Local finance reform, financial resources allocation, local authorities, public expenditure, tax reforms, financial prerogatives, local government finances, public finance management
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Abstract
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Abstract
Analysis of structural failures of local finances and need for reform in allocation of financial resources to local authorities.
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[...] For example, Madame Marie Françoise Leclerc, mayor of Berthouville, recently expressed her intention to take on debt to finance the rehabilitation project of a main road. Many French communes are subject to the same configuration. Thus, if we consider the entire debt to be repaid in the short, medium, and long term, the global raw savings of local authorities are clearly consumed. Consequently, the budgetary dynamics of local authorities become deficitary. Xerfi and the DGFIP announce a global financing need of 17 billion euros in 2024. These figures are confirmed by a global debt balance of approximately 260 billion euros. [...]
[...] As a result, municipalities have increased the property tax, by more than 30% for some of them. Departments have also increased notary fees to manage expenses socials. As for the regions, they are not only dependent on VAT, but it is also experiencing a chronic slowdown in its growth. The problem is the relatively gloomy socio-economic context, marked by a real estate crisis linked to inflation, high interest rates, and a restriction of credit institutions. Therefore, the increases in property tax and notary fees are unwelcome, even if they are necessary or even vital for local authorities. [...]
[...] This decline results from multiple structural failures? 2. Analysis of the structural failures of local finances (critiques) The failures The structural failures of local finances are the factors behind the dysfunction of local authorities. These dysfunctions directly or indirectly generate additional costs (expenditure) and fuel overall indebtedness. Moreover, these dysfunctions can impact the quality of public services delivered to the population, as we will see through the example of roads in France. Firstly, local authorities have relatively limited room for maneuver to generate revenue. [...]
[...] This allows us to deduce a positive raw savings (Xerfi Canal agency) of ?40 billion (Xerfi Canal / DGFIP)5. In light of such figures, how can we explain the growth of the global deficit of local authorities for the year 2024? First, the raw savings are in constant decline each year since at least 2020. For example, between 2022 and 2024, the raw savings of local authorities decreased from 47.6 billion euros to 40 billion euros, a decline of approximately 10% (DGFIP). [...]
[...] But how can we overcome all the administrative, financial and political obstacles to meet the needs of citizens? This note will serve as viable and sustainable solutions so that this new reform can be effective. The first axis will describe in detail the current functioning of local finances, its interactions with the central State in particular. On the basis of this description, we will analyze the structural failures of local finances and then propose sustainable solutions guaranteeing the needs of the populations. [...]
