On 20 February 2018 the Plenum of the Constitutional Court (Judge Rapporteur Jan Musil) dismissed motion of a group of 64 Senators that proposed annulment of a number of provisions of the Act No. 23/2017 Coll., on the Fiscal Responsibility Rules, Act No. 243/2000 Coll., on the Fiscal Equalisation and Act No. 250/2000, on the Fiscal Rules of Local Budgets.

The petitioners alleged that the newly introduced “debt brake” and “debt ceiling” measures violated inter alia the right to self-governance of local governments and their property rights. Specifically, they complained about the requirement to maintain balanced budget and the competence of the Ministry of Finance to suspend financial transfers to the local budgets. Besides their substantive arguments, the petitioners also complained that the new rules have only a statutory basis and have retroactive effect.

The Plenum found that the right to self-governance constitutes a pillar of the democratic state governed by the rule of law, at the same time the self-governing units have to take into account their peoples’ interests when managing finances. Their discretion and autonomy is also limited by principles of rational, justified, accountable and economical budgeting. Excessive budget deficits speak of irresponsibility towards the future generations. Thus, the aims of the challenged norms are legitimate as they seek effective, diligent and accountable economic management.

The Constitutional Court also underlined that the revenues of the local-governing units are inter alia dependent on the state budget. Once the national government contributes to the maintenance of the local governments, the requirement of the solidarity of the local governments in situation of economic downturn seems legitimate. These principles are also reflected in the European Union norms, which seek to avoid excessive deficits at the local and regional levels as well.

Under the challenged laws the local units are not completely forbidden to have a deficit budget, they should rather reduce their debts and strive for a balanced budget. The Constitutional Court found the measures facilitating these aims to be proportionate. The Czech Constitution allows for interferences in financial management of the local governments should they not affect the very essence of property rights and the right to manage their own finances.