Despite declining tax revenue, rising costs and poor economic prospects, Bavaria’s municipalities will receive more money from the Free State next year. The state government and leading associations agreed on the so-called municipal financial equalization on Thursday; with a volume of 11.4 billion euros, a minimal increase of almost two percent compared to the previous year. Finance Minister Albert Füracker (CSU) spoke of a “strong foundation”; because of challenges such as inflation or higher personnel costs due to collective agreements, it was “not easy to maintain a stable financial architecture.” The municipal side is also “characterized by the knowledge that the trees cannot grow into the sky because the times are the way they are.” The red pencil was not applied, but not all wishes were fulfilled either. In other words: The money is no longer so easy in Bavaria.
Representatives of the leading associations reacted rather cautiously to the agreement. Thomas Karmasin, President of the Bavarian District Council, said that they had “accepted the result”. He advocated a structural debate about the tasks of municipalities and conceivable shares of certain types of taxes – in order to create leeway again in the long term. Karmasin complained primarily about the federal government, which is “constantly making new demands” and we have to “insulate ourselves” from them. Municipal council president Uwe Brandl said that the financial equalization was “marked by a commendable effort, but not satisfactory” in view of the tasks of the municipalities. Like Karmasin, he called for a “relentless criticism of tasks and expenditure”.
Füracker appeared open to a reform debate, as did the chairmen of the budget committee in the state parliament, Josef Zellmeier (CSU) and Bernhard Pohl (CSU). Zellmeier called the negotiation result a good compromise, “the increase is considerable.” Pohl recalled that the municipalities have to deal directly with the citizens; they are “the ones who ensure local social peace”.
With the result of the negotiations, districts, counties, cities and municipalities can now try to plan reliably. So they know how much the Free State is helping them to fulfill their tasks. In recent years, the volume of financial equalization has increased steadily; in 2017 it was just under nine billion euros. Traditionally, the lion’s share of financial equalization is made up of so-called key allocations, which are largely “free funds” for municipalities. It also involves, among other things, money for building construction, which is relevant for schools and daycare centers, for example, wastewater infrastructure and clinics. “There is no investment backlog, which is always complained about in Bavarian hospitals,” emphasized Füracker.
The accommodation of migrants, which has been one of the biggest challenges for many districts and municipalities for a long time, only indirectly affects financial equalization. Here the Free State passes on appropriate federal funds to the municipalities, and according to the Finance Minister, additional money. However, the district offices are left with massive personnel costs for managing accommodation and for integration.
Regarding the federal government’s turbulence in the budget, Füracker spoke of uncertainty for the Free State as well. In any case, one is “not in a position to replace federal funds that are lost in Bavaria if tax revenues decline.” In general, people in this country should not only talk about emergencies and how to circumvent debt brakes in accordance with the constitution – but also about how to generate income again and how the economy is progressing. The financial equalization with its 11.4 billion euros is now a first step towards the Free State’s budget. In 2023 this was a good 71 billion euros. The one-year budget for next year is due to come to the cabinet in January; Füracker would like to present the draft to the state parliament in the first quarter.