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The funding model for faiths: from 1990 to 2011, via the signing of the Agreement with the Holy See in 1997

1. From 1990 to 1996

The Constitution of the Hungarian People’s Republic promulgated on 20 August 1949 established the separation of church and state; it was implemented gradually as a result of anti-clerical and anti-religious political interventions and laws establishing the state monopoly over schools, the progressive nationalisation of church establishments and the dissolution of religious orders etc. After the transition to democracy in 1989, the funding structure for faiths came to be defined by Law IV of 1990, the Law on Freedom of Conscience and Religion and the Churches (LCR); its scope was subsequently increased by Law XXXII of 1991. With the separation of church and state being confirmed, the Hungarian State does, however, recognise that the churches are important social actors and creators of cohesion which, in addition to their spiritual activities, contribute to the good of the country in cultural, educational, social etc. fields, and this justifies the introduction of an adequate system of funding. Since 1990, the legislator has allowed churches to provide public services in various domains: education or sport, for example. For this purpose, they can create their own establishments or else perform assignments (such as catechesis) in public establishments. Church funding is made up of the following items: the churches’ own income, perhaps from their principal activities or their financial/business activities and state subsidies.
This system of funding still harboured uncertainties, as § 19 of the LCR had left Parliament free to subsidise (or not) other church activities within the framework of the annual finance law, on a case-by-case basis according to the faith and in respect of concrete goals. In the 1991 finance law, eight sections determined subsidies allocated to faiths, whereas in 1997 there were 46 sections. Each year, lawmakers have made available resources for the operation of basic church institutions and their investments etc. In addition, one constant should be noted: subsidies for public collections (museums, libraries) managed by churches. Subsidies for faiths have since 1991 concerned both church activities serving the common good and their purely religious activities.
This budget has seen clear increases since 1991 due to the emergence of a new financial item, namely compensation paid to churches for property assets confiscated after 1948. If the LCR has provided a legal framework for faiths so that they can contribute to serving society, they could not assume this burden without property or resources. A law was then passed which within ten years was to return to them for their use land assets which were under the ownership of state or local authorities when the law came into force. As regards renovation of property assets returned to churches in a run-down state, the latter were granted new subsidies, which have year on year been the subject of negotiations between the government in power and representatives from the faiths, the system for funding faiths often being subject to the political bargaining of the moment.

2. The agreement with the Vatican and the new governmental agreements

1997 marks a turning point in the funding structure. Not being able to achieve the return/reimbursement of confiscated goods within ten years, the representatives of the faiths proposed to extend the deadline until 2011. They also suggested the creation of a new model of reimbursement, by transforming the value of the land assets not returned into a capital on which churches would be able to benefit from annual interest. In 1996, the government introduced with Law CXXVI a system of funding allowing taxpayers to pay one percent of personal income tax (IR) for the benefit of a church, a faith or an organisation of public interest. The churches protested against this law, since lawmakers thereby put faiths “into competition” with other civil organisations.
The turning point came with the Agreement, signed between the Holy See and Hungary in the Vatican on 20 June 1997, on “funding public service activities and other purely religious activities performed in Hungary by the Catholic Church, as well as in several property-related areas”.
In 9 February 1990, an agreement was signed between Hungary and the Holy See restoring diplomatic relations; it stated that the issues of concern to both partners would be resolved in the future by mutual agreement. Thus, the Agreement of 1997 was drawn up. This agreement between the Vatican and Hungary does not regulate in a global way the relation between the partners, but focuses on the issue of funding the Catholic Church; in this precise case, it can be compared to a concordat.
This text sets out the rules for funding activities performed by the Hungarian Catholic Church, whether in public service or the purely religious domain. It lists guarantees so that private individuals can donate part of their income tax to the church. This agreement plays a major part in the implementation of a “Hungarian” model of relations between the state and faiths for two reasons. First of all, more detailed legislation on faiths was developed in parallel to preparing this concordat; these two texts were harmonised. Furthermore, the agreement with the Vatican served as a model for other agreements signed with three “historical churches”: the Reformed Church, the Lutheran Church and the Alliance of Jewish Communities in Hungary, then subsequently with the Baptist Church and the Serbian Orthodox Diocese. These agreements were published in the form of a decree and do not possess true legal character. They may be regarded as contracts of a political kind or, according to Jurist Balazs Schanda, as “common law agreements”. As for their content, there is a difference when compared to the agreement with the Vatican, since the latter deals with issues of a primarily financial character, while the others have a global character and set out general principles of cooperation between the state and the church concerned. All these texts recognise the principle of separation of church and state, but it is a benevolent separation which respects religious freedom and freedom of religions, supports their activities and is open to cooperation in the general interest, in particular in the area of public services.
Broadly speaking, the agreements on church funding between the Hungarian State and faiths include the following principles: a) church establishments providing public services must receive the same subsidies as establishments that depend on the state or local authorities; b) churches also receive subsidies in the areas of education, health etc.; c) the partners fix the funding rules based on reimbursements of former confiscated goods and on the basis of one percent of IR and one-off, exceptional subsidies.

3. Law CXXIV of 1997 on the funding of faiths

Parallel to the preparation of the concordat, the law on the funding of faiths was drawn up. Law CXXIV of 1997 transposes into Hungarian legislation the principal elements of bilateral agreements between the Hungarian State and the faiths. At the latter’s request, lawmakers decided upon a second amount of one percent of IR that was able to be assigned to churches. The first one percent can be allotted or to one of the officially registered churches or to a specific state fund. The second one percent can be assigned to an association or a secular or religious NGO. The state provides a contribution of the same value to institutions providing a public service, irrespective of whether they depend on the state, local/regional authorities or the churches.
The law on the funding of faiths has been amended several times, but it is Law CXXXIII of 2000 (finance law for the budgetary year) which brought about a global change. Several new sections were introduced (e.g. under certain conditions, the churches have henceforth the right to receive tax-deductible donations; the state contributes to the budget of the catechesis taking place outside state education). Today, the fundamental principles of the legal status of churches as well as certain principles concerning their funding are contained in the law on religious freedom and on the legal status of the churches, Law CCVI of 2011. The rules for funding faiths continue to be fixed by Law CXXIV of 1997 and bilateral agreements signed between the state and churches. The National Assembly decides the annual amount of financial resources allocated to churches by the finance law for the budgetary year.
The current structure of the funding of faiths is then made up of the following elements: a) churches’ own revenues from religious activities, non-financial/non-business activities and financial/business activities; b) subsidies received from the state budget - subsidies for activities performed in the public sphere and the complementary subsidy (part of the IR of private individuals), interest arising from compensation for confiscated church assets and other endowments defined each year by the finance law. Also, faiths can benefit from other subsidies, originating from the European Union or other programmes of international funding.

See the summary (pp. 13-25, in English) of the works of Bernadette Szilágyi whose research relates to the issue of church funding.

D 11 February 2015    ARozalia Horvath

CNRS Unistra Dres Gsrl

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