The suggestions KS raised were largely taken on board when designing the resulting package of remedial measures. Out of a total package worth approximately NOK 20 billion, NOK 6.4 billion was channelled through the local government sector. The bulk of these funds was earmarked for support for exceptional maintenance, but some money was also freely allocated. One reason why maintenance initiatives in the local government sector became such a central part of the package was because the economic downturn in Norway initially triggered a falloff in home building in particular and thus a decline in production in the construction industry. Another is that the government at the time wished to signal a general political prioritisation of the local government sector. However, the fact that the sector itself was well prepared for the task may have a bearing on this.
Several years ago the Norwegian Association of Local and Regional Authorities already conducted its own analysis into how the local authority sector reacted to fluctuations in the Norwegian economy. It concluded that the pro-cyclical reaction of local governments was weak, but that the local government sector only made modest contributions towards fluctuations in the economy. Following up on this, an R&D project was launched to analyse how the local government sector reacted to changing revenues. The project showed that the delay between normal changes in revenue and its impact on operations and investment in the sector is so long that regulating the sector’s revenues is not a suitable counter-cyclical policy instrument. Anyone seeking to conduct a counter-cyclical policy using the sector’s normal revenues, be they free or specifically allocated funds, would run the risk of such activities having their greatest effects after the economy had turned around again. In other words, an attempted counter-cyclical policy can easily end up becoming a ‘pro-cyclical’ policy.
Furthermore, in a debate on welfare services in the light of the future rise in the number of elderly people, the Norwegian Association of Local and Regional Authorities had made it clear that in spite of the country’s healthy public finances, in years to come we should be careful not to over-expand welfare services in the local government sector, since we might then run the risk of welfare arrangements not being maintainable when in 10 to 15 years’ time the elderly population surges, dramatically driving up the demand for services. Nor could we, solely out of a desire to adopt a counter-recessionary policy, now dramatically raise the standards of welfare services, only to lower them again when the need for a counter-recessionary policy abated.
On this basis, the Norwegian Association of Local and Regional Authorities concluded that it would not be desirable to use usual operational and investment-related activities in the local government sector as an instrument in a counter-recessionary policy. Besides, were local authorities to be used, special initiatives would have to be devised to ensure both that increased revenues were quickly converted into heightened activity and that any adopted measures could be swiftly implemented. And naturally the initiatives in question would have to be of use to the sector, preferably so lowering its future expenditure and paving the way for durably improved services.
The Norwegian Association of Local and Regional Authorities also initiated an R&D project highlighting that there was a (far from optimal) major backlog in the maintenance of local government buildings. The results were published early in 2008. When the issue of an initiative package was raised in the autumn of that same year, the Norwegian Association of Local and Regional Authorities asked all local authorities and county councils to provide an overview of their own maintenance backlog. The results suggested that the non-covered maintenance backlog for buildings and amenities identified by the sector might be as high as NOK 30 billion.
Exceptional maintenance work is a counter-recessionary initiative that without further ado satisfies some of the demands made on it, and can be concluded when it is no longer required. It will likewise have permanent positive effects for the local authorities in question, since they will curb their investment and lower their future operating costs. The only thing we need to bear in mind is that allocating more resources to exceptional maintenance must quickly prompt an increase in activity. To ensure that this happens, the Norwegian Association of Local and Regional Authorities stressed the importance of informing local authorities about their plans before finalising any arrangements so that they could start planning their own initiatives. In addition, the funds in question had to be made available to the local authorities quickly, without prior and protracted application procedures. The role of the state should be retrospective control with how the funds were used. This was followed-up by the government.
The government presented its package of measures at the end of January this year. That package was adopted by the Storting (Norwegian parliament) in February, and already during March half of the local authorities had initiated extraordinary maintenance measures. All projects in question must be started up this year.
