FAQs on the budget

For the second year in a row, the city must also expect significantly lower trade taxes in 2025. This is due to the overall economic development and additional tax repayments. Trade tax revenue of 220 million euros was forecast for 2024. As taxes already received for previous years also had to be repaid, trade tax income of only 71 million euros is expected in 2024. For 2025, the municipal finance department is forecasting trade tax income of 120 million euros.

Trade tax revenues are subject to regular fluctuations. There are therefore mechanisms in place to compensate for these fluctuations, albeit with a time lag, such as allocations from the federal and state governments. In addition, the city has reduced debt on a large scale in recent years and built up reserves.

However, losses of this magnitude caused by unforeseeable repayments are unusual and can only be offset in the medium term. As a result, the city's reserves are being depleted and the city has to work with measures such as a budget freeze as for 2024 and cutbacks. A budget consolidation concept had to be drawn up for 2025 in order to stabilize the financial situation. This concept was presented at the end of March. At its meeting on April 30, the city council approved the budget consolidation concept.

The companies' advance payments are determined by the tax office and are binding for the municipalities. These payments are usually calculated on the basis of the previous year's assessment or on the basis of the companies' profit expectations, which they submit to the tax office. The city is in regular contact with major trade tax payers in order to be able to make adjustments to the forecasts as quickly as possible. For this reason, the city issued a budget freeze in July 2024 following corresponding discussions.

The draft budget for 2025, which was already under pressure to make savings, was cut by a further 9 million euros in the material budget and around 1.7 million euros in investments. In the area of personnel, a six-month freeze on filling vacant positions will save a further 7.5 million euros per year. New jobs will be created in 2025, mainly in schools and daycare centers, and will be fully financed by job cuts in other areas. On balance, this will even result in annual savings of 500,000 euros.

In order to stabilize the budget situation, the city of Erlangen will also have to make savings in 2025. For example, plans for investment projects will be postponed. There are also significant restrictions on so-called voluntary services, i.e. expenditure that goes beyond mandatory tasks. Mandatory tasks are prescribed by law, such as the provision of schools, childcare and public safety. Voluntary services, on the other hand, relate to services that are not mandatory, such as cultural events, sports promotion and grants to clubs.

There will also be delays or reductions in infrastructure projects that are not urgent mandatory tasks, such as the construction of new district houses or playgrounds.

Compared to other cities of a similar size, Erlangen has a wide range of cultural and leisure facilities. Here in particular, but also in administrative services, staff cuts will lead to restrictions. The changed framework conditions make it necessary to constantly review whether it is necessary to react with changes to taxes and fees in individual areas.

In addition to the savings measures already agreed, the city administration has drawn up a budget consolidation check. It includes what is possible and appears responsible. At its meeting on April 30, the city council then adopted a budget consolidation concept.

The preparation of the municipal budget involves several important steps.

• First, the administration prepares a draft budget that reflects the city's financial priorities. This draft is developed on the basis of revenue forecasts, such as trade tax, as well as planned expenditure for administration, investments and mandatory tasks.
• The city council then examines this draft and decides which measures and projects are to be implemented. The budget resolution in Erlangen was passed by the city council on January 16, 2025.

After the budget was adopted, it was submitted to the government of Middle Franconia as the responsible supervisory authority. This examines the budget for legality and balance, in particular

• whether the city can fulfill its mandatory tasks and
• its long-term solvency is assured.

If there are any concerns, the government can reject the budget or impose conditions.

For 2025, it is to be expected that the budget cannot be approved due to the large gap between planned revenue and planned expenditure - particularly in administrative activities. This means that the so-called "provisional budget management" will apply for the entire year. Corresponding regulations can be found in Art. 69 of the Bavarian municipal code. The basic announcement here is: the city provides the financial services

• to which it is legally obliged or
• which cannot be postponed for the continuation of necessary tasks.

Even if the 2025 budget is not approved, the borrowing required in 2025 for the planned municipal investments requires individual approval from the government of Middle Franconia. In addition, the city must submit a budget consolidation concept to the government of Middle Franconia in order to secure future investments in schools, childcare and the city's infrastructure. In addition to the savings measures already adopted, the city administration has drawn up a budget consolidation check. It includes what is possible and appears responsible. At its meeting on April 30, the city council adopted a budget consolidation concept.

The slump in trade tax in Erlangen is not due to profound economic problems, such as corporate insolvency. Erlangen remains a stable and attractive business location. The outlook for 2026 shows that the city has the opportunity to gradually work its way out of its financial difficulties through compensation mechanisms and structural adjustments. However, savings efforts will continue to be necessary.