Budget deficit in Friesland: Where is the financial help?

On January 26, 2025, the majority group in the Friesland district council, consisting of the SPD, Greens and FDP, approved a draft budget that is aimed at investments in schools, hospitals and infrastructure projects. However, this draft envisages an expected deficit of around 44.9 million euros for 2025. The main reasons for this deficit are the compensation of losses for the Friesland clinics and increased task allocations.

Jannes Wiesner, group spokesman for the SPD, points out that the problems can be traced back to structural underfinancing of the municipalities. The municipalities receive additional tasks every year that are not adequately financed by the state and federal government. This situation leads to a structural imbalance between the task and expenditure burden of the municipalities, which bear 25% of the national tasks, while their share of tax revenue is only 14%.

Demands for better cooperation

Gerhard Ratzel, chairman of the FDP parliamentary group, emphasizes the need for better cooperation between cities, municipalities and the district, and criticizes the disagreement on important projects such as the expansion of sirens. Wiesner also expresses concerns about the current design of the federal and state debt brake, as it does not take the local level into account. Municipalities need an adequate minimum financial level, which could possibly be secured by increasing their share of sales tax.

In a further context, the federal government reports that a draft for the 2025 budget was approved on July 5, 2024. The cabinet discussion is scheduled for July 17, 2024. This draft also includes a growth initiative and a supplementary budget, which include an additional eleven billion euros in loans, mainly due to increased costs in connection with the Renewable Energy Act and citizens' money.

The debt brake will be adhered to, with tax relief such as the elimination of cold progression, an increase in child benefit and increases in child allowances and basic tax allowances being planned. However, the municipalities are struggling with a dramatic financial situation and expect a negative financing balance of -13.2 billion euros for 2024. The prospect of an improvement in the financial situation of the municipalities in the following years is not foreseeable.

The causes of this underfunding are diverse and include increasing expenses due to inflation, higher case numbers, burdens in the social sector and high collective bargaining agreements. The planned tax relief will result in a full annual impact of -1.8 billion euros for the municipalities. In addition, the growth initiative includes an extension of the degressive depreciation rate for movable assets until 2028, which will lead to further reduced income for the municipalities. Compensation for tax losses, for example by waiving the trade tax levy, is considered necessary.