Report on the development of budgetary management of municipalities, voluntary associations of municipalities and regions as at 30 June 2026
Local government budgets ended the first half of 2026 with a surplus of almost CZK 61 billion, of which the surplus of the Capital City of Prague amounted to CZK 19.3 billion. The budget result is, however, significantly affected by funds earmarked exclusively for direct education expenditure and subsidies provided to private schools1 that the regions and the Capital City of Prague had not yet transferred to schools and educational institutions by the end of June. After excluding these funds, the budget surplus amounted to CZK 26 billion. More than half of the total surplus was generated by the Capital City of Prague. The overall surplus of local government budgets is therefore significantly influenced by Prague’s budget performance.
On the revenue side, the main positive factor was the significant growth in tax revenues. This was supported by the change in the budgetary allocation of taxes effective from 1 January 2026, which increased the share of municipalities and regions in shared taxes in connection with the change in financing of non-teaching staff. At the same time, this change resulted in a lower volume of transfers received for direct education expenditure.
Expenditure grew faster than revenue, which was reflected in a year-on-year decline in the budget surplus. Investment activity of local government budgets increased significantly, although there is still scope for greater use of their investment potential. Unused investment potential reached CZK 48 billion in the middle of the year, of which CZK 19 billion was attributable to the Capital City of Prague. Prague’s persistently high unused investment potential points to its long-term inability to fully use its operating balance to finance investment and to the generous setting of the budgetary allocation of taxes compared with other local governments.
Regions increased capital expenditure while their debt declined slightly, whereas municipalities recorded higher investment accompanied by only a modest increase in debt. This development indicates the favourable financial position of municipalities and regions and their ability to undertake higher investment without a significant increase in debt. At the same time, the long-term growth in savings of municipalities, regions and voluntary associations of municipalities, including their contributory organizations, continued. Bank account balances reached almost CZK 625 billion in the middle of the year. A significant share was held by the Capital City of Prague, which accounted for almost one third of the total amount. Savings substantially exceed total debt and continue to grow over the long term. Thus, even with increasing investment activity, municipalities and regions maintain a strong financial position and significant scope for financing further investment.
A new Subsidy Register has been launched in the MONITOR State Treasury application, making it easier to search for information on transfers and loans provided from public budgets. The State Subsidy Register is now complemented by the Territorial Subsidy Register and the Subsidy Register for Non-Profit Organisations. Citizens, journalists, analysts and public administration representatives can thus access information on subsidies provided from public budgets clearly in one place.
More detailed information on the financial management of local governments is available in the Analytical section of the MONITOR application under Territorial Organisations.
Management of Local Governments
Regions, municipalities and voluntary associations of municipalities recorded a budget surplus of CZK 60.5 billion in the first half of 2026. This was 6.3% (CZK 4.1 billion) lower than a year earlier (see Chart No. 1). Excluding direct education expenditure and subsidies to private schools1, the surplus was CZK 26.2 billion, almost 2% lower than a year earlier.
Revenues of Local Government Budgets
Total consolidated revenues reached CZK 506.6 billion in June 2026, up 7.8% year on year (CZK 36.4 billion). Excluding direct education expenditure and subsidies to private schools1, revenues amounted to CZK 374 billion.
Own revenues reached CZK 309.3 billion, driven mainly by higher shared-tax revenues following the 2026 change in the budgetary allocation of taxes. The state share in VAT and personal and corporate income taxes was reduced by 2.55 percentage points in favour of municipalities and regions, increasing their tax revenues by CZK 16.7 billion by the end of June. Total tax revenues rose by 17.9% to CZK 265 billion and the self-sufficiency ratio increased to 83%.
Transfers fell to CZK 197.3 billion. Non-investment transfers declined by 5.3% to reflect the lower volume of direct education funding after financing for non-teaching staff was shifted from direct transfers to shared taxes. Investment transfers, by contrast, increased by CZK 3.6 billion, mainly due to higher funding under the Integrated Regional Operational Programme (IROP).
Expenditure of Local Government Budgets
Total consolidated expenditure reached CZK 446 billion, up 10% year on year (CZK 40.5 billion), outpacing revenue growth. Excluding direct education expenditure and subsidies to private schools1, expenditure amounted to CZK 347.8 billion.
Current expenditure rose by 7.8% to CZK 361.9 billion, mainly due to non-investment transfers to contributory organizations. The additional operating expenditure related to the transfer of financing for non-teaching staff was fully covered by the higher allocation of shared taxes.
Capital expenditure increased by 20.6% to CZK 84.1 billion, mainly reflecting investment in buildings and software.
Management of regions
Regions recorded a budget surplus of CZK 32.1 billion in the first half of 2026, down 8.2% year on year, but still the third-highest half-year surplus on record (see Chart No. 2). Excluding direct education expenditure and subsidies to private schools1, the budget balance amounted to CZK 2.4 billion, down 42.5% (CZK 1.8 billion) year on year.
Regional revenues
Total regional revenues reached CZK 220.5 billion, up 2% year on year. Adjusted revenues1 were CZK 91.3 billion. Own revenues increased to CZK 70.1 billion and represented 67% of adjusted revenues2 . Tax revenues rose strongly to CZK 62.1 billion, mainly due to the change in the budgetary allocation of taxes.
Corporate income tax revenue showed the strongest year-on-year increase, reaching CZK 16.2 billion. VAT revenue rose to CZK 31 billion and personal income tax revenue to CZK 14.4 billion.
Regions received transfers of CZK 150.4 billion, down 5% year on year. Non-investment transfers fell by 6% to CZK 145.4 billion, mainly because direct education expenditure declined following the transfer of financing for non-teaching staff to shared taxes. Investment transfers received by regions increased by 39.8% to CZK 5 billion, supported in particular by higher EU funding under the Just Transition Programme.
Regional expenditure
Total regional expenditure reached CZK 188.4 billion, up 4% year on year. Adjusted expenditure1 amounted to CZK 102.5 billion. Current expenditure increased by 1.5% to CZK 168.6 billion, while capital expenditure rose by 31.1% to CZK 19.8 billion, mainly due to higher road construction investment. Regions have consistently underused the funds allocated for roads through the budgetary allocation of taxes. In 2025, their own-source expenditure on roads and other road infrastructure was CZK 7.9 billion below the amount theoretically allocated for this purpose under the tax-sharing system.
Debt and balance on the regions' bank accounts
Regional debt, including contributory organizations, amounted to CZK 26.7 billion at the end of the first half of 2026 and decreased slightly from end-2025 despite strong investment growth. This confirms the regions’ favourable financial position and ability to finance a substantial share of investment without additional borrowing.
Regional bank deposits, including contributory organizations, reached CZK 145 billion, up 38.9%. After excluding untransferred education funds1, deposits amounted to CZK 115.3 billion, up 10.5% from end-2025 and more than four times total regional debt.
Since 2016, regional debt has increased by 25.5%, while bank account balances have risen by 300.2%. Even after adjusting for education funds, the long-term increase in regional savings remains clear.
Management of municipalities
Municipalities recorded a budget surplus of CZK 28.4 billion in the first half of 2026. Excluding direct education expenditure and subsidies to private schools1, which for municipalities applies only to Prague, the surplus was CZK 23.9 billion.
Prague accounted for a significant share of the municipal surplus, recording CZK 19.3 billion, up 6.5% year on year, with revenues of CZK 81.2 billion and expenditure of CZK 61.9 billion. Excluding Prague, other municipalities recorded a surplus of CZK 9.1 billion, down 15.9%.
Municipal revenues
Total municipal revenues reached CZK 292.5 billion, up 12.6% year on year. Adjusted revenues1 amounted to CZK 275.5 billion. Own revenuesi reached CZK 238.3 billion, representing 86% of adjusted revenues2. Tax revenues increased by 16.8% to CZK 202.9 billion, supported by the 2026 change in the budgetary allocation of taxes.
Corporate income tax revenue recorded the strongest increase and reached CZK 51.6 billion. VAT revenue amounted to CZK 83 billion and personal income tax revenue to CZK 40.3 billion. Other tax revenues declined to CZK 28.1 billion, including CZK 13.9 billion from immovable property tax.
Municipalities received transfers of CZK 54.2 billion, up 4.3% year on year. Non-investment transfers declined slightly to CZK 40.8 billion, mainly due to lower direct education expenditure and lower funding under the Jan Amos Komenský Operational Programme. Investment transfers received by municipalities rose by 30.3% to CZK 13.8 billion, supported mainly by higher funding from the National Recovery Plan.
Municipal expenditure
Total municipal expenditure reached CZK 264.1 billion, up 14.4% year on year. Adjusted expenditure1 was CZK 251.7 billion. Current expenditure increased by 13.3% to CZK 199.3 billion, primarily due to higher salaries for local government employees, while capital expenditure rose by 18% to CZK 64.8 billion, mainly due to higher road construction investment.
Debt and balance on the municipalities' bank accounts
Municipal debt, including contributory organizations, amounted to CZK 73.1 billion, up 3.9% from end-2025. The strong increase in investment alongside only modest debt growth indicates that municipalities financed most additional investment without substantial reliance on external funding. Prague’s debt fell by 11.5% to CZK 6.7 billion.
Municipal savings, including contributory organizations, reached CZK 475.2 billion in mid-2026, up 9.8%. Prague held CZK 205.5 billion, up 16% year on year.
Since 2016, municipal debt has increased by only 1.7%, while bank account balances have risen by 174%, leaving substantial room to finance further investment without a significant increase in debt.
Management of voluntary associations of municipalities
In the first half of 2026, voluntary associations of municipalities reported both revenues and expenditures of CZK 2.9 billion. Their budget balance declined year on year, resulting in a slight deficit of CZK 0.04 billion.
1 Direct education expenditures represent funds from the state budget (specifically from the chapter of the Ministry of Education, Youth and Sports), which the regions and the Capital City of Prague allocate directly to the respective schools and educational institutions. The regions and the Capital City of Prague have no discretion over how these funds are used. The same applies to subsidies for private schools. For this reason, the total revenues and expenditures of regions and the Capital City of Prague are adjusted to avoid distortions in their budgetary performance.
2 Adjusted revenues = total revenues excluding transfers earmarked for direct education expenditure and subsidies to private schools.
i Own revenues = tax revenues + non-tax revenues + capital revenues