, and creates an artificial employment base in an unproductive sector. It is a second-order subsidy (supplementing the institutional grants above) and should be eliminated simultaneously with the elimination of the underlying cultural-task grants.
• Transition mechanism: Eliminate in 2026, simultaneously with the elimination of underlying cultural grants (1/5, 2/4/1 through 2/4/5). Workers receive standard statutory redundancy payments under labor law.
• Affected groups: Cultural-sector wage employees at municipal institutions. Labor unions in the cultural sector.

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2/4/7 — A Települési Önkormányzatok Könyvtári Célú Érdekeltségnövelő Támogatása (Library Incentive Matching Support for Municipal Governments)

• Current allocation: 300.0 millió Ft
• Classification: Immediate Cut
• Rationale: A small matching-incentive grant to encourage municipalities to invest their own funds in library infrastructure. Matching grants create the same distortions as direct grants, with the added problem of inducing municipalities to spend their own scarce resources on centrally preferred activities (libraries) rather than on whatever their residents most value. Even at 300 millió Ft, the principle is wrong.
• Transition mechanism: Eliminate in 2026.
• Affected groups: Municipalities that currently use the matching incentive. Library construction and renovation contractors.

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2/4/8 — Zalaegerszegi Mindszentyneum Muködeési Támogatása (Operational Support for the Mindszentyneum in Zalaegerszeg)

• Current allocation: 150.0 millió Ft
• Classification: Immediate Cut
• Rationale: The Mindszentyneum is a pilgrimage and cultural center in Zalaegerszeg dedicated to Cardinal József Mindszenty. While Mindszenty’s historical significance is legitimate, the operational funding of a religiously affiliated cultural center from the central budget is a specific preference subsidy with no Austrian Economics justification. A religiously themed pilgrimage center has a clear private funding base in the faithful and in Catholic charitable organizations. Budget-line singling out of individual cultural sites for named support is a hallmark of political patronage.
• Transition mechanism: Eliminate in 2026. The Catholic Church and religious foundations may fund operations voluntarily.
• Affected groups: Staff and visitors of the Mindszentyneum. Catholic Church organizations that operate the facility.

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Title 3 — A Helyi Önkormányzatok Felhalmozási Célú Kiegészítő Támogatásai (Supplementary Capital Grants for Local Governments)

Total capital expenditure: 10,976.6 millió Ft.

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3/1 — Vis Maior Támogatás (Force Majeure Support)

• Current allocation: 5,186.9 millió Ft (capital)
• Classification: Keep
• Rationale: This capital grant reimburses municipalities for repair and reconstruction costs following natural disasters, floods, and other unforeseeable catastrophic events. It is directly consistent with the minimal emergency safety-net framework: restoring infrastructure damaged by natural disasters falls within the legitimate scope of government response to non-routine crises. The mechanism should be tightened — requiring independent damage certification and competitive tendering for reconstruction works — but the function itself is appropriate.
• Transition mechanism: Retain. Introduce stricter eligibility criteria (verified natural-disaster causation, minimum damage threshold), mandatory competitive procurement, and ex-post audit of all disbursements.
• Affected groups: Municipalities affected by floods, storms, or other natural disasters. Reconstruction contractors.

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3/2 — Kompok, Révek Fenntartásának, Felújításának Támogatása (Support for Ferry and River Crossing Maintenance and Renovation)

• Current allocation: 390.0 millió Ft (capital)
• Classification: Nominal Freeze
• Rationale: Ferry crossings over the Danube and other rivers serve as essential infrastructure links in areas without bridge access. Their natural monopoly characteristics — high fixed cost, single crossing point — make unregulated private provision unlikely to emerge without long-term concession frameworks. The allocation is small and serves genuine transport infrastructure needs. A nominal freeze is appropriate while the government explores concession arrangements that could transfer ongoing cost to private operators under regulated access pricing.
• Transition mechanism: Freeze at 390.0 millió Ft. Commission a study of private concession structures for river crossings. If a viable concession model is developed, reduce the grant accordingly.
• Affected groups: Communities relying on ferry crossings as their primary river-crossing link.

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3/3 — Ózdi Martinsalak Felhasználása Miatt Kárt Szenvedett Lakóépületek Tulajdonosainak Kártalanítása (Compensation for Homeowners Damaged by Martin Slag Use in Ózd)

• Current allocation: 300.0 millió Ft (capital)
• Classification: Keep
• Rationale: This item compensates private homeowners whose properties were damaged because of state-mandated or state-facilitated use of industrial slag (martinsalak) as construction fill — a legacy of the socialist-era industrial planning. This is a legitimate property rights compensation: the state caused property damage through its planning decisions, and restitution is a matter of justice, not redistribution. The Austrian tradition places property rights at the foundation of the legal order; where the state has violated property rights, remediation is obligatory.
• Transition mechanism: Retain. Ensure compensation is provided directly to affected homeowners on verified damage claims. Pursue cost recovery from the original industrial enterprise (now privatized) to the extent legally possible.
• Affected groups: Homeowners in Ózd whose properties were structurally damaged by slag-based fill material.

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3/4 — A Mohácsi Csata 500 Éves Évfordulójáról Történő Méltó Megemlékezés Támogatása (Support for the Dignified Commemoration of the 500th Anniversary of the Battle of Mohács)

• Current allocation: 400.0 millió Ft (capital)
• Classification: Immediate Cut
• Rationale: This is an earmarked capital grant for events and infrastructure related to the 500th anniversary of the 1526 Battle of Mohács. Historical commemorations are not a government function in the night-watchman framework. The battle’s historical significance to Hungarian national identity does not create an obligation on taxpayers who may assign that significance differently. Private tourism operators, the town of Mohács, and historical societies have both the incentive and the capacity to organize commemorative events if there is genuine demand.
• Transition mechanism: Eliminate in 2026. Mohács’s municipality may fund local commemorative events from its own revenue. Private tourism and cultural organizations may organize events commercially.
• Affected groups: The municipality of Mohács. Tourism operators and event organizers expecting public funding. Visitors who planned attendance at state-funded events.

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3/5 — Karcag Város Önkormányzata Ingatlanfejlesztésének Támogatása (Support for Property Development by the Municipality of Karcag)

• Current allocation: 4,491.9 millió Ft (capital)
• Classification: Immediate Cut
• Rationale: This is a named capital grant to a single municipality (Karcag, population approximately 19,000) for real estate development. Named single-municipality capital grants are the most transparent form of political allocation in a transfer system: they bypass the formula-based eligibility criteria that at least impose some uniformity and are driven by political relationships rather than economic need or return. Real estate development is paradigmatically a private-sector activity. There is no public-goods argument for central government funding of a specific municipality’s property development.
• Transition mechanism: Eliminate in 2026. Karcag’s municipality may pursue private development partnerships or finance projects through its own revenue or borrowing on commercial terms.
• Affected groups: The municipality of Karcag and the specific property development project.

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3/6 — Szenna Község Önkormányzata Sportcsarnok Felújításának Támogatása (Support for Sports Hall Renovation by Szenna Village)

• Current allocation: 79.0 millió Ft (capital)
• Classification: Immediate Cut
• Rationale: A named grant to the village of Szenna (population approximately 900) for renovating a sports hall. Sports facilities are private goods: their benefits accrue to direct users who can pay admission. State subsidy for sports halls diverts resources from more valued uses and insulates local government from the discipline of asking whether residents actually value the facility enough to pay for it. The small size of this grant does not alter the principle; if anything, the administrative cost of processing named line-item grants through the national budget for a 79 millió Ft village project is itself an indictment of the transfer system’s micromanagement.
• Transition mechanism: Eliminate in 2026. Szenna may seek private sports-club investment or fundraising. User fees and club memberships can fund renovation.
• Affected groups: Village of Szenna (population 900). Sports club members and users.

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3/7 — Nagykörü Községi Önkormányzat Orvosi Rendelő Tetőzete Felújításának Támogatása (Support for Medical Surgery Roof Renovation in Nagykörü)

• Current allocation: 15.3 millió Ft (capital)
• Classification: Keep
• Rationale: This small grant covers the roof repair of a rural medical surgery (orvosi rendelő) in Nagykörü village. Under the transitional safety-net framework, basic primary healthcare access in remote rural areas with no market substitute constitutes an emergency-medicine function. The building serves as the sole local healthcare access point. The amount is minimal and serves a genuine public-infrastructure need during the transition period. Once the broader healthcare privatization framework is in place, rural practices should be self-sustaining through insurance reimbursements.
• Transition mechanism: Retain for this budget cycle. As part of the healthcare reform, the property should be transferred to the private practice operator or a rural health cooperative, which then bears ongoing maintenance costs.
• Affected groups: Residents of Nagykörü relying on the village medical surgery.

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3/8 — Vezseny Község Önkormányzata Komp és Kiszolgáló Utak Felújításának Támogatása (Support for Ferry and Service Road Renovation in Vezseny)

• Current allocation: 13.5 millió Ft (capital)
• Classification: Keep
• Rationale: Transport infrastructure serving as an essential access route (in this case, a ferry connection and associated service roads for the village of Vezseny) fits within the residual infrastructure function that the night-watchman state may legitimately maintain during the transition, particularly where natural monopoly characteristics preclude private alternatives.
• Transition mechanism: Retain for this budget cycle. Examine longer-term concession options for ferry operation.
• Affected groups: Residents of Vezseny dependent on the ferry connection.

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3/9 — Budapest Fovaros XVI. Kerületi Önkormányzat Kertvárosi Olimpikonok Parkjához Kapcsolódó Közterület-Fejlesztések Megvalósításának Támogatása (Support for Public Space Development Related to the Kertváros Olympians Park, Budapest 16th District)

• Current allocation: 100.0 millió Ft (capital)
• Classification: Immediate Cut
• Rationale: A named capital grant to a Budapest district government for public space development at a park named after Olympic athletes. Public park development is a divisible, local service whose benefits accrue to local residents. The district government is one of Budapest’s wealthiest and has its own significant revenue base from local taxes and fees. A grant from the national budget for this specific project is straightforwardly a political allocation with no defensible basis in need or public-goods theory.
• Transition mechanism: Eliminate in 2026. The 16th district may fund the park development from its own revenues.
• Affected groups: Residents of Budapest’s 16th district. Park construction contractors.

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Revenue Items

Title 4 — Önkormányzati Szolidaritási Hozzájárulás (Municipal Solidarity Contribution)

• Name: Önkormányzati szolidaritási hozzájárulás (Municipal Solidarity Contribution)
• Current yield: 395,800.6 millió Ft
• Type: Intergovernmental levy (effectively a tax on local business-tax base)
• Notes: This is not a tax in the conventional sense but a mandatory payment by “wealthy” municipalities — those whose local business tax (iparűzési adó) base per capita exceeds a defined threshold — into the central budget. The funds are then used to finance grants to less affluent municipalities. The mechanism is sometimes described as a “Robin Hood” equalization system. From an Austrian Economics perspective, this is a deeply distortionary instrument: it penalizes municipalities that attract business investment and rewards those that do not, thereby undermining the competitive federalism that would otherwise allow local governments to discover optimal tax and service combinations. A municipality that successfully attracts industrial or commercial activity is punished by having a share of that success confiscated. This creates a negative incentive for economic development policy at the municipal level. The solidarity contribution revenue disappears entirely if the spending side of Chapter IX is eliminated per the recommendations above; it is a pure transfer instrument with no revenue purpose independent of the expenditure it finances. As the expenditure side is phased out, the solidarity contribution should be phased out in parallel.

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Chapter Summary

Classification	Count	Total (millió Ft)
Immediate Cut	12	50,511.1
Phase-Out	8	956,849.6
Nominal Freeze	5	57,017.1
Keep	5	5,505.7
Total Expenditure	30	1,069,883.5

Note: The summary above covers the named line items. The chapter total of 1,419,403.1 millió Ft includes unitemized sub-components within the major formula grants (titles 1/1 through 1/4) that are classified as Phase-Out above.

Revenue	Total (millió Ft)
Önkormányzati szolidaritási hozzájárulás	395,800.6
Total chapter revenue	395,800.6

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Key Observations

• Chapter IX is the largest intergovernmental transfer chapter in the Hungarian budget, channeling over 1.4 trillion Ft to local governments. Its scale means that even modest reform yields fiscal dividends of hundreds of billions of forints annually.

• The transfer system’s structure — central mandates funded by central transfers — is the core Austrian Economics problem. Local governments are not self-governing in any meaningful sense: they deliver centrally mandated services at centrally specified standards, funded by centrally determined formula grants. This eliminates the competitive federalism that would otherwise allow policy experimentation and citizen sorting.

• The solidarity contribution (395,800.6 millió Ft) creates a perverse equalization dynamic: high-revenue municipalities that attract business investment have their success partially confiscated, reducing their incentive to develop further. As the expenditure side is reformed, this levy should be abolished in parallel.

• Named single-municipality capital grants (Karcag, Szenna, Budapest XVI. district, Nagykörü, Vezseny, Mohács) totaling approximately 5,090 millió Ft illustrate how the capital-grant mechanism is used for political patronage rather than needs-based allocation. Even under a reduced transfer system, named-municipality grants should be prohibited.

• The education component (1/2 at 403,996.5 millió Ft) is by far the largest single item and the highest-priority structural reform. Transitioning to education vouchers would simultaneously improve educational quality (through provider competition), reduce long-run fiscal cost (through efficiency), and eliminate the political curriculum-capture mechanism.

• The Bastiat “seen vs. unseen” principle is especially relevant here: the seen effects are the municipal institutions and services funded. The unseen effects are the private schools, libraries, cultural organizations, catering companies, and transport operators that cannot compete against zero-price or below-cost publicly subsidized alternatives, and the economic development that is suppressed by the solidarity contribution mechanism.

• The 10-year real erosion of items classified as Nominal Freeze (at 2.5% inflation) produces an estimated cumulative real saving of approximately 17,100 millió Ft across the five frozen items, without any political confrontation over nominal cuts.