A dark surprise in the welfare area

Director of Welfare Field Guidance Department Willer Viko Ahonen The Ministry of Finance said that the development of the economic situation in welfare areas this year has been worrying.

– Ahonen said that what surprised the welfare regions this year was that despite the savings targets, the use of purchased services and temporary work increased.

Ahonen said that the cost-saving measures planned by the regions were generally progressing well, but the weak economic situation had led to cost increases that exceeded previous estimates.

As a result, the goal of bringing the economy into balance is disappearing in several areas. Ahonen said that the economic situation in most regions has been weak this year.

Ahonen said VM’s key message to the welfare sector was that in addition to the austerity measures already decided, additional measures were needed this year to balance the economy.

Minister for the Guidance of the Welfare Sector Ville-Veikko Ahonen said costs in these areas had risen more than expected. Mikko Huisko

Rating Darkened

Last year, the regions ran a combined deficit of 1.36 billion euros.

According to the regions’ own budgets, the deficit this year totals 900 million euros. In 2025 and 2026, the regions are expected to achieve a surplus of 1.2 billion euros, and the deficits accumulated in previous years can be closed within the timetable stipulated by law, that is, by the end of 2026.

The Interior Department believes that the outlook for 2025 and 2026 is quite optimistic, with uncertainty about the effectiveness of adaptation measures planned by regions.

The Ministry of Economy’s National Economy Department recently revised down its estimate of the welfare regional deficit for this year, from 1 billion euros estimated last autumn to 1.2 billion euros.

Requests for additional funding are on the table

Vantaa and Kerava are the first welfare regions to ask the state for an additional 148 million euros in funding.

Ahonen said the working group dealing with requests for additional funds will hold its first meeting in early June. According to him, the aim is to reach a decision as quickly as possible.

According to Ahonen, in addition to Vantaa and Kerava, several other regions have expressed their readiness to apply for additional funding in the coming years, but Ahonen said it was not yet clear whether there would be any additional funding applications this year.

Under the law, regions can receive more money from the state if service organizations or residents’ basic rights are threatened.

If additional funds are received, VM may require the region to take adjustments to balance the economy.

Weak investment capacity

The Ministry of Finance has set conditions for some regions to balance their economies, as they must apply to the government for borrowing rights to make long-term investments. By obtaining loans, the regions must take measures to balance their economies.

The lending agency limits over-indebtedness for investments in welfare regions. This year, 11 regions have been granted borrowing mandates of around 2 billion euros. Decisions are being prepared for two areas.

According to the Treasury’s assessment, it is unlikely that any region will be given borrowing rights next year unless the government makes a change of decision.

VM estimates that the regions’ ability to finance investments by means other than over-indebtedness will improve only next year or only by 2026.

If a welfare region fails to make up its deficit by the end of 2026, it may be subject to an assessment process, with the risk that the region will be merged with another one.

However, the Treasury has promised regions that they can avoid this procedure if they develop credible savings plans and implement actions.