– The city household suffers from Long Covid Syndrome – it does not come out of the crisis so quickly. In the coming year, the result of the administration will again be a big minus. According to SZ information, the city could make a loss of more than 450 million euros in 2022 in the ongoing business of its presentations. This year there are around 600 million. The city is thus violating applicable guidelines and is under enormous pressure.
The government of Upper Bavaria, as the supervisory authority, is pushing for Munich to make massive savings and increase revenues. From there, there are clear indications that one should pay attention to discipline in spending, it says from the town hall. Therapy for Long Covid Syndrome will therefore be painful for everyone. The city employees, but also all other citizens, could in future clearly notice the budget crisis in their own wallet.
In the wake of the pandemic, the Free State temporarily relaxed the requirements for the approval of households, but Munich should no longer make any losses in the ongoing business of the administration as soon as possible. If the city is forced to zero, however, “then there is a risk of incapacity to act,” says treasurer Christoph Frey. The city would then have to cut at least 20 percent of its voluntary services.
In July, the city council will decide on the key dates for the 2022 budget. The units have already announced their anticipated needs. As in this year, the administration will again have to save 200 million euros, 50 million in personnel and 150 million in the budget of the departments – that corresponds to 6.5 percent of the planned budget. This will reduce the forecast deficit to still more than 250 million euros. But even this result is far from the budget’s eligibility for approval.
The deficit for the years 2021 and 2022 in budget planning means “that the permanent ability of the state capital to meet all payment obligations is jeopardized,” warns Chamberlain Christoph Frey.
(Photo: Alessandra Schellnegger)
The stop of re-appointments in the administration continues. “There will be a harder hiring freeze in 2022 than in 2021,” says HR officer Alexander Dietrich. 40 million euros are to be saved by vacant positions. In theory, that would correspond to a good 600 vacancies that will not be filled again. In fact, the difficult-to-predict fluctuation could make it closer to 1200 jobs. Already this year around 1000 positions cannot be filled.
One will also have to discuss whether the city will cut its voluntary work on staff, says Dietrich. So there could be cuts in the travel allowance. A reduction in the number of further training offers is also up for debate. If both were eliminated, another ten million euros could be saved – this would make a total of 50 million euros. Dietrich does not want to save on the junior staff. “We want to continue training and then take over the people.” The speaker excludes operational dismissals.
The city will not be able to avoid curbing investments either. So far, she had planned to be able to spend 1.8 billion euros every year until 2024 for projects that have already been decided that have yet to be implemented: schools, daycare centers, housing construction. Kämmerer Frey wants to reduce this amount by a third in 2022, to 1.2 billion euros. The city is also expected to earn 50 million euros more per year. The citizens could then also feel the budget gap. Some things could soon become more expensive, for example parking, but also entrance fees.
For years, the city was able to look forward to budget surpluses of several hundred million euros every year. But due to the corona pandemic, income from business tax collapsed. It is the city’s most important source of income. Around 1.74 billion euros flowed through them into the city budget in 2020 – a decrease of 950 million euros or 35 percent compared to the previous year. Last year the federal and state governments compensated for the failures of the municipalities. But the city is also expecting significant losses this year and next. This year, more business tax could come into the coffers again; Kämmerer Frey reckons with 2.2 billion euros. But that would still be 19 percent less than in 2019, the year before the Corona crisis. In 2022 it could be around 2.3 billion euros.
However, there are still no aid commitments for the years 2021 and 2022. Lord Mayor Dieter Reiter therefore recently appealed to the federal government to provide the municipalities again with financial support in order to compensate for the shortfall in income. “The city of Munich urgently needs quick and unbureaucratic help,” said a letter to Federal Finance Minister Olaf Scholz. “The state capital cannot cope with the corona-related tax losses on its own.” An early decision on the continuation is necessary “in order to be able to stabilize the budgets of the cities”, so OB Reiter.
The minus for the years 2021 and 2022 in the budget planning leads to “that the permanent capacity of the state capital to meet all payment obligations is jeopardized,” warned treasurer Christoph Frey. The city is therefore reaching its limits when it comes to further increasing new borrowing.
Without financial support from the Free State of Bavaria or the federal government, without strict budget discipline, the city will still not reach zero in ongoing business in 2023. So the Long Covid Syndrome will continue. According to Kämmerer Frey, the result of the administration could only move in the direction of a red zero again in 2024 or 2025. “The effects of the corona pandemic will burden us for years to come.”