The purpose of the cost equalisation in the local government financial equalisation is to equalise structural cost and requirement differences between municipalities and between county councils. However, the equalisation should not take place for cost differences resulting from differences in terms of the service level, quality, fees and efficiency. The cost equalisation between municipalities comprises of ten different sub-models for different activities.
One of the models is the sub-model for pre-school services and out-of-school care. Statskontoret (the Swedish Agency for Public Management) has been assigned by the Government to update the data about pre-school children’s duration of stay which is used in the sub-model. In addition, the share of children in pre-school age and the share of enrolled in leisure-time centres are used for calculations in the sub-model.
The data on pre-school children’s average duration of stay which is currently used is from 2005. Furthermore, the data is only available on municipal group level. By means of parental surveys of the Swedish National Agency for Education, since September 2013 data on duration of stay from 2012 is available on the municipal level. For calculations in the sub-model, the impact for differences in duration of stay is reduced to 50% as the operational costs are not assessed as increasing to the same extent as the duration of stay.
Statskontoret’s assignment of providing proposals on how the data on duration of stay should be updated includes examining whether the basis of division should be municipal group or municipality. Furthermore, Statskontoret should assess whether the reduction of impact for differences in duration of stay should remain. However, the assignment did not entail conducting a review of the sub-model as a whole.
Statskontoret proposes that the duration of stay component in the sub-model should be updated in accordance with the following:
- The municipality should be the basis of division.
- The reduction of 50% of the impact for differences in the average duration of stay should remain.
- The average duration of stay which will be used in the sub-model should be corrected and based on basic data where children of the unemployed and those on parental leave should not have more than 15 hours. The purpose is to avoid municipalities being compensated for a higher service level than that required by the Education Act .
The municipality should be the basis of division
Statskontoret proposes that the municipality should be the basis of division, as the average duration of stay varies relatively largely between individual municipalities in the same municipal group. Statskontoret has found that to a large extent the spread can be explained by how much the parents work and study. The basis has been that the cost equalisation should be based on data distributed on the municipal areas involved, as the equalisation takes place between municipalities. Statskontoret assesses that the current data on duration of stay, which is based on a sample survey, is of a sufficiently good quality . However, Statskontoret ascertains that the other sub-models of cost equalisation are primarily based on register data, which is desirable for several reasons.
Reduction of the average duration of stay should remain
Statskontoret proposes that the current reduction of the average duration of stay by 50% should remain. The duration of stay has a relatively strong connection with the cost per inhabitant for pre-school activities. However, Statskontoret assesses that the connection is not sufficiently strong to have full impact during the calculations. Statskontoret’s perception should be seen in the light of that the age structure in the municipality has the strongest connection with cost per inhabitant and which explains a significant share of the structural cost differences .
Financial consequences of Statskontoret’s proposal
The sub-model reallocates approximately SEK 4.1 billion in total for the equalisation year 2015. With Statskontoret’s proposal, the reallocation reduces to approximately SEK 4 billion. For individual municipalities the financial outcome of the calculations in the sub-model changes by between minus SEK 339 and plus SEK 463 per inhabitant. A majority of the municipalities, 174 of 290, will have a better outcome.
Future review requirements of the sub-model as a whole
Statskontoret would like to call the attention of the Government to the long-term requirement of revising the sub-model in its entirety. This primarily applies if data provision cannot be ensured. It is unclear when data on duration of stay can be updated next time. Furthermore, the age structure over time can increasingly explain the structural cost differences between the municipalities.