Report: Saxony's municipalities in dire financial straits

Saxony's municipalities are facing a financial ice age due to empty coffers. "We are plunging from record deficit to record deficit," said Bert Wendsche, President of the Saxon Association of Towns and Municipalities (SSG), at the presentation of the municipal finance report for 2024/2025 in Dresden. In the first three quarters of 2025, the deficit amounted to 1.1 billion euros. "This cannot continue! Action must finally be taken now so that local self-government does not become an empty promise."

Icy times for Saxon municipalities

The financial report looks as frosty as the ice floes on the Elbe, Wendsche, who is also the Lord Mayor of Radebeul, told media representatives in response to the figures. He felt like Cassandra, but did not hope to share her fate. The Greek king's daughter and seeress Cassandra is regarded as a symbol that the truth is not heard. Wendsche has been pointing out the financial plight of local authorities for years. Now he is calling for action: "Enough words have been exchanged."

The SSG President pointed out that a third of local authorities are no longer able to finance loan repayments and necessary investments from their current income. More than half of cities and municipalities would no longer be able to reconcile their income with their expenditure by 2024. This development is more or less evident in all federal states. Compared to the municipalities in the other eastern German federal states, Saxony is in the red when it comes to state allocations.

Saxony brings up the rear in the east when it comes to allocations to municipalities

The municipalities in Saxony lag far behind Brandenburg and Mecklenburg-Western Pomerania in terms of financial resources, even though they have more tasks to complete, explained SSG Managing Director Mischa Woitscheck. In relation to Mecklenburg-Western Pomerania, the difference amounted to 600 euros per inhabitant in the previous year. Converted, the municipalities in the state would not have around 2.4 billion at their disposal.

Public services cannot be financed on credit

"We expect the Free State of Saxony to live up to its responsibility to provide adequate funding for the municipalities. In particular, this also means a higher and rule-based co-financing of the Free State of Saxony for the rising daycare center operating costs and the financial participation of the Free State of Saxony in the social expenses of the districts and independent cities," Wendsche clarified. Public services such as daycare centers, schools or roads cannot continue to be financed on credit.

Financial experts see municipal finances in a real crisis

The municipal finance report was compiled by financial experts from the University of Leipzig. Co-author Mario Hesse considers the report to be "as exciting as a thriller". Saxony's municipal finances are in a real crisis situation. There has been a steady deterioration since the coronavirus pandemic. "The situation is really bad. What's worse, it's not getting any better any time soon."

According to Hesse, the problem is not that a single region is pushing the average down. 50 percent of all municipalities are in deficit. Around a third of local authorities would not even manage to balance the current balance. This means that they are unable to pay off their own loans or invest on their own. "This is a real crisis signal."

SSG demands relief from compulsory tasks and standards

"Improving the financial resources of the municipalities will ultimately only be possible through a joint effort by the federal and state governments," said Wendsche. The municipal level must be relieved of compulsory tasks and standards. On the other hand, a higher contribution from the federal and state governments to rising social spending, including daycare, and, last but not least, better basic funding for the municipalities is necessary.

Leading association: "We finally need a solution"

"Although the federal government is primarily responsible for a significant proportion of social spending in the municipalities, the state is responsible for funding the cities and municipalities. It doesn't help us if the federal and state governments pass responsibility onto each other. We need a solution," appealed the SSG President.