Local Government Finance

In most countries, the local governments face great challenges in the economic area. The public expenditure policies are tight, and the demands from the citizens to the quantity and quality of the public services are increasing.

In order to comply with these challenges, it is necessary to develop the overall framework of legislation, institutions, administrative procedures and administrative capacity regarding the local government economy.

It is a precondition for decentralisation of tasks to the local government levels that the necessary funds are made available for the local governments. In that respect, LGDK finds it of utmost importance for the local government's self-sustainability that sufficient own financial income sources are created for the local governments.

An evaluation of whether the system of local government assigned functions and related costs is in balance with the total system of assigned revenues is often very urgent in all local government systems. For example in counties in transition or systems where the calculation of costs has been lacking or only made superficially.

Calculation of costs of new or changed legislation is especially of importance in situations where a huge number of laws and administrative guidelines have to be changed in accordance with EU legislation. Without proper calculation of the costs of these new initiatives and related funding, the implementation will be limited.

Unfunded mandates from central to local governments and attempts to solve national budget problems by transfer of tasks to lower levels of government without sufficient funding have created serious problems in Europe and around the world.