France/Impact of the health crisis on local authorities

Published on 08/07/2021 | La rédaction


Even if their debt increased by 5.3 billion euros in 2020, local authorities have resisted the crisis rather well, says the Court of Auditors in a report published on Wednesday 30 June. However, this report hides heterogeneous situations.

In the end, local authorities are not doing too badly... This is what is underlined by a report on the evolution of their financial situation in 2020, published this Wednesday 30 June by the Court of Auditors. "If the financial situation of the local public sector has deteriorated in 2020, under the effect of the health crisis and its economic and social consequences, several factors have contributed to the deterioration.Although the financial situation of the local public sector deteriorated in 2020, under the effect of the health crisis and its economic and social consequences, several factors contributed to limiting the extent of this deterioration", warn the magistrates of the rue Cambon.

The fact remains that the good financial dynamics of the local authorities, which had been boosted in recent years, were brutally interrupted by the health crisis. While their gross savings* had increased by 10 billion euros in five years, the Covid crisis increased their outstanding debt by 5.3 billion euros. This debt now stands at 181.2 billion euros. A significant increase in their debt "comparable to that observed in four years between 2015 and 2019 (+5.4 billion euros), the report details. And which was caused in particular by losses of state revenue and tariffs (tax on urban planning, closed swimming pools, etc.), which have been little or not compensated by the State.

In spite of everything, the local authorities have proved their stability, particularly thanks to their specific tax system, which is not very dependent on the economic situation. "Property and housing tax revenues have increased by 1.9% thanks to the dynamism of the bases, with average rates having decreased very slightly in 2020," explains the Court. It is worth noting that the savings on purchases of goods and services (-3.2%) were greater than the additional costs generated by the health crisis. But in the end, "the overall gross savings of local authorities decreased by 10.3% in 2020 to 35 billion euros, a level close to 2018 (35.9 billion euros)".

Contrasting situations

This relatively good performance by local authorities should not, however, be analysed in a monolithic way. On the contrary, the local situation appears to be contrasted between the different levels: municipalities, departments and regions, as well as within each level. At the level of the communal block, despite partial compensation by the State for tax and property losses, "gross savings have fallen (-5.5%) more sharply for the communes than for the EPCIs**", the experts point out. Above all, we understand that it is the most populated municipalities (over 100,000 inhabitants) that have been the most affected by the crisis. This is because their level of expenses is higher than in smaller municipalities.

At the higher level, "the situation of the departments deteriorated in 2020", the Court warns. This is due to a marked increase in their social expenditure (+3.9%), and in particular the active solidarity income (+6.7%). This shows how hard the crisis has hit the most precarious households. For the départements, social expenditure represents an increasingly significant share (56.2%) of their operating expenditure. Here again, it is the most populous departments (over one million inhabitants) that have been the most affected by the crisis. For the latter, it is the scissor effect: a 4.6% drop in transfer duties (DMTO) - a tax levied on real estate sales that is added to notary fees - and a 4.9% increase in their social spending. In spite of all this, and despite the episodes of sanitary confinements, it should be noted that the overall decrease in DMTO for the departments was limited (-1.7%). This is a sign that the property market did not collapse in 2020.

Finally, the regions have also suffered from the crisis. Their debt reduction capacity increased in 2020, rising from 4.3 years to 6 years. Their gross savings have also fallen by 22%. But this does not prevent these behemoths from maintaining a real capacity for investment. The 1.7 billion increase in their real investment expenditure last year is proof of this.

If the Court of Auditors is not alarmist, it nevertheless reminds that the financial situation of local authorities could still deteriorate in 2021. In particular, for the departments, under the increasing weight of their social expenses.

Gross savings: according to the definition of the Court of Auditors, "the difference between real operating revenue and real operating expenditure, which constitutes the self-financing of local authorities".

EPCI : Public establishment for inter-municipal cooperation


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