The global operating grant: what is it? -------------------------------------------
Municipalities and intermunicipal authorities derive their income from local taxes paid by residents and property owners (residence tax and taxes on developed and undeveloped property) and from the territorial economic contribution paid by businesses, which replaced the business tax. A significant share of their resources also comes from the central government. The main one, the global operating grant, dates back to the decentralization legislation passed in 1982, which transferred many responsibilities to municipalities while compensating them for the resulting costs—insufficiently, in the view of many elected officials. Numerous successive reforms were then layered onto this grant, until its calculation became so sophisticated that no one could explain it any longer; reform was unavoidable…
Grants and inequalities -------------------------------
In 2015, as part of the Finance Act for the following year, Parliament passed a reform of the global operating grant. At the time, it seems, neither members of the National Assembly nor senators nor associations of elected officials spotted certain inconsistencies and absurdities. The reaction came only after the fact, so the government was forced to postpone implementation by a year. The new grant has three components. While the basic grant of €75 per inhabitant is not disputed, the same cannot be said of the rurality grant, and especially the centrality grant. The latter is first calculated for each intermunicipal authority, using a method similar to that applied to the National Equalization Fund for Intermunicipal and Municipal Resources (FPIC), with the amount per inhabitant increasing with the authority's population. The intermunicipal authority then retains a share proportional to its fiscal integration coefficient; its member municipalities divide the remainder in proportion to the fifth power of their populations.
This is devastating for municipalities! If one municipality has ten times the population of another, it receives 100,000 times as much. Take two municipalities of roughly the same size, with 11,800 and 10,300 inhabitants: the first receives twice as much as the second. The latter may then be tempted to join another intermunicipal authority in which it would be the most populous municipality… At a time when intermunicipal authorities are being reorganized and merged, purely financial arguments may sweep aside territorial considerations.