The Swedish Agency for Public Management

Isolated settlement structures in cost equalisation – an alternative to Growth Analysis' distribution model (2013:11)

The Swedish Agency for Public Management (Statskontoret) is commissioned to follow up on the system for local government financial equalisation. This report is part of this commission.

Growth Analysis' (Tillväxtanalys) calculations on additional costs for isolated settlement structures are included in some of the sub-models for cost equalisation as a supplement to or deduction from the ordinary standard cost. For the municipalities these additional costs are part of the sub-models for (1) pre- and primary school, (2) secondary school, and (3) care for the elderly, while for the county councils the costs are included in the sub-model for healthcare.

The current equalisation method for isolated settlement structures is complex, non-transparent, detailed and involves high administrative costs. The aim of this report has therefore been to describe the distribution method of Tillväxtanalys for isolated settlement structures in the cost equalisation and to examine alternative options to that method. These options have been evaluated against certain established criteria in order to make it possible to assess and compare them to each other. Based on the alternative methods Statskontoret has tried to find a new distribution method that can replace the current one.

Statskontoret suggests a new distribution method for the concerned sub-models in the cost equalisation between municipalities by reason of additional costs for isolated settlement structures. It is proposed that this distribution method should be based on variables such as distance between inhabitants and the extent to which the area is built-up. Statskontoret suggests two new alternative distribution methods for the county councils: one method that is equal to the one presented for the municipalities and one method that involves using the proposal of the Equalisation Committee of 2008 (Utjämningskommittén.08) as a standard for a fixed distribution.

The proposed distribution method is deemed to solve the problems of the current method. It is simple, transparent and involves lower administration costs.