Since the transition period in the early 1990’s, a diverse and active civil society has evolved in Hungary, with about 5,000 organisations (associations and foundations) currently active at some-level.

However, in the past six to seven years, many of them have had to begin operating under increasingly deteriorating conditions, characterised by a degenerating legal environment with limited access to funding and the closure of numerous advocacy avenues as well as a government-orchestrated smear campaign against independent civil society organisations (CSOs).

While the basic legislation of CSOs allows for free operation (though with considerable administrative burdens), in 2017 – in a move unprecedented in the European Union – the Hungarian Parliament passed an act “on the transparency of organisations supported from abroad”.

This move, styled after the Russian “foreign agent” law, prescribes that CSOs receiving more than 7.2 million HUF (approximately $24,000) from non-domestic sources (whether public or private) on an annual basis must register with the courts as being “foreign funded” and use this label on their websites and all publications. Non-compliant organisations are subject to sanctions, which eventually may lead to fines or even the organization’s dissolution.

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The level of pressure

This was the first time in Hungary that the harassment of CSOs has taken the form of a restrictive legal rule, but unfortunately it was not the last. In 2018, the restrictive legislation was followed by the so-called “Stop Soros” law package, aimed at those persons and organisations allegedly supporting migration; it essentially threatening anyone (e.g. lawyers) who provide legal aid (or other assistance) to refugees and asylum seekers.

Additionally, the law imposing a 25% tax on the income of any organisations doing the same. (So far, in practice neither of these measures have been used against anyone.)

The financial viability of the sector is being characterised by a peculiar ambiguity: according to the latest available statistics, the total income of the sector, amounting to 630 billion HUF ($2.33 billion) shows a theoretical abundance of funding, yet “starving” CSOs are clearly visible and increasing in number. 40% of the sector still works with a small annual budget of less than 500,000 HUF (app. $1850).

Also, there is a large gap between the capital and the rest of the country, with 60% of the income under the control of Budapest-based organisations.

Public funding constitutes an important source for the sector as a whole – according to latest official statistics it comprised 38% of the total income.

The EU Structural Funds for the 2014-20 period (which can be considered as part of public funding as these are distributed and managed by the government) has recently sped up, with a large number of calls announced and contracts concluded.

However, there are very few budget lines where CSOs could apply by themselves – they are mostly only eligible as partners of local governments or churches. Therefore, only CSOs loyal to these institutions have any chance of winning grants. The political bias in the distribution of public funds is practically out in the open and increasing.

A characteristic case was that of the so-called Civil Union Forum, the government’s main “CSO arm” (or GONGO); investigative journalists found out that the state-owned electricity company subsidised this organisation with 500 million HUF (app. $1.85 million). No other organisation received amounts anywhere near this magnitude. In this situation, CSOs working in sensitive or controversial areas (e.g. gender issues, drug prevention) are virtually excluded from public sources.

CSOs receiving funds from non-domestic sources – whether private or public – are being stigmatised by legal and governmental institutions, with particular ire being directed at Open Society Foundations (founded by philanthropist billionaire George Soros) and their beneficiaries. At the same time, other major international donors while expressing their concern over the shrinking civil space in the region have so far given only minor contributions – although this seems to be changing now.

Under these circumstances, fundraising from private donors, including crowdsourcing (e.g., adjukossze.hu) are becoming more popular, but rather benefit the professionally communicating CSOs and independent media outlets. Occasional collections for charitable purposes can also be successful, but only to cover individual actions. Corporate giving is championed by multinationals, but Hungarian-owned businesses give mostly along personal or political lines.

Limited opportunities

Sadly, private donors of CSOs do not receive any tax deduction, while the conditions of exemptions on corporate donations strongly favour professional sport organisations over CSOs. The total amount of funds from the 1% income tax incentive significantly decreased in 2016 for the fist time in several years (by app. 1 billion HUF, 3.7 million USD), largely due to the new “automatic” tax declaration system which had been introduced. While this generally simplifies taxpayers’ lives, it also makes it easier to forget about the 1%. (Still, some harassed organisations were able to increase their income from this source as a result of strong campaigning).

CSOs can – in theory – generate income from selling or contracting for goods and services, but in practice this is rare in the absence of a market. Most of the sectors where CSOs have traditionally provided services (e.g. education, social welfare) were nationalised, and services are provided by state institutions themselves or outsourced exclusively to churches and state-owned companies.

Also, governments – both national and local – attempt to downplay the gravity of social problems and issues (e.g. housing), stressing that public institutions can take care of everything without the assistance of independent actors. As a result, there is hardly any state funding, or indeed space for CSOs to provide services in these areas. While social entrepreneurship is fashionable, and there is support available (both from the EU and private foundations), there are only a handful examples of sustainable enterprises that are able to operate without external funding.

Under these conditions, retaining professional staff is a grave problem for most CSOs, especially the smaller ones. According to statistics, the number of employees in the sector remained constant in the last few years, comprising app. 80,000 full-time equivalents. But employees are hired often on a (part-time) project-basis, and once funding runs out, there are no means to keep them. In this situation volunteering would be a way of survival for CSOs; however, it is still not widespread: according to a research by the statistical office, 94% of the people who help voluntarily do this informally and not through CSOs.

 

This article comes from the newest bilingual (Polish/English) issue of Res Publica, Civil Society Renewal, which can be purchased by emailing sklep@res.publica.pl.

The Director of Ökotárs Hungarian Environmental Partnership Foundation


Eastern European Futures

In 2009, the European Union and six of its Eastern neighbours launched the Eastern Partnership (EaP) with the stated aim of building a common area of shared democracy, prosperity, stability and increased cooperation. A decade on, however, progress has been mixed.

Visegrad Insight is published by the Res Publica Foundation. This special edition has been prepared in cooperation with the German Marshall Fund of the United States and supported by the International Visegrad Fund.

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