Mayors of Finland’s largest cities demand sufficient government compensation for coronavirus expenses

Finland’s government recently recognised how hard the coronavirus outbreak has hit the economies of the country’s municipalities. The mayors of the 21 largest cities are however unsatisfied with the cabinet’s current compensation plans, saying that the insufficiency and ambiguity of the proposal has cities concerned.

Finland’s coalition government made a decision-in-principal on 8 April to grant the country’s municipalities with approximately one billion euros in compensation to cover expenses associated with the covid-19 pandemic. According to the latest estimates, however, this would only cover about half of the costs Finnish municipalities will incur.

The financial state of many municipalities in Finland was challenging already before the coronavirus outbreak, and if state compensation proves insufficient for covering the resulting costs, it is clear that cities throughout the country will have to seriously consider cutbacks and tax increases to achieve and maintain a balanced budget. In addition, the 500-million-euro first phase of state compensation to make up for lost tax revenue will be deducted from state assistance for the year 2021, so it will not change the prevailing situation or relieve the financial distress of Finland’s municipalities in the long term.

It is essential that the state compensates for the additional expenses and lost revenue in a just manner. Support should also be targeted at those municipalities and cities where the outbreak has had the largest effect and caused the greatest loss of tax revenue. The effects of the proposed compensation plan on individual municipalities cannot be assessed currently, as the government will not decide on support measures and targeting methods until later in the spring. For this reason, municipalities cannot rely on the plan resulting from the government’s supplementary budget negotiations in their own decision-making.

The coronavirus will influence public finances and municipal economies for many years to come, and municipalities will have to deal with long-term expenditures and revenue losses. Total expenses incurred yet this year will only become clear as the crisis develops, and the scale of the financial impact may grow considerably from the current estimate of two billion euros. The coronavirus and its impact is felt most acutely in the country’s largest cities, where the state of emergency and attending restrictions have had a more dramatic effect, due to the more service-oriented structure of their economies, among other factors.

The Finnish government must be prepared to compensate for added expenses and revenue losses past the year 2020. In addition, the goals and policies in the current government programme and with regard to expanding the tasks and obligations of municipalities must be reassessed with a critical eye under the new circumstances. We cannot afford measures that would weaken municipal economies any further.

The wide range of effects the coronavirus crisis will have on municipalities and the public sector as a whole must be analysed in close dialogue between the cities and the state. Only once we are able to reach a common understanding of the necessary course of action will we be able to find our way out of this crisis.

This statement was issued by the C21 network of mayors, municipal leaders that represent the cities of Helsinki, Espoo, Tampere, Vantaa, Oulu, Turku, Jyväskylä, Lahti, Kuopio, Kouvola, Pori, Joensuu, Lappeenranta, Hämeenlinna, Vaasa, Rovaniemi, Seinäjoki, Mikkeli, Kotka, Salo and Porvoo. The network meets regularly to strengthen communications in the area of municipal policy and jointly promote the best interests of the country’s largest cities.