Upside down world in district finance: Normally, the income and expenses of ongoing operations add up to at least a black zero. There is usually a surplus, with which investments are financed. Everything is different in the financial year 2023. The associated administrative budget is under such pressure that a minus of 10.1 million euros is inevitable. There has never been such a clear deficit. Only 5.9 million euros can be absorbed through net depreciation, the remaining 4.2 million must be offset through reserves.
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Little is left for investment
Fortunately, the district was recently able to strengthen its liquidity because the end of the 2020 financial year was around twelve million euros better than expected. It is now using these additional funds to bridge the financial gap. In previous years the result was still positive, in 2022 6.8 million could be transferred to the part of the budget that finances investments – making it the most important indicator of a district’s performance. In 2023, with the help of loans, it looks meager: only 6.9 million euros will be invested – more than three million less than in 2022. Of these, only 4.9 million will flow into the construction of municipal roads or vocational schools – 2.7 million less than in 2022.
Negative result expected by 2026
District treasurer Michael Schellmann hopes that the draft budget for 2023 with the double-digit deficit remains an “outlier”, as the district council informed on Monday. “In the long run, this would not be compatible with the principles of orderly financial management.” According to the law, the profit budget must be at least balanced, preferably with its own resources. But even from 2024 to 2026 it seems “that a positive ordinary result is not possible in any year,” explains Schellmann. The projected deficit is expected to shrink by at least half in 2024 and 2025.
2023 threatened an even higher deficit
In reality, the deficit in 2023 could have reached 15 million euros, says Schellmann in the interview with HZ. But a series of “carryovers” since 2022 have provided relief. So these funds did not have to be reevaluated, but still remained because the projects were put on hold due to Corona and lack of personnel. “This is a one-time effect that will no longer be available to us in 2024,” warns Schellmann. Even the reserves can no longer be exploited on a large scale to compensate for deficits because they are reserved for financing the new municipality. The first phase of construction will cost 40 million euros: 20 million will be financed with own funds, 20 million with loans.
The district surcharge of cities and municipalities is to increase significantly from 2024
Due to these financial constraints, the assessment rate for the district levy must increase from 31.5 to 35.5% from 2024. But even this is not enough “to write a black zero again in operation.” All 16 cities and towns are required to pay annually to fund services that go beyond the municipal level. It is the main source of income for the district. Decisive for this are the tax power totals of the municipalities two years ago. Since these fell in 2021, the district will already receive almost five million euros less in 2023 with the same valuation rate.
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Rising social costs strain the budget
Above all, it is the social costs that increasingly exceed the district budget. “In 2023 we will give 96 cents of every euro of district levy directly to social services,” says Schellmann in the district council.
31 more jobs, but skilled workers are rare
As the district has to perform more and more mandatory tasks, it will need about 31 more jobs in 2023. The catch: As in the past, many of them may not be filled at all. And: Payroll costs could explode if rates rise more than expected.
The construction of new hospitals remains a major cost item
The hospital also remains a big cost blocker. The district has to finance the new Öhringer building: as before, with around 1.8 million euros per year. There will also be ten million euros in 2024. And no one knows how and by whom the huge losses due to the coronavirus and the energy crisis will be compensated.
