Financial management of local authorities in Sweden - PowerPoint PPT Presentation

Financial management of local authorities in Sweden

Problems ofscale

Björn SundströmSALARbjorn.sundstrom@skl.se

Municipalities and county councils/regions

Municipalities290

20 County councils (21 Counties)

Source: Eurostat, national sources and DEXIA calculations

Source: Eurostat, national sources and DEXIA calculations

Source: Eurostat, national sources and DEXIA calculations

6

Problems of scale

The smallerthe municpialitiesare the higher are the costs per capita (SEK per capita)

SEK/capita

Municipalities by size

Cost per capita (SEK) for elderlycare by size

Cost per capita (SEK) for politicalactivities by size

Cost per capita (SEK) for infrastructure by size

Number ofgrowing

Municip.

Size of the labour market regions

Small tomorrow

Small today

How to handle the challenges

Delegatedfunctions

Inter-municipal cooperation

Elderly care reform

1952

19621962-1969

1969

1974

1977-2012

2400 rural municipalities, 10 boroughs, 90 town/cities

816 rural municipalities (> 2000 inh/municip.), 88 boroughs, 133 town/cities

> 8000 inh./municipality, coherentterritory in terns ofeconomicgeography, municipal blocks (300)

Voluntarymerges

Compulsory municipal boundary reform (obligatorium)

The amalgamation reform is implemented (277 municip.)

277 municipalitiesbecame 290

• In 2007, 271 municipalities became 98 with an average size of 55,000 inhabitants,
• 14 counties became 5 regions
• A minimum size for the new municipalities was set at 20,000 inhabitants
• Regions, as opposed to the counties, cannot impose taxes
• New tasks to perform for the municipalities
• A financing and equalisation reform necessary

• Income equalisation: tax base guarantee as per cent of national average taxable income
• Cost equalization due to demography, rural areas etc
• Equal economic conditions to all municipalities and county councils
• Differences in tax rates reflects only different efficiency or ambition

Large differences in taxable income

• With an average (income) tax rate of 20,70 % will
• Danderyd obtain a tax income of 68 000 SEK per capita.
• Borgholm obtain a tax income of 28 000 SEK per capita.
• All municipalities need approx. 41 000 SEK per capita

“No new responsibilities should be imposed on the municipalities and county councils unless they can finance them without raising taxes.

If the Government or Parliament adopt decisions that enable the municipalities to provide services more cheaply, they should reduce government grants to a corresponding extent.”

• Have focus on the challenges to be solved
• Criteria for distribution of responsibilities have to be discussed
• Overall vision and strategy
• Find necessary support for the reforms
• Organisational structureA strong change management as well as effective project management is most important

Social securitycontributions (employercontributions etc.), 43%, are includedin tax on income from employment in the municipal sector

• Municipalities and county councils have constitutional power to independently set the local tax rate
• Tax base = wages, entrepreneurial income, social benefits replacing income, pensions. Minus basic deduction.
• Average tax rate 2011 = 31,55 % (20,73 % municipalities + 10,88 % county councils)
• Highest combined tax rate = 34,17 % (Ragunda, Jämtland)
• Lowest combined tax rate = 28,89 % (Vellinge, Skåne)
• Small real estate tax tomunicpalitiesintroduced 2009

Source: Eurostat, national sources and DEXIA calculations