back to normal in 2021 for OFGL

The Post Bank foresaw it, the government confirmed it, the Observatory for Finance and Local Government (OFGL) just confirmed it on Tuesday, June 21st, in its pre-annual report: Community finances have known – in general – to return to normal after the crisis that the organization , which brings together experts and local and national elected officials, has estimated a net loss to communities of €3.5 billion (see box). “2021 marks a return to trends or levels more in line with previous observations. [ 2020] the authors of the report say.

+19.9% ​​gross savings

Community financials are green again, with gross savings peaking at +19.9%, “more than offsetting a -11.5% decline in 2020,” the report said. All local authorities have benefited from this, except for the regions, whose self-financing in 2021 (€5.8 billion, +13.9% compared to 2020) remains 10% lower than in 2019.

These good management results are associated with revenue dynamics (+5% compared to 2020), while the local sector was able to control costs by +2.4% (compared to 0.6% in 2020). In particular, these are payments for consideration (DMTO), which increase revenue by a third. Excluding DMTOs, which also naturally don’t spread well, revenue grew just 3.3%.

First of all, the structure of the basket of tax resources was greatly upset in 2021: “local authorities have undergone a massive redistribution of income in connection with the reform of housing tax and economic taxes, which, for example, abolished all electricity tariffs. departments,” says André Leinel, president of the local finance committee that oversees OGFL. In fact, the VAT offset the loss of €37.4 billion in tax revenue, making it “the first source of a tax nature for local authorities,” OFGL claims.

Mechanically, the proliferation of offset schemes around the housing tax as well as the CFE or management fee base resulted in an overall increase in government assistance of 5.6% last year.

Heatstroke on additional budgets and staff costs

In terms of spending, if the local sector returns to a relatively normal growth rate of 2.4% (compared to 0.6% in 2020 due to the health crisis), the ancillary and union budgets will suffer +4 respectively. 3% and + 6.4%. In addition, current spending varies greatly depending on the category of local government: +2.7% for the municipal block, +1.4% for departments and +3.5% for regions.

Another lesson is that in 2021, staff costs will again rise significantly: +2.9%, as in 2017, the year of the increase in the index and the revision of civil service index grids. However, it is not the remuneration of civil servants that matters most: their salaries increased by only 0.7% in 2021. On the other hand, communities are massively using subsidized jobs, remuneration for which increases by 15.1% in 2021, for students – by 12.8%, and for other types of contracts – by +11.2%.

Note communities’ taste for restoring visibility: Spending on advertising, fairs, receptions and public relations rose 24.7%. Finally, the local authorities have resumed their current purchasing policy, not yet affected by inflation, which will be factored into this year’s figures.

Lack of visibility at all levels

For André Leignel, this “difficult exercise” yields above all “inconspicuous results”, in particular due to the specter of inflation that began at the end of 2021 and which has been deployed in all spending since the beginning of the year. the perceived uncertainty is confirmed by the differences between initial budgets and management reports and, in particular, in investment spending: if they regain strength at +5.3%, in particular due to the postponement to 2020, they are less than those which were taken into the original budget (+8.8%) and do not catch up with the air pocket of 2020: -0.6% between 2019 and 2021 and even -11.3% for municipalities, the main category of investing communities.

EPCI, for their part, stalled in 2021, cutting their subsidies by 6.2%, bringing their total investment spending down to a low of 0.6%. Investments of the municipal bloc accounted more for additional budgets and unions (+10.9%) by a quarter of its amount. They naturally finance environmental projects, especially in the areas of waste collection, water management and transport.

Back to more or less luck

The 5% increase in revenue also surprised local players, who were expecting a weak growth of 1.5%, fearing the impact of the crisis on taxation and business revenues. On the tax side, if DMTO (+24.5%) as well as TICPE (+1.3%), TCFE (+5.2%) or mobility fees (+8.7%) exceeded 2019 levels, changes in tourism taxes (+5.3%), gambling (-17%), taxes on registration certificates (+3.5%) and basic economic taxes (CVAE (-1.1%), Tascom (-0, 6%) and TLPE (18.7%)) are still behind.

In terms of activity revenue, increases in parking fees and fees (+12.6%), revenues related to transportation, recreation, sports and extra-curricular activities do not allow for the recovery of 2019 amounts. while inflation is cyclical, which makes the chairman of the local financial committee say that “clouds are gathering for local authorities.”

3.5 billion net loss

OFGL conducted a comprehensive assessment exercise for a two-year health crisis. At the end of the tally, the communities show an cumulative €1.9bn reduction in tax revenue, including €600m in 2021. The municipal bloc accounts for 63%. Likewise, the loss of operating income is estimated at almost €3.5bn in total, including €938 in 2021. By integrating all losses, the observatory estimates a gross loss of €7.1bn over two years: €4.9bn in 2020 and €2.2bn in 2021. At the same time, OGFL estimates that local governments saved €823m in 2021, but almost €1.1bn in involuntary spending, for a net cost of €260m. Net of public assistance (competition for masks, insurance of €216m in 2020 and €57m in 2021, refundable advances to Mobility Organizing Authorities (MOAs), etc.) net loss of local authorities valued in approximately euros. 3.5 billion over two years, “compensated by the efforts of local authorities, which led to the restoration of gross savings of local authorities,” says André Leinel.

Read a cape on… the impact of the Covid crisis on local finances in 2020 and 2021