Public participation in municipal financial planning

The outlook for municipal finances is changing due to demographic changes and the establishment of wellbeing services counties. Together with local authorities, we are experimenting ways to facilitate financial planning through public involvement.

What is this about?

Sitra funds experiments and shares information to develop an approach to involve citizens in municipal financial planning.

Tasks and finances of municipalities are undergoing major changes. With the establishment of wellbeing services counties, municipalities are no longer responsible for organising social and health care services nor the fire and rescue services. On the other hand, the transfer of employment and business services from the state to municipalities or joint municipal authorities from the beginning of 2025 will give them new tasks and tools. Nevertheless, population ageing and regional concentration are eroding municipal tax revenue and further differentiating service needs.

This disruption is also an opportunity for municipalities. With sufficient will, municipalities can specialise based on their strengths, build new partnerships and renew their ways of working.

This is where the involvement of local citizens can help, as it guides one to consider the impact of investments and to weigh up different options. Involvement increases citizens’ confidence when they can see the link between budget and objectives that have been decided. It also gives decision-makers the backing needed to make wise choices.

Citizen participation in municipal financial planning is based on the 2015 Municipalities Act and contributes to subsidiarity principle as well as fulfillment of municipal autonomy.

What do we do?

Sitra helps partner municipalities to experiment with new ways for citizens to participate in financial planning, identify municipal goals and evaluate their achievement.

We are also bringing together a broad development network of organisations involved in public finance planning to explore the issue in more depth, develop the approach and identify the necessary follow-up actions.

Experiments 2023

Pilot experiments were linked to municipalities’ financial planning for 2024 as part of their normal processes. Citizens’ panels were tasked with assessing the financial situation of their municipality and making proposals within the budget framework, which were then published.

This is how the experiments proceeded:

In Pieksämäki, the citizens’ panel was made up of a random sample of city residents. On the basis of the orientation and sectoral consultations, the panel made recommendations to the city government on the budget. In addition, the panel assessed the influence of city strategy in the performance charts of the sectors and made recommendations to increase the steering effect of the strategy.
In Merikarvia, the panel was assembled through an open invitation, which was also addressed to the numerous summer residents of the small municipality. The panel learned about values and financial outlook of the municipality, played a budget game, made recommendations for the budget and presented them at the budget seminar of the municipal council.
In Kaarina and Mäntyharju, the youth councils were introduced to the municipal finances. They discussed the main areas for development and made their recommendations for the budget. The recommendations were also taken into the preparation process. These experiments were coordinated by the Finnish Association of Youth Councils.

In addition to funding from Sitra, the citizen panels and youth councils were supported in familiarising themselves with municipal finances and analysing the impact of the proposals with the help of an accounting consultant.

The pilots will end in early 2024 with an evaluation of implementation and results. We will share best practices, tools and lessons learned with all municipalities.

Experiments 2024

These advanced experiments will be linked to the municipalities’ financial planning for 2025 as part of their normal processes. Following a funding call, the cities of Turku, Jyväskylä and Salo as well as the municipality of Rautalampi were selected as partners. Each municipality will randomly select a panel of citizens to take a position on a key issue identified in the municipality’s finances, making recommendations at different stages of the financial planning and evaluation process.

This is how the pilots will proceed:

In Turku, a citizens’ panel will examine key economic figures in relation to the adjustment programme. The panel covers all the city’s sectors and makes recommendations for budget preparation at the committee stage.
In Jyväskylä, the citizens’ panel will examine the impact of the rebalancing programme on the daily lives of the city’s residents and which sections of population are affected. If necessary, the panel makes recommendations to adjust the focus of the programme.
In Salo, the citizens’ panel will learn about the review the city’s performance and finances as well as investment needs. The panel makes recommendations for this year’s evaluation report, next budget and the 2026–2029 investment plan.
In Rautalampi, the citizens’ panel will examine the situation of the municipally owned rental housing company and the role of housing supply in the municipal economy, and make recommendations for the development of rental housing to the municipal government.

The experiments will provide experience of how citizen participation helps to address such issues in different municipalities. At the same time, the aim is to find approaches that can be established as part of the financial planning of all municipalities.

The experiments will end at the beginning of 2025 with an evaluation of implementation and results. We will share best practices, tools and lessons learned with all municipalities.

Development Network

A national development network, set up by Sitra, promotes the participation of municipalities in economic planning: its development, experimentation and implementation. The network monitors the progress of experiments, deepens knowledge, shares expertise, creates partnerships and models the way forward.

If you work in the field of municipal financial planning and would like to contribute to its participation, you can also sign up to the network yourself by filling in the form. The network works through remote and face-to-face meetings about 3–4 times a year.

One of the guiding principles for looking at foreign examples is outcome based budgeting. It starts by defining the desired results and identifying the inputs to achieve them, which are then used to build the budget. The involvement of citizens supports results-based budgeting, as the results of municipal activities are almost always linked to the lives of citizens.