2024 barometer of the financial health of local authorities: faced with uncertainties, a local world that resists?

The fifth edition of the AFL Barometer

The Barometer of the financial health of communities, established using data from the General Directorate of Public Finances, aggregates the scores of each community to take stock of the last six budgetary years. While French communities showed, in 2022, their capacity for resilience in the face of the various shocks encountered, they were faced in 2023 with a sharp deterioration in the economic situation.

For Marie Ducamin, president of the AFL-ST Board of Directors: “The financial health of the local world determines its ability to face the challenges of the century. The general trend of improvement observed for several years continued this year, but no longer masks the concerns inspired by the evolution of certain territories or certain types of communities. »

The year 2023 for local finances: divergent dynamics

The year 2023 illustrates the gradual emergence of two blocks within the local world: on the one hand a municipal block which is resisting, or even strengthening its financial situation, and on the other a block of departments/regions whose budgetary balances are evolving from more erratically, and experienced a clear deterioration during the last financial year. If the average score of all the communities, at 2,79, is slightly increasing and attests to the solidity of the local world, it covers very variable situations.

2023 was a year of strong upward pressure on community operating expenses. The cause is inflation which weighed on general expenditure, but also the revaluation of the index point which increased personnel costs.

The evolution of revenue according to the type of community explains the divergent trajectories. The municipal block benefited from the revaluation of the basis of built land, firstly, as well as from an inflation effect which increased the revenue associated with the VAT reversion. It therefore benefited from more dynamic revenues than the departments and regions. The former, in particular, no longer benefit from revenues linked to the CVAE and the TFPB, and have been penalized by the slowdown in the real estate market, and therefore by the drop in the amount of DMTO received.

These dynamics translate, for the municipal bloc, into a clear improvement in gross savings, even though those of the departments - and to a lesser extent that of the regions - are falling sharply. The debt rate of the municipal bloc is decreasing, that of the departments remains stable and that of the regions is increasing.

Municipal finances: solidity and convergence

French municipalities are still in solid financial health, and in overall progress since their average score is 2,73, the best of all community segments. They are showing great resilience, in a context of strong inflationary pressure on spending.

Structural contrasts in financial health between municipalities according to their size are observed again this year. However, it is remarkable that, unlike last year, all demographic strata saw their situations improve. Without going so far as to mention convergence, we also note that the most populated demographic strata – and in less good overall financial health – are those whose situation improves the most between 2022 and 2023.

Intercommunality with its own taxation, a budgetary trajectory that is still well oriented

The financial health of groups with their own tax system generally improved in 2023, reaching 3,08, the best average score in recent years. The different segments are well oriented, the EPT being the only ones to mark time.

Generally speaking, the intercommunity benefited from a good dynamic in tax revenues, which made it possible to cope with a massive increase in real operating expenses. The reduction in direct tax revenue was offset by fractions of VAT.

The departments in 2023: an unprecedented budgetary deterioration in ten years

2023 is a year of clear deterioration in the financial health of departments. Their average rating experienced a very significant deterioration, going from 2,65 to 3,5.

This deterioration was anticipated, in a context of inflation, strong social needs, and the real estate market crisis. Operating revenues are even experiencing a decline, while operating expenses remain dynamic. The equipment effort clearly stalled in 2023.

It is remarkable that the financial situations are, on the whole, more difficult as the departments are larger.

Regions and CTU in 2023: a halt to the recovery observed over the past two years?

The financial situation of the regions and CTU deteriorated in 2023, breaking with the improvement trajectory that had prevailed for two years. As in the departments, but to a lesser extent, this segment of communities experienced a greater increase in its operating expenses than in its operating revenues.

This year's barometer confirms the trend towards convergence between metropolitan regions and regions/CTUs of Corsica and overseas.

Focus on intermunicipal unions: a limited deterioration of the financial rating in 2023

The financial health of intercommunal and mixed unions is characterized by very great stability. This situation is generally favorable, with an appreciation of solvency ratios mainly due to the contraction in the debt ratio.

Find the Barometer by following this link.

Illustrative image of the article via Depositphotos.com.