1.2 billion shortfall

40% of municipalities are running out of money

Almost every second municipality is no longer able to make the necessary investments from its current budget. (symbolic image)

(Bild: Christian Schulter)

Up to 40 percent of Austrian cities and municipalities are likely to face financial problems this year, and things will get even worse by 2027, experts warn. There is currently a shortfall of around 1.2 billion euros, and investments are often only possible with new debt or not at all. Sustainable solutions should turn the tide.

Specifically, it is about the surplus of current income over expenditure. According to calculations by the Center for Public Administration Research (KDZ), this figure will fall to 8.2 percent on average for all municipalities this year. However, more and more local authorities no longer have a surplus or are even in the red. As a result, additional expenditure (e.g. for the expansion of kindergartens, climate protection measures, investments) can only be covered by releasing any reserves or taking out additional loans.

The municipalities were already 13.2 billion euros in debt in 2022. A good portion of their current budgets is already being used to repay these old loans.

"It's getting down to the wire internally," says Matthias Stadler, Mayor of St. Pölten, summarizing the critical situation. According to KDZ, the total surplus of all local authorities will fall to 1.8 billion euros in 2024, which is 45% less than in 2019 when adjusted for inflation. Without countermeasures, a further slide to 1.4 billion or 5.9% surplus ratio is predicted by 2027. 

(Bild: Krone KREATIV/Adobe Stock)

The reason for this is that local authority expenditure is set to rise by six to seven percent per year due to additional tasks, and by as much as nine percent for nurseries and elementary school. The levies that the municipalities have to pay to the federal states are also on the rise, for example to cover the losses of the state hospitals. 

Around 1.2 billion euros are therefore missing, even though the federal government has just approved an aid package: 300 million euros as a one-off financial injection for 2025, 500 million euros as a subsidy for investments and a total of 120 million euros by 2028 to support citizens with digital ID cards (ID-Austria).

Sustainable solutions needed
However, this is just a drop in the ocean, says Stadler, sustainable solutions are finally needed. In order to turn the tide, the federal states should, for example, put the brakes on levies and introduce more taxes on vacant properties and second homes. The federal government should finally raise the property tax that goes to the municipalities closer to the real market value of properties. And the municipalities themselves would have to raise around 580 million euros by reviewing their services and implementing cost-saving measures (e.g. through increased cooperation with neighboring towns).