Just as financial transfers between richer and poorer cantons (NFA in German) contribute to Switzerland’s wellbeing, so, in a country putting special emphasis on devolution, do transfers between towns and villages within individual cantons.
Most intra-cantonal transfer systems face even bigger challenges than the NFA – subject to so much recent discussion. Avenir Suisse’s latest “cantonal monitoring” report highlights and compares what’s at stake. It concludes that achieving inter-communal “solidarity” has become much more expensive than necessary.
For poorer towns and villages, it’s often not even worth the bother: for communities whose tax revenues are below a certain level, boosting receipts is counterproductive, as they just suffer an identical loss of receipts from the intra-cantonal system. Nationally, 40% of towns and villages find themselves in this plight: in German speaking Switzerland, it’s 56%. What’s counterintuitive is that even such towns and villages try at least verbally to boost their attractiveness – and hence their tax base.
That’s the good news. Local politics largely attracts people genuinely interested in the wellbeing of their communities, not operators focused exclusively on maximising local revenues. But even such justifiable praise shouldn’t detract from criticism of transfer systems that punish good performance. Nor does it mean the myriad other weaknesses of most cantonal systems should be ignored.
Avenir Suisse’s 5th “cantonal monitoring” offers the first comprehensive analysis and ranking of Switzerland’s intra-cantonal financial transfer mechanisms. As with earlier studies in the series, much of the information comes from ground breaking local research. Do all communes have the same powers when it comes to financing and revenue raising? Is there a clear division between the equalisation of resources and potentials and the compensation of burdens? Who finances transfer payments and how high are they? Are transfers based on communities’ exogenous burdens, or are they grounded on actual expenditures? How many towns and villages are completely dependent on transfer payments? And – returning to the weaknesses mentioned at the start: how significantly do such failings handicap local competition between the communes? In all, the study reviews 12 criteria (shown in the table on page 5 of the German language press release). The findings there also serve as a useful guide to cantons.
Nationally, Glarus comes out top. Its success stems from its pioneering (but barely replicable) 2011 local government reform, when administrative regions were combined to create a modern and transparent transfer system, stripped of significant distortions.
Second is Freiburg, another stand out thanks to an intra-cantonal transfer system that is simpler and more transparent than the NFA and breaks new ground in the equalisation of burdens. Wallis (third) and Schaffhausen (fourth) are followed by a broad midfield of 17 cantons, some showing serious failings in how resources are transferred internally. Graubünden, St. Gallen und Solothurn all trail, with significant needs for reforms. Tail ender Ticino is a byword for virtually all the “don’ts” in internal transfers.
Five years after the introduction of the NFA, many cantons have thoroughly revised their transfer systems, leading to noteworthy improvements. But much can still be done. Many of current mechanisms remain unnecessarily complex and, via full or part reform, have become more extensive. Others are plain outdated. There is no justification for most of the distortions highlighted in the study. Inter-communal transfers represent the – “financial glue” that holds together a country as heterogeneous as Switzerland. But they accomplish that function only imperfectly.