Municipalities and Services Restructuring Finnish local and regional administration AFLRA Brussels Office, October 2005

Present municipal division in Finland 432 municipalities (19 regions) the most decentralized country in the EU wide municipal competences relatively independent financial status Local self-government safeguarded in the Finnish Constitution number of municipalities has been declining in recent years present municipal division is based on mid 19th century parishes and towns needs to face the challenges of 21st century

The different levels of administration in Finland NATIONAL LEVEL LL/AA/valtio REGIONAL LEVEL PARLAMENTARY ELECTION LOCAL LEVEL Provincial State Offices 5 Regional Environment Centres 13 Road Districts 9 Trade& Employ- ment Centres 15 Regional Councils (Regional planning, regional development) 19 S T A T E Municipalities and joint municipal authorities (education and culture, social welfare and health, technical infrastrucucture, water and waste, environment, local economy and employment, recreation,…) Citizens, enterprises, local communities MUNICIPAL ELECTION CHARGES, TAXES STATE GRANTS Police and justice, taxation, local employment offices Åland 80 % 20%

MUNICIPAL ECONOMY STATE ECONOMY POPULATION AND AGE STRUCTURES MUNICIPAL EMPLOYEES DEMOCRACY INDUSTRY AND COMMERCE AND EMPLOYMENT PRODUCTIVITY TECHNOLOGICAL DEVELOPMENT CITIZEN Municipal restructuring Organisation of municipal services Municipal tasks Municipal financing Municipal cooperation The changing operational environment of Finnish Municipalities GLOBALISATION EUROPEAN UNION Source: Ministery of the Interior

Challenges for the municipalities Ageing population change in demand for public services availability of labour: need of skilled labour in the municipalites Regional differences Sustainability of municipal finances differences in demographic changes differences in service costs and -levels how to safequard services in all regions Future of public finances, problems in financing services Globalisation, international competition, EU

Strenghts in facing the Challenges International evaluations: Finland on top in competitiveness, partly because of the quality of public institutions Decentralized administratation: brings transparency and efficiency Skilled personnel High quality of services Citizens are relatively satisfied and willing to pay for the services

Elderly dependency ratio People at least 65 years to the year-olds Finland France Greece Belgium EU-15 Denmark Spain Netherlands Austria UK Luxembourg Portugal Ireland Italy Sweden Germany all 2010all 2020 Source: European Commission

Changes in population’s age structure Age group Change , % 0 – 5 years % 6 – 18 years % 19 – 64 years % 65 and over % All % Age group Change 2005 – 2030, 1000 people 0 – 5 years – 18 years – 64 years and over All Source: Statistics Finland

Projected population change (%) Source: Statistics Finland

Effect of population factors on the demand of basic services (Index 2005=100), Changes % in year Expenditure, million € Expenditure EDUCATION SERVICES ,5-0,3 preschool education ,10,3 comprehensive school ,4-0,2 upper secondary school ,8-1,2 vocational education ,3-0,9 polytechnic ,3-0,9 HEALTH SERVICES specialised hospital care ,6 health centres ,7 SOCIAL SERVICES ,11,9 daycare for children ,20,2 institutional elderly care ,92,6 home care ,52,1 service accommodation ,71,6 Source: Ministry of Social Affairs and Health

Municipal employees retiring percentage of current employees regionally Source: Halmeenmäki Tuomo: Kunta-alan eläkepoistuma Kuntien eläkevakuutus, Lapland Kainuu Southern Karelia Southern Savo Northern Savo Satakunta Kymenlaakso Ostrobothnia Uusimaa Eastern Uusimaa Åland islands South-West Finland Central Ostrobothnia Kanta-Häme Northern Ostrobothnia Northern Karelia Päijät-Häme Southern Ostrobothnia Central Finland Tampere region

Loan stock and cash of the municipalities and joint municipal organisations (current prices, milliard €) Source: Years Statistics Finland. Prognosis for : KUTHANEK Association of Finnish Local and Regional Authorities. Loan stock Cash

Restructuring Finnish local and regional administration The project was set by the Government for the term of May 2005 to May 2006 The objective of the project is a sound structural and financial basis for the services that municipalities are currently responsible for, in order to secure the organisation and provision of such services in the future, with due regard to the required standard of quality, effectiveness, availability, efficiency, and technological advancement. The new structure should be sustainable also in 2020’s Source Ministery of the Interior

Project Organisation Working Group on Restructuring Municipalities and Services (Restructuring Group) responsible for the practical implementation representation from the various ministries and six political parties Chaired by the Minister for Regional and Municipal Affairs, Mr. Hannes Manninen Project Manager and Secreteriat, working directly under the Chairman Source Ministery of the Interior

Task 1 Based on the key findings made in the first stage of the Project, the Restructuring Group evaluates the areas of responsibility for the provision of services, with due regard to the specific features of individual services, in terms of availability and standard of quality in the long term (at least up to the year 2015), while exploring new ways of producing the services with special emphasis on efficiency and productivity.

Task 2 In September 2005, the Restructuring Group submitted to the Ministerial Working Group for Preparing the Basic Service Programme, a position paper on the main measures to be taken in the regions. The Ministerial Group adopted the position paper on Sept 28th. In the regional stage of the Project, the measures outlined for the regions in the position paper will be evaluated in order that the feasibility of various options be debated, with due regard to the specific features of each region. Source Ministery of the Interior

Task 3: The Regional Stage The regional stage is carried by the municipalities and the Regional Councils in cooperation with the Association of Finnish Local and Regional Authorities. Due consideration will be given to the special features of each region, cooperation across municipal, regional and provincial borders, the key organisations essential to the provision and production of services, expertise, and regional and political representativeness. Source Ministery of the Interior

Task 4 The Restructuring Group will prepare, by 31 December 2005, a proposal for the duties to be reassigned from the municipalities to the Central Government and the impact of such re-assignment on the financial relations between the municipalities and the Government. Source Ministery of the Interior

Task 5 Additionally, the Restructuring Group will collect and process the proposals related to the responsibility and means for the provision of services for submission to the Cabinet by May Source Ministery of the Interior

Task 6 In May / June 2006, the Cabinet will pass decisions on the future financing, organisation and production structures (the options include a framework act, Cabinet decision-in-principle, inclusion of the Basic Services Programme in national legislation or other such action) and take a position on any need to amend the Municipal Grouping Act. Basic bills on legal reforms will be put before the Parliament during Source Ministery of the Interior

Cabinet decision on spending limits III/ 2005 Decision to instigate the project V/ 2005 Ministerial Working Group on Basic Services Programme V/ VI/2006 Working period of the Working Group on Restructuring Municipalities and Services V/ V/2006 Preparation by the State Secre- taries Working Group III-IV/ 2005 Project to restructure municipalities and services Cabinet decision on measures to implement the reform V-VI/2006 Preparation of the proposals by the Working Group on Restructuring Municipalities and services III-V/2006 Working period of the four Preparatory Working Groups V/2005 – III/2006 Cabinet position on preparation of regional proposals IX/2005 Regional implementation stage IX/2005- II-III/2006 Evaluation of structures and preparation of measures for the regional stage V-IX/2005 Source Ministery of the Interior

Models under discussion 1. “Model of Strong Basic Municipalities” 2. “District Model” 3. “Regional Model”

”District Model” Objective: Social and Health Care Districts which are responsible for organising all the social and health care services Basis of inhabitants – , divided into lower level “Basic Care Areas” (some inhabitants) Politically controlled by a convention of municipalities Services financed by the municipalities and state grants State grants based on population Planning would start 2007 and the implementation from 2009

“Regional Model” (1/2) Objective: 20 – 25 regional municipalities with taxing power and directly elected councils. Present municipalities become/would be called “Local Municipalities”. Regional Municipalities responsible for the services that municipalities are currently responsible for Also responsibility for the tasks of the present Regional Councils and other Joint Municipal Boards (at present some 250 Joint Municipal Authorities with different tasks) Can delegate duties and submit needed financial resources to Local Municipalities, with elected councils as well

”Regional Model” (2/2) Taxes and state grants to Regional Municipalities Transition period: In Autumn 2008 election of the regional councils; proceeding according to the timetable required by jurisprudence Open questions: Taxation rights of the Local Municipalities? Delegation of duties/tasks

“ Model of Strong Basic Municipalities” (1/2) Based on the existing structures and competencies Objective: vital municipalities with sustainable finances Operational criteria based on the commuting areas and the location of services Minimum – inhabitants per municipality Means municipal mergers, from 432 municipalities to around 100 Financing, service provision and democratic control at the same level - municipalities In a transitional phase possibility to assign duties to service districts Source Ministery of the Interior

“Model of Strong Basic Municipalities” (2/2) Specialised health and social services provided by social and health districts The number of social and health districts and Joint Municipal organisations will be reduced If no success on a voluntary basis the Cabinet may take necessary measures Municipalities should make decisions before autumn 2007 Implementation starting from the beginning of 2009

Models and the Finnish Legislation Model of Strong Basic Municipalities municipal mergers can be implemented on the basis of existing legislation service districts reguire new legislation District Model Constitutional problem if major part of the municipal tasks will be transferred to districts and the municipalities don’t have the steering powers Regional Model if the ”Local Municipalites” don’t have the same autonomy based on the constitution, a change in the constitution will probably be needed if the ”Local Municipalities” have elected councils, legal competencies and the right to levy taxes, the ”Regional Municipality” can be considered as regional administration (regional council) and this change can be realised by an ordinary law.

AFLRA: Reforms are needed 1. Changes in the administrative structures and service provision are necessary, but they alone are not enough 2. The State policies on municipalities need to be reformed, tasks and obligations should be in line with the resources 3. The ways of organising service production like the service procesesses themselves need to be developed. 4. The new opportunities of IT should be fully utilised.

Levels of Structural Reform Administrative Stuctures (basic municipality, service districts, regional municipalities) Service Production (companies, enterprises, intercommunal cooperation, purchasing) Service processes (expertise and know-how, tehchnologies, productivity) Managing the change within Municipalities (strategy, management, expertise, resources, evaluations) State Strategy and Guidelines (legislation, municipalities policies, financing, restucturing state administration)

Next steps The regional phase of the project starts with 19 provincial seminars Oct 11th – Nov 2nd, The municipalities analyse different models from their own point of view Regional coordinating groups and project officers; interim reporting to the Restructuring Group; questionnaires and task outlines Decisions by the Cabinet concerning the division of powers between the municipalities and the Govt by Dec 31st, 2005 Reports from the regional phase by Mar 15th, 2006 Conclusions by the Cabinet in May / June 2006

The Regional Stage The work done during the regional stage should be based on municipalites own will and pay regard to the regional characteristics Best practices already developed in the regions and municipalities should be utilised in the whole country. Evaluation should be based on the long term strategies drawn up in the municipalities, measures of developement and joint projects of the municipalities which should be constantly pushed forward for strenghtening the vitality of the municipalities.