Local authorities complain about growing financial difficulties

Saxony's municipalities are complaining about a growing financial crisis. At the end of the third quarter of 2025, cities, municipalities and local authorities in the Free State had a budget deficit totaling 1.113 billion euros, according to cash flow statistics. At around 591 million euros, a large part of this is attributable to the independent cities of Dresden, Leipzig and Chemnitz.

The deficits have risen to astronomical levels, said Bert Wendsche, President of the Saxon Association of Towns and Municipalities (SSG), according to the press release. "The sound barrier of a billion euro deficit was broken in the third quarter."

Municipalities with a credit burden of almost 800 million euros

In order to cover expenditure, municipalities took out additional loans amounting to 426 million euros in the third quarter. This put the municipalities' credit burden at 795 million euros - more than twice as high as at the start of the year.

The SSG described the year-on-year fall in tax revenue of 58 million euros as worrying. According to the information, the main reason for this was a slump in trade tax. The independent cities were particularly affected.

Rising personnel expenses and higher social benefits

In terms of expenditure, municipal budgets were once again burdened in particular by rising personnel expenses (plus 103.5 million euros) and higher social benefits (plus 79 million euros). However, total expenditure fell slightly by 20 million euros, as the municipalities reduced their investment expenditure by 300 million euros.

The fact that the figures were not even worse was due to this renunciation of investments and cuts, including in the maintenance of schools, daycare centers and public facilities, said Wendsche. "This development is poison for the regional economy and the preservation of municipal infrastructure." Wendsche called for a year of reforms from the federal and state governments in 2026.