From the 2026 budget audit
A 5.5 billion Ft discretionary rescue fund — with no formula, no published criteria, no entitlement.
The central government's ad-hoc municipal bailout pot is allocated case-by-case, with no rule and no published criterion — meaning the allocation decision is political, and every municipality that knows the pot exists has weaker incentive to live within its means.
About 1,360 Ft per taxpayer per year — 5.5 billion Ft — held as a discretionary political fund that any municipality in difficulty may or may not receive, depending on the allocator's judgement.
What you see — and what you don't
The seen: a municipality rescued from fiscal difficulty. The unseen: the soft budget constraint the rescue fund creates — every council weighing a spending decision knows the central pot exists, which weakens the discipline that makes councils live within their means in the first place.
Objection
"Municipalities sometimes face genuine emergencies — floods, economic shocks — and need a safety net."
Answer
Genuine fiscal distress deserves a predictable, rule-based response, not a discretionary political channel. The reform replaces the ad-hoc fund with a published-criteria hardship component inside the formula grant: the same genuine distress is addressed, the discretionary channel is closed, and every municipality faces the same predictable rule rather than a political decision.
Share if you think municipal rescue should follow published rules, not political discretion.
The analyst's verdict
Extraordinary support for municipalities
Rationale
A discretionary reserve from which the central government provides ad-hoc support to municipalities in financial difficulty. The structure invites the public-choice critique directly: a centrally-controlled discretionary fund, allocated case-by-case by the allocator, with no formula and no published entitlement. Whatever the intent, a discretionary municipal-rescue fund concentrates a benefit (the rescued municipality) and disperses the cost (all taxpayers), and it does so through a channel where the allocation decision is political. It also softens the budget constraint of every municipality: a council that knows an extraordinary-support pot exists has weaker incentive to live within its means. The reform is to replace discretionary rescue with a rules-based mechanism — a transparent, formula-driven hardship adjustment within the Cím 1 grant, with published criteria — so that genuine fiscal distress is addressed predictably and the discretionary channel is closed. Three years lets the rules-based replacement be legislated and lets municipalities currently relying on discretionary top-ups adjust.
Transition mechanism
Three-year wind-down of the discretionary fund, in parallel with legislating a rules-based, published-criteria hardship component inside the Cím 1 formula grant. The discretionary channel closes; predictable, formula-driven distress support replaces it.
Affected groups
Municipalities that currently rely on discretionary central rescue; in the replacement, all municipalities gain a predictable rule in place of a political allocation.
Free Society Institute
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