Just two weeks after Norwegian municipalities announced that they are managing a deficit of NOK 10 billion, the municipal organization KS came up with a new estimate this week. The deficit is now estimated at NOK 15 billion. The speech was presented during a new meeting with the government on Tuesday afternoon, just four days after the previous “crisis meeting”. All over the country, cuts are reported in everything from kindergartens to schools and health services. Including the municipal minister’s own home municipality (Gloppen in Vestland). Correspondingly, Finance Minister Trygve Slagsvold Vedum has also experienced the municipal crisis “first-hand” after his own children’s school came into play. What is happening in Commune-Norway? news has broken down the answer into 8 sections. Increased costs for nursing care In the latest survey to KS, 131 out of 170 municipalities report that they are in the red. Among these, 85 per cent state that increased costs for nursing care are to blame. The main explanation is the problem with recruiting personnel, which in turn means higher expenses for overtime, the use of temporary workers and the hiring of temporary workers. news has previously told about desperate municipalities that tempt newly graduated Danish doctors with salaries of NOK 400,000 – a month. Other cost drivers are stricter staffing standards and an increased need for facilitation and special educational measures in the nurseries and schools. Increased interest expenses In 2019, a survey by Statistics Norway showed that the debt owed to Norwegian municipalities had quadrupled since 2000. If we assume that Norwegian municipalities have loan terms that follow Norges Bank’s policy rate, the annual interest costs today are NOK 15 billion higher than that they were in 2021. At the top, interest expenses increase if the municipalities do not have a disposal fund to draw from. Of the 357 municipalities in the country, one in five has a customer relationship with DNB. At the request of news, the bank carried out a count in September. She showed a doubling in the number of inquiries about overdrafts, compared to previous years. Unexpected high price growth Figures from Statistics Norway show that the Consumer Price Index (CPI) rose 3.0 per cent from September 2023 to September 2024. The so-called deflator – which is a measure of price and wage growth in the municipalities – is one level higher than this. Next year, KS expects the deflator to grow by 4.1 per cent. – Cost growth in recent years has been far greater than what has been compensated. These cost increases are taking the municipal sector with them forever, says chairman of the Norwegian Municipal Directors’ Forum, Bjørn Gudbjørgsrud. Policy rate in percent The policy rate is set eight times a year by Norges Bank. The policy interest rate governs the interest rates in the banks, and affects your housing costs. The aim of raising the interest rate is for the high prices to come down again. The forecast tells us how Norges Bank thinks interest rates will develop in the future. Read more about sources and reservations here. A higher policy rate means increased expenses if you have a mortgage 2022 2023 2024 2025 2026 2027 Forecast Norges bank Tax revenues have camouflaged an underlying problem The tax revenues of the municipalities fluctuate, and in some years there is increased tax growth. In other years, there is less tax growth. Higher tax increases and “artificial stimuli” during the pandemic may have “hid underlying challenges in the previous years, and perhaps slowed down the necessary adjustments”, writes KS in a separate report. They indicate that the extra income from pleasant tax surprises has mainly gone to “build buffers”, and to a “limited extent” has gone to lasting measures. Correspondingly, questions have been raised as to whether the municipal sector was overcompensated during the pandemic and thus forgot the art of “putting corrosion after sustenance”. – The survey gives a realistic picture of the situation. We feel that the cost drivers are a sharp increase in interest rates, increased expenses for the elderly and those in need of care and high cost growth, says Sunnfjord mayor Jenny Følling (Sp). Here together with municipal minister Erling Sande from the same party. Photo: Håvard Nyhus The demographic development with more elderly people There is an “undetonated pension bomb” in the municipal budget, writes Dagens Næringsliv. The Ministry of Local Government formulates itself more cautiously, but writes that the effect of early retirement will be “significant”. In 2025, the 1963 generation will be 62 years old and can say goodbye to working life. In a circular, Local Government Minister Erling Sande has assured the municipalities that the state will cover the increase in pension costs. Behind the reports of unrest lies an increasingly “top-heavy” age pyramid with several elderly and pensioners per employee. And from the bottom, there is a lack of “recruitment” of future employees. In March, the Norwegian fertility rate was measured at a record low of 1.4 children per woman. Minister for Children and Families Kjersti Toppe (Sp) responded by setting up a committee “to find the cause of the low birth rates”. Expensive Ukrainians A study from Ny Analyze shows that each Ukrainian refugee costs NOK 675,800 on average in the year of reception. The sum includes a stay at an asylum reception, benefits, follow-up and 12 months’ participation in the introduction programme. The Norwegian Directorate for Integration and Diversity (IMDi) has investigated how much of the bill is taken by the state – and how much “flows over” to the municipalities. The mapping shows that the municipalities have received a larger part of the bill. From 3 per cent in 2022 to 8 per cent in 2023. The government has estimated that the reception of Ukrainian refugees will cost a total of NOK 31.4 billion during 2024. In September, the rules for collective protection of Ukrainian refugees were “strongly tightened”. – The pressure on municipalities and others to help is too great. That is why we are tightening up, explained Minister of Justice Emilie Enger Mehl (Sp). Free income will be “eaten up” In the submission to the state budget for next year, the government announced that the municipalities will get a bigger pot of free income to rummage around with. In kroner and øre, the municipal sector was promised a “room for action” of NOK 3.6 billion. And then the municipalities get the support they need? Not so fast. According to KS and Unio, the “real growth” in discretionary income is actually the opposite when transfers are adjusted for population and job changes (see the red line in the figure from the national budget below). Minister of State Erling Sande (Sp) has for his part denied that he is “playing with numbers” and repeats in a chronicle that the new budget means “the biggest real growth in the scope of action of the municipalities in recent times”. Facsimile: The government System failure and lack of savings incentive Professor of social economics at NTNU, Jørn Rattsø tells news that the financing of the municipalities over time “has developed into a kind of reimbursement system”. – It has become a system where the municipalities decide the expenses, and then the state has to reimburse what is missing. He characterizes it as a “system failure” and a recipe for new crises. – It has serious weaknesses as a management system, because there is a lack of incentive for prioritization and restructuring. Terje Bendiksby / NTB scanpix Jørn Rattsø, NTNU professor A solid municipality has a reserve fund to deal with unexpected expenses, plan the service offer in the future in time, understands that the most important must be prioritized and less important tasks canceled in more difficult times, and with that manages restructuring and finances in balance. The reimbursement system that has been allowed to develop cannot last long, it is a bit reminiscent of the county councils and hospitals before they were taken away from them. Philip Hofgaard Bjørn Gudbjørgsrud, chairman of the Norwegian Municipal Directors’ Forum I think the solution in the future can not only be about more money, but also about more foresight. Then municipalities and the state must talk better together – if not, voters will be confused and trust in both politicians and administration will be reduced. news Lars-Erik Borge, NTNU professorDuring the corona period, incomes were “artificially” high (especially in 2021), which had a connection with the municipal sector being overcompensated for higher expenses and lower incomes linked to the pandemic. In addition, the municipalities received extra transfers to stimulate private business. Simon Skjelvik Brandseth / news Lars Fjeldstad, Osterøy mayor and leader of the Center Party’s mayors’ forum These are demanding times in Municipality-Norway at the moment. There are many factors that have led to this. I feel that Sande takes this seriously, and I am glad that he listens to KS who speaks on behalf of the municipalities. I do not notice a greater political pressure on amalgamation. news Jenny Følling, mayor of SunnfjordExtremely high tax revenue in 2022 and 2023 has camouflaged the cost development. Extra tax income at the end of both years helped to balance the accounts instead of the fact that they should have been used for restructuring. Published 17.10.2024, at 07.39 Updated 17.10.2024, at 08.09
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That is why there is a crisis in the municipalities – news Vestland
