Municipal Social Spending Soars, Straining Local Budgets, New Study Finds
A new study โby โฃthe โInstitute โขof German Economy (IW) โขreveals a dramatic increase in social spending byโ Germanโข municipalities between 1992 and 2022,โค whileโฃ fundingโค forโ discretionary projects like road โคconstruction and โขhousing has significantly declined. The researchโ underscores growing financial pressure on local governments, fueled by rising social service costs largely dictated by federal legislation and insufficientโ corresponding funding.
Between 1992 and 2022, social โขspending per capita rose โfrom 759 to 1,675 euros, according toโ theโค IW study. Together,โฃ theโฃ proportion of municipal funds allocated to self-persistent โคprojects-such as road construction and housing-fell from oneโ in three โeuros in 1992 to just one in five in 2022. Capital investments in buildings experienced a particularly sharp decline, โคdroppingโค from โ21% to 12% over the โsame period.
The study โขhighlights โคa shift in the composition ofโข municipal spending,with a substantial portion now driven by โpolitical decisions made at โthe state andโ federal levels.โค Authors argue these costs should beโ adequately financed by those higher levelsโค ofโค government.โ “To end the municipal โfinancial crisis, fully funded socialโ and youth services as well as a containmentโ of administrative tasks are required,” the study concludes, emphasizing the need to assess โwhether municipalities receive sufficient funds to cover their social obligations.
Local associations and state governments echo theseโฃ concerns, criticizing the federal governmentโ for imposing additional tasksโฃ on municipalities without providing commensurate financial resources. The analysis โsupportsโข their long-standing claims of underfunding โand unsustainable financial burdens.
