Higher social spending and more personnel costs: the municipalities recorded a deficit of 6.8 billion euros last year. The Association of Cities and Municipalities speaks of a “catastrophic development”.
Last year, municipalities in Germany were in the red for the first time since 2011. Municipalities and municipal associations without city states recorded a deficit of 6.8 billion euros, as the Federal Statistical Office announced. Revenue of 358.1 billion euros was compared to expenses of 364.9 billion euros in 2023.
In the years from 2012 to 2022, there were always financial surpluses through our own tax revenues and allocations from the federal and state governments. The allocations were also temporarily increased during the Corona pandemic to support municipalities. In 2022 the surplus amounted to 2.6 billion euros.
Higher social spending
According to the information, municipal spending rose sharply by twelve percent (39.2 billion euros) within a year. According to the statisticians, the cost drivers were primarily social spending – they rose by 11.7 percent to 76 billion euros. Among other things, the standard rates for citizens’ benefit and social assistance were increased on January 1, 2023. The fact that war refugees from Ukraine can receive citizen’s money also contributed to the increase – although in return the expenditure under the Asylum Seekers’ Benefits Act was 7.9 percent lower than in the previous year.
In addition to spending on social benefits, other significant types of spending also grew strongly: In the core budgets, personnel spending rose by 7.4 percent to 80.9 billion euros, which is primarily due to the 2023 collective agreement in the public sector – in particular to the special payment to compensate for inflation.
Core budget – extra budget
A core budget is a public budget at the federal, state or local level in the narrower sense. The extra budget includes all public funds, institutions and companies that belong to the state, such as special purpose associations, public universities or other funds, institutions and companies such as municipal hospitals, energy and water suppliers or transport companies.
Plus from trade tax is not enough
There was also a significant increase of nine percent on the income side, 29.7 billion euros more than in the previous year – but this could not have compensated for the increase on the expenditure side, the statisticians explained. For example, tax revenue rose by 7.3 percent to 130.3 billion euros. Trade tax revenue in particular increased more than expected – by an average of 9.5 percent.
Rhineland-Palatinate, however, is an exception here. There, net revenue fell by 26.9 percent compared to the previous year, which is due to the drop in sales at vaccine manufacturer BioNTech after the corona pandemic.
Association of cities and municipalities: “Catastrophic development”
The German Association of Cities and Municipalities speaks of a foreseeable but nevertheless “catastrophic development”. In recent years, the situation of the municipalities has not been so visible due to the support from the federal and state governments during the corona pandemic, said spokeswoman Janina Salden tagesschau.de. “In this respect, the deficit situation is not entirely new and the numbers are not surprising.”
The federal and state governments must take countermeasures and “not always pass new laws that require implementation costs at the local level if at the same time there is insufficient local funding.” Salden called for “some kind of stop sign or moratorium” to end the “cycle” of new benefit promises and associated spending.
There are also new items such as the Growth Opportunities Act, which cities and municipalities did not reject, but which additionally reduces the municipal tax share. The municipalities also need scope for action in other areas such as infrastructure.