Cities, municipalities and districts in Germany are facing difficult years.

According to a new forecast, the municipal financial balances excluding city-states will add up to a minus of 23 billion euros in the years from 2021 to 2024.

This emerges from the communal financial report of the Bertelsmann Foundation, which the organization will present on Tuesday and which appears every two years based on the latest financial statistics.

Co-author René Geißler therefore pleads for further help, "but not with the watering can as last year," he says.

Hope is once again based on support from federal and state governments, as in the previous year of the crisis.

Jan Hauser

Editor in business.

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    The minus of 23 billion euros in four years is manageable overall, as this comprises around two percent of municipal spending in one year. “The problem for the municipalities is not that there is a lack of money, but that they don't know what to expect,” says Geißler, professor for public economy and administration at the Technical University of Wildau. "This will tighten their belts." Political peace would be created if the federal government were to take over part of the trade tax losses again. However, federal intervention is not mandatory if the federal states could take over instead. According to their responsibilities, the state governments are responsible for adequate financing of their municipalities.

    All in all, the income as well as the expenses and tasks of the cities, municipalities and districts have increased steadily for years. The economic upswing also gave them higher tax revenues, which, together with selective funding from the federal and state governments, financed the growing need such as the expansion of daycare centers. But with the corona pandemic, tax revenues fell rapidly, while health spending rose and costs for local transport, zoos and museums continued to arise.

    According to the evaluation, the corona crisis and pandemic cost the municipalities at least 17 billion euros last year. However, the federal and state aid programs more than made up for this. The municipal budgets without city-states were still up and achieved a surplus for the sixth time in a row. "This aid was necessary because the state must remain able to act in the crisis," says Kirsten Witte, local authority on the Bertelsmann Foundation. The tax losses mainly affected economically strong municipalities. The municipal tax revenue in Bavaria and Baden-Württemberg fell by more than 1.5 billion euros compared to the previous year, which was significantly more than in the five eastern German states combined.

    The federal government and the federal states had agreed to each pay half of the municipal trade tax losses. However, this resulted in an overcompensation of 6 billion euros, because the municipalities ultimately only lost 5 billion euros in trade tax compared to the previous year and not 11 billion euros as previously assumed. “We can all be happy that the tax shortfalls didn't get any worse,” says Geissler.