Schleswig-Holstein State Government Approves Challenging 2026 Budget Guidelines
Government outlines directives for budget year 2026 - Government settles upon budgetary foundation for the year 2026
The Schleswig-Holstein state government has officially backed the rules for its 2026 budget, as announced by the Finance Ministry. This budgeting plan is based on an October 2024 tax projection, increased debt due to economic downturn, and a revised forecast of the state's incoming funds and expenditures.
For the following year, the government expects revenues of around 16.47 billion euros and expenses of approximately 16.56 billion euros. The estimated 90 million euro deficit arises from the uptake of cyclically-induced loans totaling 140 million euros, with a subsequent deduction of a 50 million euro debt repayment rate.
Continent-wide spending restraints and savings programs
However, the state government is confronted with a hefty funding gap of roughly 970 million euros. As stated by Finance Minister Silke Schneider (Greens), "It's clear: budget consolidation in Schleswig-Holstein is still essential." Hence, the government maintains its consolidation and investment route.
This enormous discrepancy can be attributed to several factors, including provisions for the forthcoming wage agreement for state employees, ongoing war-related crises, the effects of the massive North Sea storm surge, and digitalization costs. A one-percentage-point wage increase could add an estimated 50 million euros to the state's expenses.
The government plans to cut another 200 million euros from future budgets, with savings proposals to be developed between the present and the adoption of the 2026 budget draft by the cabinet in July.
Schneider: Constitutional amendment presents opportunities for the state
The federal government's increased financial framework, still unrevealed in the guidelines, will be taken into account at the earliest with the summer 2025 budget planning. Preliminary estimates suggest that Schleswig-Holstein could receive annual payments of around 280 million euros from a special infrastructure fund over the course of twelve years.
In addition, the state may benefit from an extra credit framework of about 400 to 500 million euros per year - equal to approximately 0.35% of the gross domestic product.
"The state government aims to immediately invest the additional credit and investment funds in 2026 infrastructure," Schneider emphasized. The objective is to achieve a modern infrastructure network throughout Schleswig-Holstein by 2040. For the finance minister, it's already decided: "The constitutional amendment presents a real opportunity for Schleswig-Holstein, as the investment demands in the state are enormous."
Future budget planning
Following the approval of the guidelines, the Finance Ministry waits for the spring projection and the May tax forecast from the federal government, which will also be incorporated into the forthcoming budget draft.
In July, the cabinet intends to adopt the 2026 budget draft together with the consolidation package and submit it to the state parliament for discussion in a first reading in September. Supplements to the budget draft will then be decided with the autumn projection and the October tax forecast of the federal government, submitted to the state parliament via a supplementary list for further debate in a second reading in December.
Challenging Budget GapBudget ConsolidationState GovernmentSchleswig-HolsteinFederal Ministry of Finance (BMF)SubsidyLoanEconomic Cycle
Enrichment Data:Governments facing significant budget gaps often employ a variety of strategies to address these discrepancies, taking into account factors such as wages, personnel costs, crisis-related expenses, digitalization costs, revenue growth, and budget consolidation. Some potentially effective approaches include:
- Streamlining wage agreements and personnel costs
- Managing expenses related to ongoing crises
- Exploring phased implementation plans for digitization
- Increasing revenue through tax reforms, economic growth, and streamlined administrative procedures
- Implementing cost-saving measures or consolidating budgets
- Considering external financing options such as loans or EU structural funds
- The Schleswig-Holstein state government, in its effort to address the challenging 970 million euro budget gap, has emphasized the necessity of consolidation in the state's employment policy, as stated by Finance Minister Silke Schneider.
- In an attempt to address the budget gap and meet the requirements of the 2026 budget guidelines, Schleswig-Holstein's government plans to cut another 200 million euros from future budgets, with savings proposals set to be developed over the coming months.
- The Finance Ministry, awaiting the spring projection and the May tax forecast from the federal government, will consider the increased financial framework as part of the summer 2025 budget planning, potentially enabling Schleswig-Holstein to access subsidies from a special infrastructure fund and an additional credit framework for infrastructure investment.
