Municipal Revival: 6.8 Billion-Dollar Lifeline Throws Cities a Lifesaver

Local Government and District Minister Erling Sande says that he takes the demanding financial situation for many of the country’s municipalities seriously. For the current year, he promises to come up with measures in the new budget later this autumn. For next year, he says the government will take action in the national budget, which is presented on Monday.

– I hope that the municipalities see that the state stands up in what are demanding times and that we also manage to lift those who need it most, Sande tells NTB.

In the proposal for the state budget, the government will increase transfers to the municipal sector by NOK 6.8 billion. According to Sande, this is a percentage increase for the municipal sector in relation to the balanced budget 2024 of 6.3 per cent.

The 6.8 billion will be free funds which, after additional costs for demographics and pensions, will give a leeway of 3.6 billion. This is over 1 billion more than what was added as a basis in the municipality’s proposal before the summer.

The community must stand up

– The municipalities have received increased costs and interest, while at the same time experiencing tax failure. Then we have to stand up together to ensure the welfare offer around the municipalities, says Sande.

He points out that the animal age, which has also affected many privately, has hit the country’s municipalities with a delay. High interest rates, depleted fund funds and changes in the municipal economy have led to depleted coffers in many places.

Not ear tagging

Of the money, 5.15 billion will go to the municipalities and 1.65 will be allocated to the county municipalities.

– The money is not earmarked from the government’s side, but we do see that there is a clear need in certain areas in the municipalities, says Sande and points out that the allocation is based on, among other things, 250 million for staffing in the kindergartens, 150 million for stepping up support for psychological health.

For the county council, the government has increased transfers by NOK 300 million to improve the security and maintenance of the country’s county road network.

AFP bomb next year

One thing the government has not set aside money for yet, however, is an announced effect for the municipalities of a new AFP scheme that became clear after the state budget was laid. The ministry has sent a circular about the expected increased expenses to the country’s municipalities with the message that the costs will not be included under the municipalities’ pension costs for 2025 for the time being.

Next year will also be the first year after the reorganization of the income system for the municipalities. Many municipalities that currently have little tax income will experience an increase when the income is distributed in a different way than today.

Before the summer, the government received approval in the Storting, which will mean that certain municipalities that currently have large incomes from wealth or dividend tax will have these greatly reduced.

The municipalities’ share of the wealth tax will be halved, from 0.7 to 0.35 per cent, while the share of tax on dividends will be completely eliminated. Rich municipalities must give up 64 øre for every krone they take in above the average. This money is redistributed to the municipalities that have incomes below the average.