Recent municipal territorial reforms in Finland

1. Recent municipal territorial reforms in Finland Pekka Kettunen (pekka.t.kettunen@jyu.fi)

2. Background • Finnish municipalities have broad tasks and their position is guarded by legislation • The tasks cover social and health care, education, culture, leisure time, waste management, environmental protection etc. • The size of the municipalities has varied, but small municipalities have traditionally co-operated with other municipalities • Small municipalities do not provide the same service level as larger ones

3. … background • Municipal incomes are based on taxation, state subsidies and fees • In the mid 1990s the state subsidies were turned into lump sums in order to encourage municipalities to find the best ways to provide services • The growing emphasis on taxation has increased differences between municipalities and made their management more competitive • Small municipalities have amalgamated with others occasionally, but in 2006 amalgamations became a national policy issue

4. Arguments for the reform • The government stated that it is often the small municipalities which are economically weak • In addition, small social and health care units are ineffective • Finally, small municipalities often violate the basic rights of the citizens • Hence the municipalities were asked by law to reorganise their social and health care so that it serves at least 20 000 inhabitants; the given options were amalgamations (hurried by additional subsidies) and municipal co-operation

5. Evaluating the reform • The reform caused a lot of movement at the local level, and resulted in a few years to a reduction of almost one fourth of the total amount (in 2002-2011 112 municipalities less, in 2009 67 less) • There are a number of evaluations going on asking how the goals of the reform were achieved • In one of them members of the personnel of social services were interviewed: they saw as advantages that many social services require comprehensive expertise and sufficient resources which small municipalities often do not possess, and as disadvantages that enlarging municipalities may mean longer distances to reach the clients, the problems of specialized experts, and the transition costs.

6. The reform: next step • After reviewing the results of the reform, the government has continued the reform now aiming at even more radical cuts • The arguments are the same as before, however, some more emphasis on strong municipalities which are directly responsible for social and health policy • The current reform has been opposed by many municipal leaders and politicians, in addition the government can not force the municipalities to amalgamations • At the moment the issue is open

7. From 336 to 70 municipalities

8. Municipal size and efficiency • In economic terms it is difficult to judge whether an amalgamation brings along efficiency and savings • The Finnish scholars have pointed out that there is no evidence showing that the larger the municipality the better • There are some results which suggest that both small and very big municipalities are ineffective • However, amalgamation may bring along temporary benefits (broader shoulders) • The broader issue is how to maintain strong municipalities across the country • In the following map, the areas marked by red color are the growth areas (they are urban areas)

10. A wider look at municipalities • Regional policy belongs to the core policies of the state (most policies have a regional dimension) • It is about the division of resources between the different parts of the country, or, the concerted efforts to guarantee the citizens equal living conditions • If, as it often is, the markets do not create balanced development, the state has to intervene • The Finnish regional policy has transferred from “support the weakest” to “support the strongest”, i.e. the current emphasis is on growth and innovations

11. In whose interests is it to keep the the whole country populated? • The private sector: depending on the markets (paper and wood industry, Nokia, IT-sector, agriculture, mining, tourism) • The public sector: in principle yes, but centralization, cuts • Politics: a few political parties defend: Center, TrueFinns, Swedish party – in between Communists - against Conservatives, Social democrats • The people (not everybody can move to Helsinki): old vs. youg, educated vs. uneducated etc.

12. Municipal political economy • The municipalities know very well that the best basis for collecting incomes is one consisting of prospereous enterprises of various sorts and well-to-do inhabitants • To a certain degree these can be affected, on the other hand these resources are not evenly distributed • The government is already now redistributing tax incomes from rich to poor municipalities • There are limits what can be done when the markets and demographic change show the way

13. Conclusions • Without private enterprise activity, it is almost impossible to maintain the whole country populated • Is the global economy an iron gage which limits the opportunities for policy-making? • Perhaps more decentralization would be the solution, i.e. letting the local people find the best ways to cope with the external challenges • The size on a municipality correlates with some beneficial features, but municipal strenght is determined largely by markets. Do we let the markets determine?