UGP: Abolishing 430 Local Units Would Save at Least One Billion Kuna Annually

Member of UGP, data scientist Nikola Strahija has come up with astonishing data – by abolishing financially unsustainable 430 local government units, at least one billion kuna would be saved annually.

Over the last decade, the bulkiness of public administration and the aggregation of numerous local government units has been a frequent topic. It was brought back to the forefront during the coronavirus crisis, when the absurdity of the division of local government units became evident through daily examples.

It became clear that some of them do not even have the basic necessities that residents need daily, yet they still have their municipality and mayor. There is even an example of a settlement that is located in two municipalities. Croatia has over 100 units that cannot function without state aid. By merging them, significant savings can be made, and the mentioned funds can be redirected to many places and projects.

Due to all of the above, member of the association Voice of Entrepreneurs Nikola Strahija decided to create a map of the optimal territorial organization of local government units. He did this using machine learning, and as the basis for logic, he used geolocation and financial reports from 2018.

 – In every part of Croatia, a local government unit with positive financial indicators was selected, and nearby units were merged around it according to location parameters. The expenditure of the original unit was not changed, but the expenditure of the merged units was. Amounts for utilities, energy (lighting), maintenance, paid subsidies, fees, and assistance to residents were taken from their expenditures, along with approximately 40% of the original expenditure. Savings are achieved on items such as the salaries of mayors, promotion, office supplies, telecommunications, representation, fees for various councils, rents, and others – said Nikola Strahija.

The result is approximately 430 fewer local units and around one billion kuna in annual savings.

– This is an excellent analysis as it uses machine learning techniques to optimally determine the boundaries of local government in terms of the sustainability of the financing model. In other words, it gives us insight into which municipalities cannot finance themselves and cannot survive without frequent assistance from the central government (and research has shown that every such dependency of local government on the central always involves politically motivated transfers of resources). The analysis was voluntarily prepared for UGP by Nikola Strahija, an excellent data scientist from Čakovec. UGP, as always, is the first to offer the public this type of analysis based solely on data that should serve the future government as a template when implementing the necessary reform of local government.  Of course, further expert analysis that respects local specifics is also needed, but this is a necessary first step or an ideal foundation for comparing other proposals for local government reform – said Vuk Vuković, an economic expert from the association Voice of Entrepreneurs.

Here you can find an interactive map.