Does the financial criterion "burn" municipalities? - The new administrative-territorial reform, the assessment of economic performance
One of the main criteria on which the new administrative-territorial reform has been drafted, where 15 municipalities are planned to be merged, is financial.
According to the draft prepared and presented, the financial-functional criterion simultaneously measures two essential elements: the capacity of the municipality to generate financial resources and its ability to turn these resources into real services for citizens. This criterion is directly related to the principle “funds follow functions”, provided for in Article 9 of the European Charter of Local Self-Government, according to which the financial resources of local units must be commensurate with the responsibilities assigned to them.
According to the document, this criterion is of primary importance for three interrelated reasons. First, it highlights the problem of unfunded mandates: when functions such as preschool education, forest management or fire protection are transferred to municipalities without the corresponding financial resources, the municipality receives the legal responsibility, but not the means to exercise it: either the function is not performed at the appropriate level, or the municipality becomes more dependent on discretionary transfers from the central government.
Secondly, the criterion shows the mismatch between resources and competencies, which creates a measurable institutional dysfunction: municipalities with less than 10 thousand inhabitants have an average of 12.6 administrative employees per 1,000 inhabitants, while municipalities with over 150 thousand inhabitants have only 2.2 employees per 1,000 inhabitants: administrative costs per inhabitant almost six times higher, without necessarily translating into better services.
Third, the criterion is related to economies of scale: fixed administrative costs (salaries, offices, basic infrastructure and specialists) do not decrease to the same extent as the population decreases; the average budget rigidity is 82.7% in municipalities with less than 10 thousand inhabitants, compared to 60.1% in municipalities with over 150 thousand inhabitants.
Thus, the draft argues that taken together, these three elements create a clear cause-and-effect chain. When sufficient resources are lacking, the legal mandate is not accompanied by the necessary financing and the municipality begins to exercise its function from a structural deficit. When the ability to spend efficiently is lacking, even existing resources are used mainly to keep the administration in operation. When a sufficient degree of efficiency is lacking, the problem is not temporary and is not only related to the performance of a particular municipality: the smaller the local unit, the higher the weight of fixed costs in the budget and the more limited the space for investment, development and improvement of services.
The report concludes that under these conditions, the municipality may have the competence recognized by law, but without financial resources, sufficient staff and administrative capacities, self-government remains formal, nominal and dysfunctional.
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