Thirteen Cities Say State Subsidy System Breaches Constitution and Threatens Services

Kouvola city said in an ePressi press release that it and twelve other major Finnish municipalities submitted an expert legal opinion to Minister of Local Government Anna‑Kaisa Ikonen on 7 April, arguing that the current state funding system violates the Constitution and must be reformed immediately. The opinion was prepared for Kouvola by Professor Tuomas Ojanen of the University of Helsinki and assesses the system against constitutional protections for municipal self‑government and residents’ equality. Ojanen concludes the arrangements are highly problematic: they undermine municipalities’ financial autonomy and create unequal access to legally mandated basic services depending on where people live. The 13 signatory cities—Jyväskylä, Kotka, Kouvola, Kuopio, Mikkeli, Oulu, Pori, Rovaniemi, Seinäjoki, Tampere, Turku, Vaasa and Vantaa—represent about 30 percent of Finland’s population. The cities point to sharp reductions in state subsidies after the social and health‑care reform: they estimate the so‑called “sote” transfer items (social and health‑care transfer items) cut their funding by about €389 million in 2026 and by €1.4 billion across 2023–2026, leaving a persistent annual shortfall of roughly €315 million from 2028 onwards. Since the cuts began, several signatory municipalities have trimmed services and balanced budgets, and many face pressure to raise municipal taxes. The cities warn that differing local tax responses to funding gaps could lead to unequal access to statutory services. Kouvola mayor Marita Toikka is quoted: “The situation can be considered very problematic from a constitutional perspective. If municipal tax rates differ significantly, this can place residents in unequal positions, which can also be seen as an equality problem.” The cities propose concrete corrective measures. They ask the ministry to remove the social and health‑care (sote) transfer items from the basic services subsidy calculation as a separate item and to phase those transfers out gradually to avoid sharp local tax increases. As reported by Aamulehti, the transition would be designed to smooth the impact on municipal finances so that direct effects on tax‑rate changes remain around 1.1 percentage points, with a multi‑year phase‑out of up to five years and an annual effect capped at roughly €100 per resident. The cities estimate the change would cost the state about €160 million per year once fully implemented, and they call for a broader overhaul of the state subsidy system to be completed no later than the next parliamentary term to secure constitutional protections and fair access to basic services. In parallel, Minister Ikonen has launched a parliamentary working group that began its work on Wednesday, with her set to chair it. According to YLE, the group will examine municipalities’ future roles and the funding model, including municipal service promises, cooperation arrangements, possible municipal mergers, and the entire state funding system. YLE reports that Ikonen said comprehensive reform cannot be completed during the current government term, describing the situation as “broken”; she also stressed that municipal tax revenue is the primary source of funding for local government, while state contributions account for less than 15% of municipalities’ finances. YLE further reports that the Chancellor of Justice has asked the Ministry of Finance for clarification in response to complaints from Tuusniemi, Pukkila and Laukaa, with a May 4 deadline for the ministry’s response (first reported by Uutissuomalainen).