Mayors urge reevaluation of flawed municipal funding system in Denmark

An expert has criticized the current funding and equalization system for municipalities in Denmark as ‘flawed,’ prompting half of the country’s mayors to send a letter to the government and Parliament urging a reevaluation. The system redistributes funds from wealthier municipalities to those with fewer resources. According to the mayors, this outdated system fails to meet current needs and negatively impacts public welfare, making it difficult to develop budgets. This challenge affects essential services, such as school renovations, care for the elderly, and support for children.

Among the recipients of the letter is Interior and Health Minister Sophie Løhde. She acknowledged the mayors’ concerns, stating that an analysis of the system is underway, marking it as an opportunity for improvement. The equalization system, last altered in 2021, has not been reviewed since 2012 and does not account for demographic changes, such as a growing elderly population and increased early retirement.

Arne Ullum, a financial expert on municipal economics, asserted the need for a more objective approach to funding allocation, similar to practices before 2020 when skilled civil servants oversaw a system grounded in fiscal realities rather than political whims.

While the government has indicated that a comprehensive review will be completed by the end of 2027, many mayors believe this timeframe is too extended. Minister Løhde defended the timeline, stating that a thorough analysis is complex and cannot be rushed. Currently, the Ministry’s financing committee is tasked with examining the municipal equalization system, but it remains uncertain if this analysis will lead to substantial changes.