Dresden's financial situation remains dire, with the city anticipating a deficit of approximately 45 million euros for the current year. This grim forecast, revealed in the mid-year financial report, suggests a critical financial crunch for the city in the second half of 2024.
This is the first time in years that Dresden, the main city, finds itself on the verge of ending the year in the red. The financial strain is primarily attributed to escalating costs due to inflation, a significant surge in spending within the social and asylum sectors, and a substantial burden of personnel costs following the recent wage agreement in the public sector.
Revenue sources, such as taxes, allocations, and fees, are projected to increase by around 200 million euros compared to initial predictions. However, this boost is counteracted by an anticipated increase in expenditures amounting to around 264 million euros, leading to a potential deficit of nearly 45 million euros.
The report provides no indication of immediate relief. Looking towards the 2025/2026 budget and the long-term financial plan until 2029, it is clear that social expenditure will continue to escalate while main allocations will experience a drastic decrease.
Mayor Dirk Hilbert proposed a shift in the city's financial strategy, highlighting that essential allocations from the Free State are significantly declining while statutory obligations, particularly in the social sector, are skyrocketing exponentially. Maintaining the current situation, he emphasized, is unfeasible.
Dresden's efforts to increase revenue may not be enough, as the anticipated increase in expenditures is projected to outweigh it, leading to a potential deficit. This financial predicament in Dresden might persist, as the report suggests a continuation of rising social expenditure and decreasing main allocations in the future.
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Factors and Potential Solutions:
Causing the deficit are rising social expenditures, decreasing main allocations, and fiscal constraints. Possible solutions include debt brake reform, tax revenue distribution reform, increased federal support, and implementing efficiency measures. By addressing these factors, Dresden and other municipalities in Germany can better manage their budgets and meet their financial obligations.
