Evolution of the social security budget Romania in 2006-2010

Universitatea Babe-Bolyai Cluj-Napoca Facultatea de tiine Politice, Administrative i ale Comunicrii Masterand: ILOIE RALUCA ELENA NGO`S MANAGEMENT, II nd year

I. INTRODUCTION In recent years, Romania is facing a problem in terms of pension reform and other social insurance rights, an issue that today is becoming more pronounced due to factors such as reduced working population, aging population, lack of a workable private social security system, stating the need of a reform in the state social insurance. The reason I chose to approach this subject, was that I believe that all people, including myself, as citizens of Romania need to know how our state provides welfare to the citizens and I wanted to analyze how the social insurance budget has evolved from one year to another, if the number of beneficiaries has increased or decreased, if the number and size of the benefits increased or decreased and what causes could determine these developments. Population reduction and aging is growing pressure on the shoulders of state social insurance budget, which must support, with fewer contributors, a growing number of beneficiaries. Romania is currently facing with fewer employees, with the pressures generated by the very late introduction of privately managed pension pillar, the increasing number of beneficiaries, high pressure from citizens to increase the average pension, the discontent caused by the existence of pension inequity. I believe the state needs to take some measures to ensure a sustainable system of social insurance, measures such as: increasing the number of legal employees by adopting active measures in the sphere of employment, promote the active aging and stimulate persons who are at retirement age to continue working, stimulate birth growth through measures that will provide future contributors to the public pension system, reducing the number of retirees by reducing fraudulent retirement (including disability pensions) or reduce pensions overly large amount.

II. FINANCIAL FORECAST Financial forecasting in public financial management are all actions taken by top management to: establishing strategic and tactical objectives of the organization, financial and material resources necessary to achieve them.

Financial forecast can contribute greatly to the organization's general forecast to include the following steps: a) Establishing the organization's strategic objectives and their position in time; b) Using the general forecasting activity results analysis - diagnosis of economic activity financial organization; c) Quantifying the anticipated disturbances and their share in all the factors that will influence the financial situation of the organization; d) Development, according to these data, the development strategy of the organization; e) Development scenarios to determine the tactics of the organization to achieve strategic objectives; f) Setting priorities and deadlines. The forecast result materializes in: Programs: that is developed for a reduced time horizon of several months to one day have a high degree of detail and certainty. Plans: to be established for periods ranging from several months to five years, is used widely in all public sector organizations have a low level of detail and binding. Forecasts: is based on a time horizon of at least 10 years, are of approximate and not binding.

III. STATE SOCIAL SECURITY BUDGET

III. 1. General concepts There is a need to regulate public finances was first developed and adopted Law no. 10/1991 on public finances, which introduced the concept of national public budget and public budgets consisted of four categories, namely: state budget, local budgets, social security, special budgets. Later this law was replaced by Law no. 72/1996, and the latter by Law no. 500/2002 that keeps mainly to Law no. 10/1991 with some improvements. Thus, establishing a uniform system of budgets, comprising: a) budget b) social security budget, c) local budgets; d) special funds; e) State Treasury budget; f) autonomous public institutions budgets g) budgets of public institutions supported in whole or in part from the state budget, state social insurance budget and special budgets; h) budgets of public institutions financed wholly from own revenues; i) budgets funds from external loans contracted or guaranteed by the state of which repayment of interest and other costs are paid from public funds; j) external grants budget. This unit is the general government budget1. Thus, it appears that the general government budget is a set of nationally compiled unit. In terms of its content, the budget can be analyzed2 as: * Document - the budget act are set and approved annually revenues and public expenditures or expenses only if necessary according to the system of financing public institutions; * Law - budget is legal document that is provided by law and approved annual revenue and expenditure of state or public institutions (forecasting and authorization act); * System of financial flows related to the formation of public funds on the one hand and their distribution on the other; * Economic policy instrument of state taxation and public spending, because by this document are set revenues reflecting fiscal policy and on the other budgetary expenses.
1 2

Condor, I., Stancu, R., Drept financiar i fiscal, Editura Tribuna Economic, Bucureti, 1996, pg. 171 Moteanu T. i colectiv, Buget i tezorerie public, Editura Universitar, Bucureti, 2003, pg. 35-36 apud Lazr, C., Finane publice, Editura UPG, Ploieti, 2007, pg. 23

State social insurance budget (BASS) is a part of the state budget. It shows that the annual financial plan that reflects the creation, distribution and use funds necessary protection pensioners, employees and family members in special situations that deplete cash income such as temporary disability because of sickness, unemployment, death3. Since 1991, this budget is made distinct from the state budget, but after a procedure similar to it. Generally consists of a Party considers revenue and centralized costs of social insurance budget and other budgets including social security needed to achieve the territorial pension houses.

III.2. STATES SOCIAL SECURITY BUDGET STRUCTURE FORMED BY REVENUES AND EXPENDITURES

The fact that the social security budget is prepared and executed separately state budget allows the state social insurance budget to fully use its income only for the protection of citizens, not allowed as these revenues are used for expenses other than for the purpose under budget in that year. At the same time, this led to the setting up of institutions that establish and collect express these types of income, which is achieved through and pay state social insurance budget. The size of social security budget is directly influenced by size of income are made by employees (as we have seen in Chapter II, social security contributions that employees and employers pay are dependent on those revenues), and the shares that are applied to such income. So we have more money allocated to the budget if revenues increase staff, while the rate remains unchanged. If the rate would increase, people would be affected by this, in most cases would form a bad opinion about the social insurance system and destroyed the original large differences between their contributions to public and private, they could decide to pay contributions to the private system because beneficial of this system are higher. Revenues from social security: - State contribution to social security; - Social security contribution payable by individual units based on free enterprise;
3

Cistelecan, R., Buget i fiscalitate, note de curs, Universitatea Petru Maior, Trgu Mure, 2002, pg. 44 [http://www.4shared.com/file/I65SPapj/Buget_si_fiscalitate-Rodica_Ci.html]

- Helping employees and retirees to obtain tickets for rest and treatment facilities; - Contributions to fund unemployment benefits, allocation of support and aid employability; - Increases and penalties for failure to pay when due the contribution of institutions and companies; - Bank interest on cash and cash equivalents arising from the social security budget execution; - Amounts allocated from State budget to balance the social security budget, approved the annual budget laws; - Surplus from the previous year (if applicable); - Other income, according to law. Social security expenditures are reflected mainly in: Social security benefits expenditure, expenditure on organization and operation of public pension fund of investing and other expenses provided by law. Expenses relating to social security benefits are: - Pensions (disability, early retirement and survivors'); - Allowances for temporary disability; - Allowances for illness prevention, rehabilitation and capacity building work; - Allowances for maternity and sick child care; - Allowances for growth and child care until the age of two years; - Unemployment benefits, allowance for support and aid employability; - Aid in case of death; - Granting flight spa and leisure; The final part of the social security budget is the difference between the amount of income and expenditure, so there may be surplus (when receipts are greater than costs) or deficiency (when costs are higher as income). Annual budget surpluses of social security can be used next year, according to destinations approved by law, after return transfers from the state budget. Current budget deficit, if any social security covers from the reserve fund. If the reserve

fund has been already used, than the deficit covers from the current general account available of the State Treasury. III.3. BUDGET PROCESS IN THE STATE SOCIAL INSURANCE BUDGET The budget process is the set of actions and measures taken by competent institutions of the financial policy applied to realization by the government. This implies the existence of budget revenues and their allocation in order to provide citizens social security benefits4. Being a separate budget from the state budget, is subjected to a procedure which is completed by its adoption by law other than the adopting the budget. Budgetary procedure, in this case, is marked by the following principles: annuality, universality, reality, budget balance, public and monetary unit5. Annuality budget refers to the fact that social security is developed for the financial year coincides with the calendar year in Romania during this period is a performed receipt of income and expenditure achievements. Although the budget is characterized by annual budgetary procedure time is prolonged for more than a year since starting the year before drafting one for which there shall continue the performance during that year and finalized by the closing account of the account year next year. Therefore, we can say that the procedure actually takes about 3 years. Principle monetary unit is the fact that all budgetary operations are expressed in national currency. In the public system in Romania, social security contributions and benefits paid in lei. For the wage or insured income established in other countries currency in Romania, contributions are paid in lei at the exchange rate communicated by NBR from the date fixed for such duties. The advertising budget principle is the advertising budget after Parliament takes under consideration, the budget should be brought to the public by means of advertising; mainly budget law shall be published in the Official Gazette. Budget reality principle requires that revenue and expenditure to be evaluated in order to reflect reality in terms of real needs of the state and possible resources to be mobilized in the budget to cover these needs. The principle depends on the accuracy and
4 5

Vcrel, I. i colaboratorii , Finane publice, Editura Didactic i Pedagogic, Bucureti, 2001, pg. 607 Legea 250/2002 legea finanelor publice publicat n Monitorul Oficial, Partea I nr. 597 / 13.08.2002

correctness of calculations performed in assessing resources and needs and the methods used in this assessment (either automatic or penultimate method or methods increase or decrease or direct assessment method). The principle of budgetary universality is the principle that income and expenditure must be budgeted in their overall amounts (total), so no income or expenditure of state must be made outside the budget. Since obtaining public revenue determines expenditure, revenue that is necessary to sign the budget with their raw product, and their total spending figure and not the balance between them. In this way Parliament can provide knowledge that will collect total revenues and expenditures will be made. The principle of budgetary balance is the requirement that all expenditures to be made in the budget must be fully covered from ordinary revenues of the budget. In practice, this balance the budget there was in all cases, often the surplus or deficit budgets.

Stages of the process Budget

1. Elaboration of the draft State Social Insurance Budget State social security budget forecasts are based on average annual pensions, wages and other economic factors. Drafting process of state social insurance budget is conducted under the Ministry of Labor, Family and Social Solidarity, which set out, with the Ministry of Finance, methodology development, execution and completion of state social insurance budget. Based on their data and those received from the specialized county and Bucharest, the Ministry of Labor, Family and Social Solidarity drafts the state social insurance budget for next year, until September 30 this year and submit it to the Ministry Public Finance for verification and endorsement.6 Work on drafting the budget period beginning in July-August last year. With the Ministry of Finance, the draft budget is submitted to the Government, which will examine amendments will bring, and then submit it to Parliament for debate and approval on November 30. 2. Adoption of state social insurance budget
6

Boaj, M., Buget i trezorerie public, note de curs, Universitatea Dimitrie Cantemir, Bucureti , curs 11, pg. 2 [http://ucdc.info/cd/doc/1030]

The draft budget is submitted to Parliament for consideration and approval by the Government. These projects are reviewed by the Budget and Finance Committees of each House standing, they can give and amendments to be included in a report. After this has been a debate in Parliament the budget law and the report submitted by the Commission for a decision approving the state social insurance budget law by voting, open or secret. Once the social security budget is adopted by Parliament, it shall be published in the Official Gazette. Government may submit proposals for amendments, the law amending the law of this budget, due to changes in the macroeconomics indicators, social protection measures and the adoption of new laws7. If the social security budget is not adopted at least three days before the expiration of the deadline, than, is applicable the last year budget. 3. Implementation of the social security budget After voting on social security budget by Parliament, following the execution phase of the house, which is the collection, storage and release resources to carry out expenditure, this is achieved by the treasury or the banking system. Competence in activities of social insurance budget execution is the Ministry of Labor, Family and Social Protection, its local authorities, financial accounting bodies in the economic, institutions. An important role of economic units and institutions are required to properly calculate and transfer the deadlines established social security contributions, to calculate and to honor the social security rights for work (sickness benefit, bereavement etc.). A part of the social security budget execution means a breakdown by quarters and institutions revenue and expenditures of this budget. Implementation of revenue is state social security budget revenue collection activity due to this budget. Establishment of state social insurance budget revenues shall be based on social security contributions and other payments collected from individuals and legal entities, which are collected according to legal provisions.

Blan, E., Drept financiar, Editura ALL Beck, Bucureti, 1999, pg. 52

Revenue collection of state social insurance budget is achieved through the following processes8: 1. Calculation and payment of taxes directly by the subjects, if social security contributions paid by employers; 2. Calculation, withholding and payment of state social insurance budget contributions owed to a third party (employer) for social security contributions payable by employees; 3. Calculation by the National House of Pensions and Other Social Rights (from 2011, the National Public Pension) contributions due from the people who provide voluntary, and calculating the contribution of people receiving subsidized treatment places. Collection of these amounts is made by cashiers or county pension funding or through the banking system. Execution of the social security budget expenditure is work to incur expenditure provided and approved by the budget. Social security expenditures is based on budget appropriations are distributed directions of Labor and Social Solidarity county and Bucharest. Social security budget appropriations are administered by authorizing budget appropriations. Budget appropriations are provided in the budget with specific destinations, are distributed holders and may not be exceeded. Authorizing officers are responsible for the use of budget appropriations, the revenue earned by using the law of the amounts received from social security budget, the use of assets entrusted to the institution they lead the organization and updating of accounting and presentation term accounting reports on budget execution9.

IV. EVOLUTION OF THE SOCIAL SECURITY BUDGET OF ROMANIA IN 20062010

8 9

Boaj, M., op.cit., curs 11, pg. 6 Boaj, M., op.cit., curs 11, pg. 8

10

In recent years, Romania is facing a problem regarding the reform of pension and social security problem today is becoming more pronounced due to factors such as reduced working population, aging, lack of private social security system functional, stating they need a reform in the state social insurance. This reform should achieve balanced social security system, but also a diversification of income to provide for social security benefits. The research method that we used to study changes in the structure of the budget, as well as the evolution of the state social insurance budget period 2006-2010 was the analysis documents. I believe that this method is most relevant for studying the theme chosen because other methods would have given me the necessary data to study the evolution of this budget. For example, the observation data I could not get clear, precise and results obtained by this method was more subjective. The strength of the analysis is that the documents offered me the opportunity to use official data (budgets, statistics) taken from national institutions such as Ministry of Finance, Ministry of Labor, Family and Social Protection, the National House of Pensions and Rights Social Security, National Institute of Statistics and also National Bank of Romania. In this analysis we used the social security budgets have been approved to run, and not budgetary account.

The analysis of income, social security expenditure budget (BASS) and its modification
a) The amount of income and expenses BASS and their dynamics nominal size Table no. 5.1.1. Revenues and expenditures of Romania in the period 2006-2010 BASS, the nominal expression

1. Venituri totale

2006 2007 2008 2009 2010 19.637.704 24.766.714 32.056.291 40.424.522 41.315.919

11

1.1. Venituri curente 1.2. Subvenii 2. Cheltuieli totale 2.1. Cheltuieli curente 2.2. Cheltuieli de capital 2.3. Operaiuni financiare

19.283.960 24.755.014 30.676.722 40.424.522 34.259.819 353.744 11.700 1.379.569 7.056.100 19.180.590 23.488.782 32.056.291 39.963.350 41.060.185 19.155.381 23.458.493 32.041.226 39.956.247 41.053.078 21.170 4.039 26.265 4.024 11.798 3.267 7.103 461.172 7.107 255.734

Deficit/Excedent 457.114 1.277.932 * Data were taken from www.mfinante.ro

As shown in Table. 5.1.1., Recorded total revenues of the state social insurance budget had continuous growth from 2006 to 2010. At the same time and total cost of the reference five years have seen a steady growth from 2006 to 2010. Subsidies to state social insurance budget showed different values in these five years, so can not see that in 2008 there were no subsidies from the state budget, unlike in 2010 when these types of income have been the highest value in the period analyzed. the real size

To calculate income and expenditure in real terms in the expression have reported their size nominal exchange rate RON / EUR at 31 December each year studied. The exchange rate in the five years we have presented in the table. 5.1.2. Table no. 5.1.2. Exchange rate RON / EURO Anul Curs de schimb RON/EURO la data de 31 decembrie Source: National Bank of Romania 2006 2007 2008 2009 2010 4,2848

3,3817 3,6102 3,9852 4,2282

12

Taking into consideration the reference by the exchange rate shown in Table 5.1.1., we obtained values in real terms income and expenditure BASS from those five years that we have presented in Table. 5.1.3. Table no. 5.1.3. Revenues and expenditures of Romania in the period 2006-2010 BASS, in real terms 2006 1. Venituri totale 1.1. Venituri curente 1.2. Subven ii 2. Cheltuieli totale 2.1. Cheltuieli curente 2.2. Cheltuieli de capital 2.3. Opera iuni financiare Deficit/Excedent 5.807,05 5.702,45 104,6 5.671,9 5.664,5 6,26 1,194 135,173 2007 6.860,2 6.857 3,24 6.506,2 6.497,8 7,28 1,12 354 2008 8.043,8 7.697,7 346,1 8.043,8 8.040 3 0,8 2009 9.560,7 9.560,7 9.451,6 9.450 1,6 109,1 2010 9.642,4 7.995,6 1.646,8 9.582,75 9.581,1 1,65 59,65

Analyzing table. 5.1.3., We can see that just as in the case presented above for the expression size in nominal income, total income situation is maintained in real terms, i.e. total revenue still grew in 2006-2010 . Analyzing the total expenditure in real terms, the situation is like for expenditures in nominal, in that they have been growing from 2006 to 2010. Also in the real expression can be seen that the subsidies received from the state budget had a high value in 2010 compared to previous years. The BASS (State Social Insurance Budget) dynamic of revenues and expenditures

13

Fig. 5.1.1. Absolute change in BASS income In Fig. 5.1.1. you can see revenue growth in 2006-2010 BASS, registering growth following values: in 2007 revenues increased 1053.15 million EUR compared to 2006, in 2008 there was an increase of 1183.6 million EUR compared to 2007, in 2009 there was an increase from 2008 as the revenue of EUR 1516.85 million (the largest revenue growth), and in 2010 there was an increase of 81.74 million euro previous year (the lowest growth recorded in the five years). In order to calculate the evolution of the income index BASS I reported the actual amount of base year income from the previous year, so we obtained index values that we have represented in Table. 5.1.4. Table no. 5.1.4. Development index of BASS income 2006 2007 2008 2009 2010 Venituri BASS (mil. Euro) 5.807,05 6.860,2 8.043,8 9.560,7 9.642,4 Indicele de evoluie al veniturilor 0 1,18 1,17 1,19 1,01 BASS Table no. 5.1.4.: we can see that revenues grew stronger over 2006-2009 when signs of development had high values, unlike in 2010 when growth was insignificant. In Fig.5.1.2.there is plotted the index BASS earnings. 14

1.4 1.18 1.17 1.19 1.01 1.2 1 0.8 0.6 0.4 0.2 0
20 06 20 07 20 08 20 09 20 10

indice cu baza in lant

Fig. 5.1.2. Relative change in BASS income In Fig. 5.1.2. We can see the relative change in income by increasing their indices. By studying this index shows that the greatest revenue growth was recorded in 2008-2009, the growth index value of 1.19, while the lowest index, namely 1.01 was recorded between 2009 -2010, which means that there has been a slower income growth. There has been a constant growth rate, with some fluctuations. In respect to the expenditures, their dynamics we represented it in Fig. 5.1.3.

Fig. 5.1.3. Absolute change in BASS expenditures 15

In Fig. 5.1.3. We can see that in the case of the expenditures and revenues, the growth rate has been a constant. In 2007, expenditure increased from 2006 to 834.2 million Euro in 2008 increased by 1,537.6 million euros compared to 2007, in 2009 expenditure increased by 1407.8 million Euro from 2008, and in 2010 expenditures increased by 131.1 million Euro. To calculate the index have reported development of BASS expenditures their actual size in the base year to the previous year, so we obtained index values that we have represented in Table. 5.1.5. Table no. 5.1.5. Development index of BASS expenditure 2006 2007 2008 2009 2010 Cheltuieli BASS ( mil. Euro) 5.671,9 6.506,2 8.043,8 9.451,6 9.582,75 Indicele de evoluie al cheltuielilor 0 1,15 1,23 1,17 1,01 BASS Table no. 5.1.5. We can see that spending grew stronger over 2006-2009 when signs of evolution were quite large values, unlike in 2010 when growth was insignificant as well as in the case of income.

Fig. 5.1.4. The relative cost modification in BASS

16

The largest increase was produced in 2007-2008 which you can see from the index which was 1.23, while the slower spending growth BASS was recorded in 2009-2010, recorded as 1, 01. b) Analysis of income and expenditure share in PIB and its dynamics BASS In Table. 5.1.6. PIB reflects the value recorded in 2006-2010. Tabel nr. 5.1.6. The value of PIB Anul 2006 2007 2008 2009 2010 PIB (mil. lei) 340.689,3 410.191,6 508.688,9 495.581 510.639,6

Sursa: Institutul Naional de Statistic

Share of PIB and its BASS dynamics To find out the total income share of PIB I have reported that income in nominal PIB expression made in the reference. In Fig. 5.1.5. I plotted total revenue ratio to PIB in 2006-2010 and Index to increase their share.

17

Fig. 5.1.5. Revenue ratio to PIB In Fig. 5.1.5. we can see that the share of total revenues in PIB in 2006 was 5.8%, increasing in 2007 to 0.23%, reaching to 6.03% this year. In 2008 the revenue to PIB increased by 0.27% compared to 2007, reaching revenues represents 6.3% of PIB. In 2009 the revenue to PIB reached 8.20%, increasing by 1.9% during 2008-2009 (the largest increase in the share produced in the five years). Total revenue came in 2010 to have a share of 8.1%. This year has decreased by 0.1% revenue share in PIB compared to 2009 BASS. In order to calculate the index of evolution of the income share to PIB we report the revenue to PIB base year to the previous year, so we obtained index values that we have represented in Table. 5.1.7.

Table no. 5.1.7. Development index of income share in PIB BASS 2006 2007 2008 2009 2010 Ponderea veniturilor n PIB 5,8% 6,03% 6,3% 8,2% 8,1% Indicele de evoluie a ponderii veniturilor 0 1,04 1,045 1,3 0,98 BASS n PIB

18

It can be seen in Table. 5.1.7. the revenue ratio increased during 2006-2009 when the evidence of evolution had values over 1 and a decrease in 2009-2010 when the index had a value less than 1, namely 0.98.
1.3 1.04 1.045

1.4 1.2 0.98 1 0.8 0.6 0.4 0.2 indice cu baza in lant

0
20 06 20 07 20 08 20 09 20 10

Fig. 5.1.6. The relative modification to revenue ratio in PIB However, in Fig. 5.1.6. we can see changes in the revenue ratio to PIB growth in its index value (representing the relative change in weight). Thus in 2006-2007 there was an index value of 1.04, in 2007-2008 the index was 1045 and in 2008-2009 the index registered a value of 1.3. In these periods have been indications of 1 higher value, which means that in the period 2006-2009 there were increases in income share to PIB. Unlike these time periods, the index registered in 2009-2010 was 0.98, which shows that there was a decrease in PIB in revenues. The share of BASS expenditures in PIB and its dynamics

To find out the total expenditure to PIB ratio we report these expenditures in nominal PIB recorded in the reference year.

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0.09 0.08 0.07 0.06 0.05 0.04 0.03 0.02 0.01 0 2006 2007 2008 2009 2010

8.06% 6.30% 5.70% 5.60%

8.04%

ponderea cheltuielilor in PIB

Fig. 5.1.7. The share of expenditure in PIB In Fig. 5.1.7. we can see that the share of total expenditure in PIB in 2006 was 5.6%, increasing by 0.1% in 2007, reaching 5.7% this year. In 2008 the share of expenditure to PIB increased by 0.6% compared to 2007, expenditures, reaching to 6.3% of PIB. In 2009 the share of expenditure to PIB reached 8.06%, increased in 2008-2009 to 1.76% (the largest increase in the expenditure ratio produced in the five years). Total expenditures in 2010 have reached a share of PIB of 8.04%. This year was a 0.02% decrease in the share of PIB spent BASS compared to 2009. In order to calculate the index of developmental of expenditure in PIB ratio we report their share of base year from the previous year, so we obtained index values that we have represented in Table. 5.1.8. Table no. 5.1.8. Evolution index of BASS expenditures in PIB 2006 2007 2008 2009 2010 Ponderea cheltuielilor n PIB 5,6% 5,7% 6,3% 8,06% 8,04% Indicele de evoluie a ponderii cheltuielilor 0 1,02 1,1 1,28 0,99 BASS n PIB

20

From table. 5.1.8. we can see that the share of expenditure to PIB has been the same as in the case of the revenue ratio increased during 2006-2009 and a decrease in 2009-2010.

1.28 1.02 1.1

1.4 1.2 0.99 1 0.8 0.6 0.4 0.2 indice cu baza in lant

0
20 06 20 07 20 08 20 09 20 10

Fig. 5.1.8. Relative change in the expenditure ratio to PIB It can be seen from Fig. 5.1.8. Change in of BASS expenditures to PIB and its growth index value. In 2006-2007 there was an index value of 1.02, in 2007-2008 the index had a value of 1.1, and in 2008-2009 the index registered a value of 1.28. In these periods have been indications of 1 higher value, which means that in the period 2006-2009 there were increases in of expenditure in PIB ratio. Also as with the index recorded revenue in 20092010 was less than 1, namely 0.99, this shows that there was a decrease of PIB spent. Surplus BASS share to PIB and its dynamics Like in the case of share income and expenses, I have reported a surplus of expression nominal PIB recorded during the reference year to determine which the share to PIB surplus was in 2006-2010.

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Fig. 5.1.9. surplus BASS share to PIB As can be seen from Fig. 5.1.5. surplus in 2006 was 0.13% of PIB in 2007 increased by 0.18%, the share of PIB surplus in coming to be of 0.31%. As for 2008, this time there is a relation of equality between income and expenditure, there was no surplus or deficit. In this case we say that the surplus was 0% (as compared to last year there was a decrease of 0.31% percent of PIB). In 2009-2010 the share of surplus decreased by 0.04% compared to 2009 when it was 0.09%. Thus, the share recorded in 2010 was 0.05% of PIB. In order to calculate the index of development of excess weight I have reported its share in PIB base year to the previous year, so we obtained index values that we have represented in Table. 5.1.9. Table no. 5.1.9. Development index of excess weight in PIB 2006 Ponderea excedentului n PIB Indicele de evoluie a excedentului BASS n PIB ponderii 0 2007 2,3 2008 2009 0 0 2010 0,5 0,13% 0,31% 0% 0,09% 0,05%

22

Table no. 5.1.9. we can see that the share of surplus in GDP registered a sharp increase during 2006-2007 when the index of development shows that this share has more than 2 times in 2007 compared to 2006. In the remaining years of evolution of the share, as we can see, it was not visible; in 2007-2008 there was a share to PIB surplus in 2008 because there was a balanced budget.

Fig. 5.1.10. The relative modification surplus share to PIB As shown in Fig. 5.1.10. Highest growth rate of surplus was recorded in 2006-2007 when he obtained an index of 2.3, while the slowest growth rate occurred in 2009-2010. By 2010 the share of surplus increased almost 3 times. c) correspondence of revenue growth, expenditure and PIB growth The calculation was performed using the corresponding coefficient brought forward which is determined by dividing the index of income or expenditure increase in growth index of PIB. Thus, data obtained on the correspondence between revenue growth and PIB growth we have represented in Fig. 5.1.11.

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Fig. 5.1.11. Correspondence between revenue growth and PIB growth Looking at Fig. 5.1.11. we can see that the coefficient is brought forward every year and thus can determine the correspondence between revenue growth and PIB. If the ratio is greater than 1, income had a higher growth rate as the PIB. If the quotient obtained is less than 1, income had a slower growth rate as the PIB, and if the coefficient is equal to 1 both have the same growth rate. Thus, the periods 2006-2007 and 2009-2010 coefficient was 0.98, and in 2007-2008 was 0.94, with in these cases brought forward by a factor of less than 1 because income had a rate growing slower than PIB. In 2008-2009 the situation changed completely been brought forward coefficient is greater than 1, therefore, income had a stronger growth rate than PIB. Data obtained on the correspondence between increased spending and PIB growth we have represented in Fig. 5.1.12.

24

Fig.

5.1.12.

Correspondence

between

increased

spending

and

PIB

growth

Looking at Fig. 5.1.12. Can see that in 2006-2007 brought forward the coefficient was 0.96 in 2007-2008 was 0.99, and in 2009-2010 it was 0.98. Because these periods brought forward coefficient was less than 1, the expenditure had a growth rate slower than PIB. In 2008-2009, has been brought forward coefficient greater than 1, i.e. 1.2 thus indicating that the pace of expenditures growth was more pronounced than that of PIB. An analysis of revenues and BASS expenditures a) Revenue structure BASS share categories and subcategories income in total income in each of the five years we have presented Analyze the table. 5.2.10. Table no. 5.2.10. Share in total income Categorii/subcategorii de venituri a.Venituri curente a.1. Contributii de asigurri 2006 98,2% 97,44% 2007 99,95% 99,3% 2008 95,7% 2009 100% 2010 82,9%

95,15% 99,7% 82,6%

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a.2. Venituri nefiscale b.Subventii

0,76% 1,8%

0,65% 0,05%

0,55% 4,3%

0,3% -

0,3% 17,1%

As can be seen from the table. 5.2.10. revenues come mostly from insurance contributions in 2006 their share in total income of 97.44% being in 2007 their share increased by 1.86% to 99.3%. In 2008 their share decreased to 4.15% of total revenues, the share of 95.15% was recorded in this period increased subsidies from the state budget to 4.25% from the previous year. In 2009, contributions have come to hold the largest share of total income in 2006-2010 (99.7%), this year not receiving subsidies from the state budget. This situation changed dramatically about subsidies, increasing their share next year by 17.1% with a decrease in revenue recorders insurance contributions by 17.1% compared to 2009. Also, we can see that the lowest share in total income is held by non-tax revenues, except in 2007 when subsidies have owned the smallest share.

Fig.

2.5.13.

the

real

evolution

of

social

security

contributions

In Fig. 2.5.13. can see that social security contributions have had a growing period, 20062009, then decreased sharply in 2009-2010. This decrease was due mostly to reduce the number of employees as shown in Fig. 05.02.14., Decrease because more people employed and have lost their jobs once the financial crisis and the effects and in Romania as in other European countries, these people had no financial capacity to pay CAS sites. 26

Fig.

5.2.14.

Average

number

of

employees

in

2006-2010

It can be seen from Fig. 2.5.13. and Fig. 5.2.14. that during 2006-2009 the number of employees grew, while revenues increased and the size of social security contributions, and in 2009-2010 the number of employees was reduced, there was a decrease in terms of revenue of insurance contributions. The amount of income from social security contributions depends on the income of staff employed and the share set to apply to such income (share CAS). If in a year wages of employed persons increases, the rate remains unchanged, can register at higher contributions. If the insurance contribution rates would increase, and revenue would remain unchanged, then it is likely that people submit complaints to the system of employment. To highlight the progress we have made insurance rates table. 05.02.11. Which shows the value of these shares, both the employee and the employer in the five years analyzed. The data table no. 5.2.17.it can be seen that the average number of employees increased from 2006 to 2008 with 211,800 in 2009-2010 and then decreased gradually with the number 567,900, reached in 2010 to 4,238,100 employees. Regarding the number of pensioners, unlike the number of employees, it increased continuously from 4.633 million (in 2006) to 4,768,100 (in 2010), in 5 years there is an evolution of the number 135,100 pensioners.

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Fig. 5.2.17. The evolution of dependency rate As can be seen from Fig. 5.2.17 in 2006, 2009, and 2010 report employee / retiree is below 1, which means that even a person not financially support a retiree. The situation presents itself differently in 2007 and 2008 the ratio is less than 1, which shows that a retired employee financial support through his contributions to the . In these circumstances the incumbent retired pension contributions paid by employees is a problem because as we have seen a number of beneficiaries is increasing year on year and the number of taxpayers is shrinking, making it especially difficult to achieve financial balance of Social Security State Budget.

The ratio between average pension and average net salary state
To highlight the relationship between average pension and average net salary of state I have made table. 5.2.18. Table no. 5.2.18. The ratio between average pension and average net salary state Anul Pensia medie Salariul mediu net Pensie/salariu 2006 2007 2008 2009 2010 311 399 593 711 739 862 1.042 1.282 1.381 1.282 36% 38,2% 46,2% 51,5% 57,6%

*Datele cu privire la cuantumul pensiei medii si cel al salariului mediu net au fost preluate de pe site-ul Institutului National de Statistic i cel al Casei Naionale de Pensii i Asigurri sociale;

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As shown in Table. 05.02.18. average pension in 2006 was 36% of average net earnings in that year, and then increased to 38.2% in 2007. In the years to increase the net salary pension report continued, reaching in 2010 to represent more than half of the net salary, i.e. 57.6%. It takes ever more than the amount of pension to increase from year to year due to pensioners need to be able to cover living expenses, the food, etc.., They increased at a rate fast enough especially 2009, when prices of goods and services have evolved with the introduction of VAT at 24%, by raising fuel prices. Size BASS expenditures were influenced not only by the large number of pensioners, but also increase the pension point value can be seen from Table. 5.2.19. Tabel nr. 5.2.19. Evoluia valorii punctului de pensie
Perioada 01.01.2006 01.09.2006 01.12.2006 01.09.2007 01.11.2007 01.01.2008 01.10.2008 01.04.2009 01.10.2009 01..1.2010 Sursa: CNPAS Valoarea punctului de pensie (lei) 323,10 339,30 396,20 416,00 541,00 581,30 697,50 718.4 732.8 732,8

Studying table. 5.2.19. we can see that the pension point has doubled from 2006 to 2010, as was the case with total BASS expenditures of , this doubling over the 5 years (19180.6 million lei year 2006 to 41,060.19 million in 2010). Granting pensions to reduce costs consider it necessary to make a greater use of the applications submitted and also need to achieve greater control of people pension benefits, because many of the pensions awarded to currently were obtained by fraud, such as disability pensions. Because of the growing older population, against the young, I think is very necessary introduction and a private insurance system to ensure our people a higher income in old age, as observed since the public system can not cover future expenditures, of benefits

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paid. Although currently have set up a private system will last a long time until it shall become effective. Conclusions

Following the analysis performed it was observed that the expenditure and income have been growing BASS 2006 to 2010, although revenues were recorded in 2009-2010 increased more slowly than in other periods. Social security contributions have had a growing period, 2006-2009, and then decreased sharply in 2009-2010. This decrease was due mostly to reduce the number of employees, unemployed people remaining No longer having the financial capacity to pay CAS sites. During this period the decrease in income from contributions received significant subsidies from the state budget to fund the pension benefits and other social insurance. The amount of income from social security contributions, as it emerged from the analysis performed depends on the number of employees, the income share of them and determined to apply to such income (share CAS). In the last year studied it was observed that with decreasing number of employees, income from social security contributions also decreased. Rate applied to earnings increased for each of the working conditions in 2006-2010. This development was driven by the need to collect more revenue from BASS to cover the social security benefits. Because there is a downward trend in the birth rate from 34% in 1930 to 3.3% (2050), we can estimate that the number of contributors to BASS will decrease significantly. Sharp decline in birth rates since 1990 is due mostly legalization of abortion after 1989. Before 1989, there was an explosion of births caused by Ceausescu's decree banning abortion, people born in this period will shape the next generation of retirees. Because the birth rate is declining those born before 1990 will have as large a generation to ensure their pensions. Size is directly influenced by costs BASS number of pensioners and aging demographic trends on Romania. Because there is a high tendency of population aging, the number of people entering retirement will increase in future (by 2050 they will represent 31.8% of total population), and the number of assets will decrease by 2010 to 12, 3%, reaching to

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53% of the total population. These population projections are quite worrying; we can estimate that the dependency ratio of pensioners and employees will increase further in the future. Reduction and aging population means increasing pressure on the shoulders of state social insurance budget, which must support, with fewer contributors to a growing number of beneficiaries. Demographic problems facing Romania shows that the social insurance system is not sustainable in its current form and requires a deep reform. Reforming the system is a time because it requires greater adoption of several measures to achieve a fair and sustainable. Currently, it encourages the organization and implementation of a pension system built on many pillars, which are both guaranteed a public fund, and private pension funds. Although currently have set up a private system will last a long time until it shall become effective. Even the European Union, almost all countries face the problem of financial sustainability of current pension systems and, therefore, are designed and implemented specific reforms to harmonize these systems. Therefore they started to increase retirement ages and to reduce opportunities for early retirement, while passing a portion of income for mandatory private pensions. Romania is currently experiencing lower employment, the pressures of very late introduction of privately managed pension pillar, increasing the number of beneficiaries, with high pressure from citizens to increase the average pension; discontent caused by the existence of inequity appeared too large pension. For this cause I think it is necessary to take measures to ensure a sustainable system of state social insurance, measures such as increasing the number of legally employed by active measures in the sphere of employment, promotion of active old age and stimulation people who have retirement age to continue working, birth through active measures to stimulate growth to ensure future contributors to public pension system, reducing the number of retirees by reducing fraudulent retirement (including disability) or reduction of the excessively large pensions.

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Bibliografie
1. Cioponea, C., M., Finane Publice i Teorie Fiscal, Editura Fundaiei Romnia de Mine, Bucureti, 2007 2. Blan, E., Drept financiar, Editura ALL Beck, Bucureti, 1999 3. Lazr, C., Finane publice, Editura UPG, Ploieti, 2007

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4. Vcrel, I., i colaboratorii- Finane publice, Ed. Didactic i Pedagogic, 2001 5. Boaj, M., Buget i trezorerie public, note de curs, Universitatea Dimitrie Cantemir, Bucureti ( accesat de pe pagina web: http://ucdc.info/cd/doc/1030 ) 6. Cistelecan, R., Buget i fiscalitate, note de curs, Universitatea Petru Maior, Trgu Mure, 2002 (accesat de pe pagina web: http://www.4shared.com/file/I65SPapj/Buget_si_fiscalitate-Rodica_Ci.html) 7. Legea 19/2000 privind sistemul public de pensii i alte drepturi de asigurri sociale publicat n Monitorul Oficial nr. 140/01.04.2000 8. Legea 250/2002 legea finanelor publice publicat n Monitorul Oficial, Partea I nr. 597 / 13.08.2002 9. Legea 263/2010 - legea pensiilor pentru anul 2011 publicat n Monitorul Oficial nr. 852/20.12.2010 10. Legea 287/2010 - legea bugetului asigurrilor sociale de stat pentru anul 2011, publicat n Monitorul Oficial nr. 880/28.12.2010 11. www.mmuncii.ro 12. www.mfinante.ro

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