Up to 40 percent of local towns and villages are likely to have financial problems this year, and things will get worse by 2027, experts warn. There is currently a deficit of around 1.2 billion euros and investments are often only possible with new debt or not at all. Sustainable solutions must turn things around.
In concrete terms, this concerns the surplus of current income over expenditure. The Center for Administrative Research (KDZ) calculates that this value will drop to 8.2 percent on average for all municipalities this year. However, more and more municipalities no longer have a surplus or are even faced with a deficit. The result is that additional expenses (for example, for the expansion of kindergartens, climate protection measures, investments) can only be covered by releasing any reserves or additional loans.
As of 2022, the municipalities had a debt of 13.2 billion euros. A large part of their current budget already goes to repaying these old loans.
“We are going to work internally,” Matthias Stadler, mayor of St. Pölten, summarizes the critical situation. In total, according to the KDZ, the surplus of all municipalities will fall to 1.8 billion euros in 2024, which, adjusted for inflation, is 45 percent less than in 2019. Without countermeasures, a further decline to 1.4 billion or 5.9% surplus. is predicted in 2027.
The reason is that municipal expenditure increases by six to seven percent per year due to additional tasks, and even by nine percent for kindergartens and primary schools. The levies that municipalities have to pay to the states are also increasing, for example to cover the departure from state hospitals.
So about 1.2 billion euros are missing, even though the federal government has just established a support package: for 2025 there will be 300 million euros as a one-off financial injection, 500 million euros as a subsidy for investments and a total of 120 million euros . million euros by 2028 to support citizens with digital identity cards (ID Austria).
Sustainable solutions are needed
But that’s just a drop, says Stadler, sustainable solutions are finally needed. To turn the tide, the states must scale back levies and introduce more taxes on vacant properties or second homes. The federal government must finally bring property taxes flowing to municipalities closer to the fair market value of real estate. And the municipalities themselves would have to raise around 580 million euros by examining their services and taking savings measures (for example by collaborating more with surrounding cities).
Source: Krone
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
