FAQs About the Budget

The conditions facing municipal budgets have been and remain extremely challenging—in Erlangen as well as nationwide. Across Germany, the municipal deficit totaled approximately 25 billion euros in 2025, and the trend is upward. For 2026, the German Association of Cities anticipates that the municipal deficit will grow to at least 32 billion euros.

In Erlangen, the financial situation is particularly strained by high trade tax refunds from 2024 and declining trade tax revenues. As a result, the city is increasingly reliant on so-called cash advances. Added to this are rising personnel and social spending, as well as construction costs that remain high.

Comprehensive cost-cutting measures regarding expenditures and staffing were already initiated in 2024. For 2025, the city has developed a far-reaching consolidation plan that is being consistently implemented. At the same time, the city is continuing to advance digitalization to make administrative processes more efficient. Mobile work models are also helping to reduce costs associated with leasing real estate. Thanks to these consolidation efforts and substantial block grants, the budget shows a surplus from ongoing administrative activities for both 2026 and the coming year, 2027.

The City of Erlangen is taking further measures to continue implementing the budget consolidation plan. Effective immediately (resolution of June 25, 2026), cash-outflow expenditures and disbursements totaling 2.25 million euros in the budgets of the city departments and municipal enterprises for the current fiscal year 2026 are being frozen.

Trade tax revenues are subject to regular fluctuations. For this reason, there are mechanisms in place to offset these fluctuations—albeit with a time lag—such as allocations from the federal and state governments. In addition, the city has significantly reduced its debt and built up reserves in recent years.

However, losses of this magnitude, resulting from unforeseeable repayments, are unusual and can only be offset in the medium term. This led to the city’s reserves being depleted and forced the city to implement measures such as a budget freeze for 2024 and spending cuts. A budget consolidation plan had to be developed for 2025 to stabilize the financial situation. This plan must be updated every six months.

The advance payments made by businesses are determined by the tax office and are binding on the municipalities. These payments are usually calculated based on the previous year’s assessment or on the businesses’ projected profits, which they submit to the tax office. The city maintains regular communication with major business tax payers in order to incorporate adjustments to the forecasts as promptly as possible.

The sharp decline in business tax revenue in Erlangen is not due to deep-seated economic problems, such as a corporate bankruptcy. Erlangen remains a stable and attractive business location. The outlook for 2026 shows that, through balancing mechanisms and structural adjustments, the city has the opportunity to gradually work its way out of its financial difficulties. However, cost-cutting measures will continue to be necessary.

Furthermore, Erlangen has once again maintained its top ranking in the prestigious Prognos Future Atlas 2025. In the nationwide ranking, which examines the future viability of cities and regions, Erlangen is the highest-rated city. Only the Munich district ranks ahead of the Huguenot city. Here: The Future Made in Erlangen