The case in summary: – A controversial “bookkeeping trick” makes Norwegian municipal budgets look healthier than they are. – The difference between what the municipalities pay in pension premiums and how much pension expenditure they actually have has increased over time. – The discrepancy is now up to NOK 65 billion. – The bookkeeping trick has contributed to presenting municipal budgets that are healthier than they actually are, says Norway’s association of municipal economists and municipal economists. – The municipalities are tempted to take advantage of “income” that only exists on paper, and must either eat away at liquid funds or take out loans when the settlement comes. – At the top, the state responds with smaller transfers to the municipalities because the budget looks healthier than it actually is. The summary is made by an AI service from OpenAI. The content is quality assured by news’s journalists before publication. Parts of the pension costs that Norwegian municipalities pay each year are recorded as “income”, even if they cannot be used as such. In the latest Municipal proposal, the government states that this difference in premiums is up to NOK 65 billion. – It is an astronomical sum. This disastrous invention must be abolished as soon as possible, says Asbjørn O. Pedersen. He is secretary general of Norway’s Association of Chambers and Municipal Economists (NKKF). Pedersen dates the fall to 2002, when local government minister Erna Solberg gave the municipalities the opportunity to moderate fluctuations in annual pension premiums by spending them over several years. By recognizing the difference in premiums as income, and recognizing the same amount as expenditure in the following years, the municipalities should have more flexibility and control over pension expenditure. Well, that was the idea anyway. According to critics, the “bookkeeping trick” has helped to “decorate the bridge” and present the municipal budget as healthier than it actually is. And over time it has only gotten worse. The devil is in the details and since 2002 the difference between what the municipalities pay in pension premiums and how much pension expenditure they actually have has exploded. Photo: NTB – This fake game must be stopped faster than scum Raudt politician, civil economist and lecturer at Bergen University College, Torstein Dahle calls the bookkeeping practice “a ticking bomb under the welfare services”. The explanation is that he leads the municipalities into temptation and into a double “luxury trap”: The municipalities run the risk of benefiting from “income” that only exists on paper, and must consume liquid funds or take out loans when the settlement comes. The state responds with smaller transfers because the municipalities look healthier than they actually are. – Sooner or later, reality strikes back. This fake game must be stopped faster than fraud, says Dahle. – The municipal budget is made up of air claims and fake income, says Torstein Dahle. Photo: Gerd Johanne Braadland / news Secretary General of the NKKF, Asbjørn O. Pedersen votes in. In the latest edition of the magazine Kommunal Økonomi, he characterizes the accounting as “madness”. – The search-rich state asks the municipalities to use the credit card and pay for the pension costs, he says. – It eats away at the municipal reserves. See more reactions to the billion deviation below. news Jens-Ingvald Olsen (R), former finance councilor in Tromsø This is a financial bomb. The problem is that the government does not take the seriousness into account, and instead gives the impression that this will go away on its own. But this is not a “zero sum game” that will even out. Since 2002, there have only been 2-3 years that the premium discrepancy has not increased. news Asbjørn O. Pedersen, general secretary of NKKFWe have been against this scheme ever since it was introduced, but the madness has only continued. The net premium discrepancy in the municipal sector continued to grow to astronomical heights. This deprives the municipal sector of liquidity, which means that many municipalities have to use their right of withdrawal and pay interest. NIKON D5 (3) / PwC Geir Are Nyeng, head of the municipal sector at PwC This underlines the seriousness of the financial situation the municipalities are in. A deficit of NOK 15 billion is perhaps the worst financial result we have ever seen. There is no target for the municipalities to run large surpluses, but the call is for a surplus of 1.75 per cent. Right now, only a few municipalities are able to do that. Cicilie Sigrid Andersen / news Kjell Ingolf Ropstad, KrFThe KrF expects a clear clarification that ensures that the municipalities are covered for the actual expenses they have for pensions. It must be entirely possible. Because now there is an urgent need for more money for the municipalities. The situation is dramatic. While Vedum and Sande are “following the situation closely”, schools are being closed and staff in schools and nursing homes are being made redundant. news Stein Kittelsen, director of BDO Consulting Short-term crisis management has taken the focus away from the long-term challenges in Municipality-Norway. The pandemic and the war in Ukraine forced attention away from long-term needs to acute problems. If the municipalities are to succeed in the challenging changes to come, it requires good interaction between all actors and interests: Linnea Skare Oskarsen / news Torstein Dahle, lecturer emeritus at the HVLM School of Business and Economics. with NOK 65 billion. It will appear as large transfers to the municipalities. But that does not give the municipalities 5 øre more to their budgets, because they have already been required to recognize this as income in previous years. Terje Bendiksby / NTB scanpix Jørn Gisle Rattsø, professor of social economics at NTNU State tries to stabilize the expenses of the municipalities over time, which they do not think the municipalities can manage on their own. The solution has become an accumulated premium deviation that has grown over time, which is now compensated through annual allowances. But the relationship between the state and the municipal sector must be assessed over a long period of time, and not on the basis of a snapshot. The government: – Will, in isolation, burden the municipalities The problem with the increasing difference in premiums has been recognized by various governments, which in turn have modified and tightened the accounting regulations. In the latest edition of the Municipal proposal (page 82), it is stated that the premium deviation “in isolation” can affect the liquidity of the municipalities, and that some municipalities will solve it by borrowing money: – This is legitimate and can be natural in a situation with large premium deviations. A higher interest rate nevertheless means that (this) has become more expensive, writes the Ministry of Municipal Affairs. See what the ministry wrote to news below. Increased pension costs have been identified as one of the drivers behind the “municipality crisis”, and next year 25,000 more Norwegians will retire. In total, 1,075,600 recipients of old-age pensions will have NOK 335.6 billion. The Ministry: – Advantage to smooth out the large fluctuations Ole Gustav Narud, State Secretary in the Ministry of Local Government and Modernization – Municipalities pay large amounts in annual pension premiums to the pension schemes for their employees. The costs for this vary greatly from year to year. Therefore, a set of regulations has been established to make it possible for the municipalities to smooth out these fluctuations between years. It is a clear advantage that the large fluctuations can be smoothed out in the municipal budget over time, as the system provides for today, in that it is the pension costs and not the pension premiums that drive the result. The difference between the pension premium and the pension costs that are recorded in the accounts is characterized as the “premium discrepancy”. The state determines most of the tax revenue and grants the resident tax to the municipalities through the revenue system. These revenues also cover the annual growth in pension costs, which burdens the municipal budget. In this way, the state ensures that pension costs in all municipal sectors are fully funded over time. The government and KS had a suitably cheerful crisis meeting last week. Today, 23 municipalities are on the so-called Robek list, which means that they are out of money and must give up control. Photo: NTB KS: – The difference in premiums creates challenges Despite assurances from municipal minister Erling Sande that the state will cover the pension costs, the municipal sector is worried about the development. “The increased costs will increase the pressure on the municipal economy”, confirmed KS when the proposal for the next state budget was presented. – The large difference in premiums creates challenges. Especially for the liquidity in a good number of municipalities, says KS director Helge Eide to news. He still does not want to go back to the time before 2002, when the municipalities paid exactly the “correct” amount every year. – The pension premium varies greatly from year to year. If we base the municipal accounting on this, there will be disproportionately large fluctuations from year to year. Published 28.10.2024, at 10.52
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Accounting tricks embellish the budget – news Vestland
