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Published: 1 June 2018

Municipalities’ expenses made a downturn in 2017

According to preliminary financial statement data collected by Statistics Finland, the operating expenses of municipalities made a downturn in 2017. Municipalities’ combined operating expenses totalled EUR 35.9 billion and they decreased by 2.3 per cent compared with the actual financial statement data for the previous year. Total operating revenue amounted to EUR 7.2 billion, which represented a decline of 6.1 per cent from the previous year's level. These data appear from the preliminary financial statement data of the statistics on local government finances, for which data were collected from all 311 municipalities and 141 joint municipal authorities in Finland.

Finances of municipalities and municipal groups in 2017, EUR million ¹⁾

	Municipalities		Municipal groups
	2017	Change, %	2017	Change, %
Operating revenue, total	7 192	-6,1	24 653	2,9
Operating expenses, total	35 854	-2,3	50 758	0,4
Annual contribution margin	3 286	20,9	5 931	11,5
Net investments 2)	2 387	-2,2	5 836	3,3
Loan stock 31st Dec	16 170	0,2	34 713	2,6

1) Preliminary data
2) Net investments = investment expenses - financing contributions for investment expenses - proceeds from transfers of non-current assets

Finances of municipalities

According to the preliminary financial statement data for 2017, the local government operating margin amounted to EUR -28.3 billion. It strengthened by EUR 318 million or 1.1 per cent compared with the actual financial statement data of the previous year. The operating margin strengthened because operating expenses decreased more than operating revenue examined in euros.

Operating expenses declined by a total of EUR 827 million or 2.3 per cent. The drop in operating expenses was affected most by a EUR 968 million decrease in personnel costs. Personnel costs went down in total by 6.7 per cent from the previous year. Operating revenue, in turn, declined by EUR 470 million or 6.1 per cent. The drop in operating revenue was caused by a decrease in sales revenue, as well as in subsidy and grant income.

According to preliminary data, municipalities’ tax revenues grew by EUR 446 million or 2.0 per cent from the year before. The share of income taxes in the tax revenue growth was EUR 33 million. Municipalities' share of corporation taxes increased by EUR 343 million. By contrast, central government transfers to local government decreased by EUR 289 million or 3.3 per cent. Tax funding formed of tax revenue and central government transfers to local government grew by EUR 157 million or 0.5 per cent. Calculated per capita, municipalities received a total of EUR 5,639 in tax funding. ¹⁾ The growth in tax funding and the strengthened operating margin boosted the annual contribution margin to a growth of EUR 568 million in 2017.

Based on the preliminary data for 2017, the annual contribution margin was negative for four municipalities, while in 2016, there were 15 municipalities with a negative annual contribution margin. According to the combined financial statement data, the annual contribution margin covered 149.0 per cent of depreciations. The key figure improved from the previous year, when the annual contribution margin covered 127.9 per cent of depreciations.

In 2017, municipalities' net investments were EUR 2.4 billion. The decrease from the previous year amounted to EUR 54 million or 2.2 per cent. Municipalities' loan stock grew from the previous year by EUR 31 million, totalling EUR 16.2 billion. The loan stock was 0.2 per cent higher than in the year before. Loans per capita in municipalities amounted to EUR 2,933. ²⁾ Municipalities' equity ratio, which describes the ratio of equity to total capital, was 60.8 per cent. The ratio went up from the previous year, when it was 59.9 per cent.

Finances of joint municipal authorities

According to preliminary financial statement data, joint municipal authorities’ combined operating expenses amounted to EUR 13.6 billion and operating revenue to EUR 14.4 billion in 2017. Compared with the actual financial statement data of the previous year, operating expenses went up by EUR 1.2 billion or 9.2 per cent. Operating revenue grew by EUR 1.1 billion or 8.4 per cent year-on-year.

The annual contribution margin of joint municipal authorities weakened from the previous year by EUR 31 million and totalled EUR 674 million. It was 4.3 per cent lower compared with the previous year. The annual contribution margin covered 110.6 per cent of joint municipal authorities’ depreciations.

Net investments grew by EUR 236 million and amounted to EUR 1.1 billion. During 2017, the loan stock of joint municipal authorities grew to EUR 3.5 billion, which corresponded with an 9.1 per cent overall growth compared with the financial statement data of 2016.

Finances of municipal groups

According to preliminary data for 2017, the total operating margin of municipal groups totalled EUR -26.0 billion. It was EUR 2.2 billion stronger than municipalities’ operating margin. The combined annual contribution margin of municipal groups improved by EUR 614 million from the previous year and totalled EUR 5.9 billion. Municipal groups' annual contribution margin was EUR 2.6 billion better than that of municipalities. The annual contribution margin was not negative for any municipal group, while in 2016, the annual contribution margin was negative for five municipal groups.

The net investments of municipal groups amounted to EUR 5.8 billion, which was EUR 186 million more than in the year before. Municipal groups’ loan stock increased by EUR 896 million and totalled EUR 34.7 billion. The loan stock grew by 2.6 per cent compared with the previous year. The loans of municipal groups per inhabitant were EUR 6,296. ³⁾

The statistics comprise data on 298 municipal groups. ⁴⁾

1) The population data used were the population of Finland on 31 December 2017.
2) The population data used were the population of Finland on 31 December 2017.
3) The population data used were the population of Finland on 31 December 2017.
4) The missing municipal group data concern municipalities of Åland.

Source: Local government finances 2017, preliminary data. Statistics Finland

Inquiries: Karen Asplund 029 551 3611, Jens Melfsen 029 551 2578, kuntatalous@stat.fi

Director in charge: Ville Vertanen

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Appendix tables

• Appendix table 1. Data on municipalities and joint municipal authorities' financial statements in 2017*, EUR million 1) (1.6.2018)
• Appendix table 2. Key figures by region in 2017* 1) (1.6.2018)

Figures

• Appendix figure 1. Municipalities internal investment acquisition costs, net investments and annual contribution margin in 2007 to 2017* (1.6.2018)

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Updated 1.6.2018