Subsidies for political parties: spending increases, populism and unjustified budget additions

In 2023 political parties will receive 258 million lei in subsidies. In the first six months of the year, the six parties entitled to the money according to the 2020 election results received 125 million lei and spent 118 million lei. The Permanent Electoral Authority (PEA), the institution that manages the funds, transferred 48.2 million lei to the Social Democrat Party (PSD), 40.8 million lei to the Liberal Party (PNL) – parties in government -, 22 million lei to Save Romania Union (USR) and 9.7 million lei to the populist Alliance for the Union of Romanians (AUR). The Popular Movement Party (PMP) and Pro Romania, non-parliamentary parties, received 2.5 million lei and 1.8 million lei respectively. The report below analyses the evolution of income and expenditure and the main issues related to these funds.

Read the full report here. (Romanian only)

Income and expenditure in the first six months

There is a significant increase in expenditure compared to the first six months of 2021 and 2022. Parties spent 118 out of 125 million, compared to 75 out of 124 million in 2022 and 46 million in 2021.
Most parties spent almost everything they received in the first 6 months or more, drawing on savings. This is a relative calculation, as the parties that received the largest amounts in subsidies have put money aside from previous years. However, we made a statistic based on the money received in the accounts in the first six months. PSD spent 85%, PNL 81%, USR 104%, PMP 132%, AUR 131% and Pro Romania 243%.
Overall, most money was spent on media and propaganda (49%), movable and immovable property (10%), staff (9%), political consultancy (7%) and political activities (5%).

The most money remains dedicated to media and propaganda contracts (almost 58 million). AUR and Pro Romania did not spend any money on this category. PSD and PNL spent almost 2/3 of the funds and there is a significant increase also for USR (1/3 of the funds): PSD (27.4 million), PNL (22.4 million), PMP (971 thousand) and USR (7.1 million).
Compared to the same period of 2021 and 2022, there is an increase in spending on propaganda and activities related to party promotion and electoral campaigns. For example, parties spent 58 million lei on media in the first months, compared to 24 million and 47 million in 2021 and 2022. Moreover, in 2022 they spent 100 million lei for the whole year and 62 million lei per year in 2021, which shows that there is a potential to exceed these amounts in 2023.
Transparency of media spending remains flawed, and the bill proposed in parliament by the PSD that would have defined political advertising was not approved in the Senate. It is due to return to the agenda of the Senate Legal Committee in September, but with little chance of being debated transparently and rigorously.
Almost all parties have spent significant amounts on political consultancy and opinion polls, and some have also invested in political action, which shows that they are preparing for next year’s elections.
USR remains the party spending the most on staff – 4.9 million compared to 3.2 million for PSD and 1.5 million for PNL.
AUR has started to spend money on subsidies, with the biggest expense being the purchase of vehicles for the medical caravan (see below), worth almost 12 million lei.
Pro Romania continues to spend significant amounts (much more than it received in the first six months of the year) on lawyers and legal executors, as decided due to a case in court.

Political parties and the election campaign

Some political parties have started the electoral campaign early and some activities in recent months have been financed with public money. EFOR observed that the AUR has made purchases from public funds in recent months for activities with a strong propagandistic characteristics. The party has initiated a caravan through several counties in the country to provide medical services. The vehicles were bought with subsidies and, according to publicly available information (articles published by Libertatea – see in the report), some of the campaign expenses were covered by third parties. It remains to be seen whether these expenses will be declared in 2024, as there is a likely association with a non-political party. The use of these party-marked vehicles indicates that this is more likely to be a political promotional campaign.
AUR has publicly announced that it has purchased 20 minibuses for students to donate to communities. According to the AUR these are purchased with public funds, which means that it cannot donate these minibuses, as it would be against current legislation. The purchase of these cars for the purpose of donation (even declaratively) is also questionable, as Law 334/2006 states in art. 25 1) (i) that parties can use subsidies for “investments in movable and immovable property, necessary for the activity of the respective parties.” It is not clear how the purchase of these machines to be donated serves the activity of the party. Paragraph 2. of the same article states that “It is forbidden to use the income from subsidies from the state budget for any purpose other than those provided for in para. (1).” So, at the moment, minibuses are rather used as election campaign tools and cannot be used for the stated public purpose.

Annual budgets and grant corrections (2021 and 2022)

Data obtained by EFOR according to Law 544/2001 (FOIA) show that the positive budget rectification requests in 2021 and 2022 were initiated by the PEA on its own initiative, without any requests from political parties.
In 2021, compared to the budget for financing political parties of 162 million lei granted by the State Budget Law, an additional 284 million lei was proposed, which would have brought the total amount to 446 million lei. The amount was later reduced in the approval process to almost 90 million. In 2022, the PEA got another 24 million lei over the originally approved budget.
The requests were based on Article 18 (2) of Law 334/2006, which sets very flexible limits for the allocation of subsidies, i.e. 0.01-0.04% of GDP. It is not very clear how this article constitutes the legal basis for an institution to add tens or hundreds of millions of lei to the budget without requests from political parties or other justified reasons.
These answers reflect that the PEA has largely acted contrary to its mandate and requested significant additions to funds on criteria that are unclear and without legal basis. The increase to 446 million cannot be understood or justified. The requests are based on estimates and do not have a solid reasoning behind them, which is contrary to the principles of efficient and economic public policy-making. Moreover, the behaviour of the institution at that time shows rather that it acted in favour of political parties and did not function as a control institution, which is supposed to manage budgets related to subsidies. The decision on the amount of subsidies should be a political one, of the Government and Parliament, and it should not be up to the PEA to arbitrarily juggle with these amounts.
For 2023 we have no information that additional funds have been requested by the PEA. The fact that this practice is not continued is a positive one.

Recommendations

For the Parliament

Debate in a judicious and transparent manner the draft law amending Law 334/2006 (PEA draft, later adopted by PSD)
Reduce the limits for the allocation of funds and therefore reduce the amounts paid annually to political parties
To impose a more predictable and stable system for allocating subsidies.
Set clear limits on the powers of the PEA to manage the allocation of state subsidies, to reduce arbitrary and potentially political decisions. It should not be part of the mandate of the PEA to be able to request additional funding without any restrictions;
Unexpended public subsidy funds allocated to parties should be returned to the state budget at the end of the year if not used. A more flexible alternative would be to impose a three-year period for spending the remaining funds – after which the unspent money should be returned to the state.

For the PEA:

The PEA should make public all its activities related to public funding of political parties.
The PEA should respect the provisions of Law 544/2001 and provide the requested information
The PEA should properly explain how the budget for subsidies is prepared and justified.
The PEA should publish data related to political funding in open format.

Project implemented by Expert Forum Association in partnership with Romanian Housing Association Casa Plus, Euroland Banat, Centre for Civic Resources and “Mircea Eliade” National College Resita, with the financial support of Active Citizens Fund Romania, a programme funded by Iceland, Liechtenstein and Norway through EEA Grants 2014-2021. The content of this website does not necessarily represent the official position of the EEA and Norway Grants 2014-2021; for more information visit www.eeagrants.org. Information about Active Citizens Fund Romania is available at www.activecitizensfund.ro. “Working together for a green, competitive and inclusive Europe”

The banipartide.ro platform and the campaign for transparency of political financing were supported by the Effective Combat Against Corruption (ECAC) project, implemented with the support of the Bureau of International Narcotics and Law Enforcement (INL) in partnership with the International Foundation for Electoral Systems (IFES) and CEELI Institute (Central and Eastern European Law Initiative).