Demographic change has far-reaching consequences for the revenue and expenditures of the municipalities in Saxony. The demographic development in Saxony is expected to be very heterogeneous. There will be regions with strong population declines as well as regions that will maintain their number of inhabitants. In order to measure the impact of demography exactly, a micro-regional analysis is necessary. The project will estimate both the decline in revenues as well as the resulting adaptation requirements and possibilities at the level of the municipalities in Saxony.
On basis of the municipal fiscal equalisation scheme, the future revenues of the municipalities in Saxony are forecast up to 2020. Using these results, the expenditures of the municipalities are examined more closely. With the help of an econometric model, the demand for the provision of public services as a factor of population size is estimated. The information provides insights on the extent to which individual municipal expenditures can be adjusted to population size or on whether there are fixed costs in the provision and as a result an adjustment to demographic change is not at all possible. Finally it is examined, for individual municipalities, whether they currently produce their local range of facilities at an efficient level and which (short-term) savings potential can be identified. Here the methods of “Data Envelopment Analysis” as well as the “Free Disposal Hull” are used. Both methods enable efficiency in the service provision between municipalities to be compared.
The provisional results confirm the assumption of falling state and municipality revenues. However, this decline is not as large as expected, at least not at the municipal level. For the expenditure side it was revealed that most of the individual municipalities can prepare themselves very well for falling revenues as well as the imminent changes in the population. There are no (technical) obstacles that make it difficult for small municipalities to adapt their expenditures to demographic change. Also the size of the municipalities has no influence on their adaptability. Instead, it has been shown that with the decline in population an even more disproportionate savings potential can be achieved in the range of municipal facilities. The efficiency analysis also showed that in addition to the medium and long-term savings potential, considerable reserves in municipal expenditures can still be activated. On average, smaller municipalities (measured by the number of inhabitants) proved to be more inefficient than large municipalities. The prerequisite for both the short-term tapping of efficiency reserves as well as the medium- and long-term adjustment of municipal expenditures to demographic change presupposes, however, a corresponding will to adapt among the municipalities.
Whether Saxony should provide funds to the municipalities for the coming adjustments and what the nature of this support should be will be worked out in the further course of the project. One goal is to encourage neighbouring municipalities to engage in more cooperative projects in order, in this way, to avoid overinvestment in local infrastructure. Also the incentives that municipalities have to maintain some public goods provisions for inefficiently long periods of time to be more attractive in competing for investors must be taken into consideration by an appropriate support policy.
Thater, Christian, „Auswirkungen des demographischen Wandels auf die kommunalen Ausgaben im Freistaat Sachsen“, in: ifo Dresden berichtet 05/2009, p. 13-20. (Download, PDF, 130 KB).
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