Experts Back Local Governments' Calls for More Funding from the Special Fund
The action coalition “For the Dignity of Our Cities” has received prominent support: The Investment Advisory Board of the Federal Ministry of Finance recommends allocating a larger share of the infrastructure package worth billions to local governments.
The experts highlighted the funding gap and possible solutions. At a press conference held by the Investment Advisory Board of the Federal Ministry of Finance, its members emphasized that local governments in Germany would face a deficit of just under 32 billion euros in 2025. As a solution, they recommended providing cities and municipalities with more funds from the Special Infrastructure Fund. After all, local governments account for about 40 percent of all public investments and approximately 60 percent of public construction investments.
In doing so, the Investment Council confirmed a key demand of the action coalition “For the Dignity of Our Cities,” which brings together financially strained municipalities. Throughout the entire process leading up to the establishment of the Special Infrastructure Fund, the coalition had insisted that cities and municipalities be given appropriate consideration in proportion to their share of investment.
However, the funds (100 billion euros) did not go directly to the municipalities but to the states, which distributed them according to their own criteria. The federal government’s requirement to pass on at least 60 percent was removed by the states before the package was approved. As a result, there were 16 different regulations governing how much money the municipalities would receive.
An internal survey by the Action Alliance shows just how differently the distribution was regulated. The shares allocated to municipalities vary by up to 30 percentage points.
North Rhine-Westphalia ranks at the bottom of this list. The state allocates only 47.4 percent of the special fund to municipalities as a lump sum. Additional funds are distributed through grant programs and are therefore subject to the same difficulties
as other forms of funding: The municipalities that benefit most from these funds are those with sufficient personnel and financial resources to navigate the complex application processes.
The organization “Für die Würde unserer Städte” (For the Dignity of Our Cities) outlined the consequences a few days ago at the State Press Conference: The debt of North Rhine-Westphalia’s municipalities rose by 571 euros per resident last year. During the same period, the state reduced its debt by 217 euros per capita.
“It is high time to act. The wildfire is already here, and before we end up with cities and municipalities that are completely unable to act, the federal government should follow the Investment Advisory Board’s recommendation,” say Martin Murrack and Silke Ehrbar-Wulfen, spokespersons for the “For the Dignity of Our Cities” coalition.
Background Information
Federal Finance Minister Lars Klingbeil has appointed the Investment Advisory Board as an independent body composed of volunteer experts. Its members include entrepreneur Harald Christ, former SAP Executive Board member Sabine Bendiek, Ann-Kristin Achleitner from the Technical University of Munich, former Volkswagen Executive Board member Hiltrud Werner, former Mayor of Mannheim Peter Kurz, labor union representative Roman Zitzelsberger, and scholar Jens Südekum.
Seventy-three municipalities from eight federal states have joined forces in the action alliance “For the Dignity of Our Cities.” Approximately ten million people live in these cities and districts. The municipalities are particularly affected by structural change, which is why they have low tax revenues and high expenditures, especially in the social sector.