With a year left until what looks to be a tight election, the government is reallocating considerable amounts of public assets away from the state and into, e.g., foundations. The goal could be to sustain Orbán’s „System of National Cooperation” in the event that he should lose the 2022 election. However it may turn out, does this mean that future governments will no longer have a say in higher education? And what about the hundreds of valuable state properties that were recently transferred? Are they destined to forever remain in the possession of Fidesz loyalists? Opposition leaders don’t see the situation as being completely hopeless. Translated by Dominic Spadacene.
Next week the National Assembly is expected to pass a bill that would place 70 percent of Hungary’s higher education under the auspices of foundations. At the same time, the state would be effectively handing over billions of forints in public assets to organizations led by Fidesz delegates, free of charge.
Even in the bill’s wording, the legislator made no attempt to conceal the objective to ensure the foundations’ independence from whatever government may be in power. And with the 2022 elections coming up next year, it is difficult to interpret this in any way other than Viktor Orbán ensuring that Fidesz can maintain important positions in preparation for a possible defeat.
Outsourcing the state’s responsibilities
As a first step following the law’s adoption, 32 public-interest asset management foundations that will be carrying out public functions will be able to begin operations. A detailed list can be found starting on page 19 of the bill, which has been uploaded to the National Assembly’s website (pdf). As of April 20th, it included all foundations that shall carry this classification from now on; however, the situation is changing dynamically. In the meantime, for example, it was determined that the foundation operating the House of Terror would also be entrusted with assets.
Considering the growing portfolio of foundations, it doesn’t seem so far-fetched that these nearly three dozen foundations are just the beginning and that we may say quite a few more such model changes during the time leading up to the elections.
In addition to institutions of higher education, foundations will gain possession of mansions, resorts, harbors, parks, estates, a theater, clinics, and shares in various companies. For the time being, an exact listing is hard to come by since it is not yet clear what assets each foundation will be receiving from the state. One thing is for sure: hundreds of valuable properties are being discussed, and, considering the shares of companies like MOL and Gideon Richter, the combined stake is on the order of trillions of forints. (It’s a bizarre situation, given that the state bought back the shares in MOL from the Russians for hundreds of billions of forints in 2011, and yet now it can simply give these shares away to a foundation for nothing. And by doing so, the government gives up all formal control over the oil company.)
When it comes to functions, the foundation-based structure opted for by the government outsources away from the state activities related to education, culture, healthcare, agriculture, and memory politics.
The main point of this foundation-based structure – beyond the fact that each one will be able to start operations with 600 million forints worth of public assets – is that the state assets that are to be handed over to these foundations will no longer be considered public capital in the classical sense. From here on out, it will be the trustees appointed by the current government who will administer the recently acquired state assets and also receive founder rights. Further, the law prohibits the revoking of this provision, and most of the regulations governing the operation of the foundations can only be amended by a two-thirds majority.
Meanwhile, there is another bill before the National Assembly that, while independent of the foundation-based structure, is still in line with the trend of slimming down the state. Proposal T/15709, discussed in detail by András Schiffer on 24.hu, regards the establishment of the „Supervisory Authority for Regulated Activities.” This new authority would oversee the tobacco trade, the gambling market, judicial enforcement, the register of liquidators, as well as concession-related tasks. The implication of this last item is that the Concession Council would also operate under the new authority.
From the list itself, it’s clear that the regulation of industries that see the movement of vast sums of money would come under the supervision of the new authority. Furthermore, for the past few decades, the supervision of these activities have fallen under the government’s judicial, financial, and economic jurisdiction. And just like the Media Council and the Energy Authority, the president of this institution would be appointed by the prime minister for a period of nine years.
A lot of money is needed to keep NER afloat, particularly from the opposition
While there may be several reasons for establishing the foundations and the new authority, they all point roughly in the same direction: reducing the scope of activity for the next government – should the opposition happen to take it – and maintaining Fidesz’s clientele.
Over the past few weeks, there have been multiple speculations regarding Viktor Orbán's possible motivation. According to the commentaries, the precursor to the current salvaging of wealth and power dates back to the end of Socialism in Hungary in 1989, when the technocratic elite of the late Kádár period managed to salvage their influence and continue to hold onto important positions for decades. This is allegedly what led László Kövér [current Fidesz Speaker of the National Assembly] to the conclusion that „we were in the government, but we weren’t in power” following the first Fidesz administration (1998-2002).
According to this logic, Orbán's goal may be to make things more difficult for the next government, should it end up in the hands of the opposition (just as the Socialist-related elite did with him during his first term as prime minister). It may also be to successfully maintain the network that has been loyal to him and his party, even at a time when the streams of funds keeping NER alive would be largely blocked off.
The Fidesz leaders on the boards of trustees of the public foundations – who currently hold important positions in the administration as ministers and state secretaries – are given tasks
and, above all, monthly salaries in the millions (forints). As a result, it may be in their interest to build out the System of National Cooperation even as opposition, or at least to try to keep it afloat.
Fidesz may also have a need for Orbán’s emerging parallel state since a change in government would lead to a mass of party loyalists leaving their posts in the state administration, as was the case, for example, after the 2019 municipal elections. If the government changes hands, that exodus would be significantly larger, and keeping outgoing officials close to NER could be a serious challenge for those currently in power.
Potentially unsettling for party loyalists
It takes money to keep people on board, and NER’s operations are costing a pretty penny. Take, for example, the media holding company made up of hundreds of publications so loyal to Orbán, which, despite the seemingly endless stream of state advertisements, managed to generate billions in losses in 2019. Operation of the substantially streamlined version of the system (i.e., the retainment of at least a portion of its personnel) requires significant and continuous external funding, as most of the media outlets tied to Fidesz are not viable from a market standpoint.
The financial motivation is conspicuous also because while state universities were subject to the public procurement obligation, the universities that are switching to the new management model are exempt from it. As there are offhand hundreds of properties, which in many cases are in need of renovation, these sorts of projects will be possible to carry out in the future with minimum transparency. First off, this poses a serious risk of corruption. Secondly, if a construction company under NER falls from favor following a potential change of government, even then it wouldn’t be entirely without work.
The current power move being made in preparation for possible foul weather also has a psychological side to it that gives rise to some uncertainty. While it may seem reassuring to its devotees and clientele that the Orbán administration is „so wisely” planning ahead,
the safeguarding of assets sends the very message that in 2022 not only is a Fidesz administration with a two-thirds majority not in the cards but also that Orbán will lose the election.
The preparation for possible defeat can itself significantly undermine the appeal of what earlier seemed to be an unquestionably strong leader. It can also prompt the less devoted party loyalists in NER to start thinking about a plan B or C. If you’re interested in why current forecasts indicate just as many arguments both for and against Orbán winning the next election, we've discussed the topic before in greater detail.
The opposition doesn’t see the situation as hopeless
According to multiple perspectives from the government-independent public sphere, a potential new government wouldn’t really know how to deal with the current transfer of assets. Several politicians from the opposition responded to our inquiries on the matter, saying that there are possible ways to resolve the situation at hand.
As for the universities, Deputy Speaker of the National Assembly Koloman Brenner said that foundation-based structure is not intrinsically evil; however, if we look beyond our borders, we see that large universities offering comprehensive education programs are all supported by the state because this is the only way they can maintain their extensive research and education portfolios. Jobbik’s representative on educational matters stated that since the university senates themselves decided to switch to the foundation model, it’s realistically possible that following a change of government, in a year or two, the very same senates (seeing the issues cropping up) may request to go back to being state-supported, in the same way that they had initially voted for the foundation-supported model.
Of course, a conflict may arise at this stage, considering that the boards of trustees of the foundations are primarily filled with Fidesz members. These boards are essentially free to modify the scope of activity of the senates and, according to certain interpretations, they can even revoke the right to elect a rector.
Then the question is, if the board of trustees blocks the will of the very senate representing the autonomy of the universities, or violates the rights of the universities’ leadership, what sort of political consequences could there be?
Opposition politicians believe that with the way things currently stand, there are two areas of concern with the privatization of higher education. One is that the board of trustees, which is appointed by the current minister, can choose to prolong itself practically for life. The other is that the switch back to state support doesn’t happen automatically even if the university senate elects for that option: the request requires a two-thirds approval by parliament.
Although the boards of trustees have a fairly extensive range of authority over the institutions, the Higher Education Act can be modified with a 50% majority. With this, it is relatively easy to ensure the enforcement of student and teacher rights by such legal safeguards, stated Member of the National Assembly Gergely Arató.
According to the Democratic Coalition politician, even now the government could intervene in a dictatorial exercise of power by a board of trustees – as seen in the case of the University of Theatre and Film Arts in Budapest (SZFE) –, however, it doesn’t currently show any desire to do so. He believes that if the government changes hands, a variety of techniques would be available to restore university autonomy, but he didn’t wish to elaborate further so as not to show their hand to the current administration.
Not even a two-thirds majority is enough to take away someone’s property
All of the opposition politicians that we interviewed stated that, for one thing, their lawyers are already examining the situation as it unfolds. Secondly, since state property is at stake, they are confident that there would be the opportunity to review the proceedings, should the government change hands. They also agreed that the situation regarding assets is more complicated than that for higher education.
The opposition politicians say that, if possible, they would have to win the election with a two-thirds majority (which, given the electoral system, they don’t consider unrealistic, since Fidesz also managed to end up with a two-thirds majority despite winning by only a slight margin in the election). If they manage to do so, they would have more room to maneuver. However, even with a two-thirds majority, it’s not possible to take away someone’s property. The way they see it, the key to the solution is that it’s not possible to essentially outsource the state’s tasks to private institutions in such a way that the state continues to finance them without there being any public oversight.
According to Bertalan Tóth, Chairman of the Hungarian Socialist Party, it is possible to resolve the extended scope of the Public Procurement Act with a law passed by a simple majority. At the same time, the opposition is also very determined for the state to regain control over the MOL and Richter shares that constitute state assets.
The representative believes that there is still the question regarding the fate of the 1.5 trillion forints provided by the EU – money that the government used to „sweeten” the deal for universities to opt to change their models. This is because – as a result of an amendment passed last year – the manner in which this money is spent no longer falls under the scope of public procurement. As such, it is not certain whether the EU will permit the spending of so much money without any transparency. If this is the case, it’s even possible that the universities that opted to change their models may wish to return to being supported by the state in the not-so-distant future.