The state government is already supporting cities and municipalities with record investments and is preparing a sustainable reform of the KFA together with the municipalities.
The Saarland state government is consistently advancing the reform of the Municipal Financial Equalization (KFA) while simultaneously continuing its comprehensive support for cities, municipalities, and districts. This was emphasized by State Secretary of Finance Wolfgang Förster and State Secretary of the Interior Torsten Lang following the meeting of the steering committee.
"We want a sustainable reform that is enduring, legally secure, and supported by a broad base. That is why we rely on scientific analysis, partnership-based dialogue, and political responsibility. Thoroughness takes precedence over speed here," emphasized Förster.
In 2022, the state government, together with the leading municipal associations, initiated a new evaluation process. Unlike previous reform approaches, both the distribution of funds among the municipalities and the financial relations between the state and municipalities are being examined. The preparation of the report is taking more time than originally anticipated. After the results are presented, a comprehensive political assessment must take place.
Lang pointed out that the state already supports the municipalities to a significant extent today: "Through AUFBRUCH SAARLAND alone, we are providing the municipalities with additional investment funds amounting to 782 million euros. In addition, there is the school construction program with 232.5 million euros, flood aid, investments in disaster control, and numerous other relief measures."
The preliminary interim results of the assessment particularly confirm significant investment needs at the municipal level. At the same time, it is evident that the difficult financial situation of the municipalities is not a unique problem of Saarland. Municipalities nationwide are recording historically high deficits. For this reason, the state government is advocating for further relief measures at the federal level, especially regarding social costs.
Förster and Lang emphasized that the state government will consistently continue on the path it has taken. The goal is to further reduce the backlog of investments at the municipal level, create additional financial leeway for the municipalities, and, based on the expert report, establish the conditions for a sustainable reform of the municipal financial equalization system in the upcoming legislative period.
An overview of the five points on the agenda:
1. Primarily, the completion of the review process must take place, followed by an appropriate discussion of the conclusions drawn from the expert report results. The goal is to finalize the report during this legislative period – the results of the report will form the basis for a reform of the KFA in the next legislative period.
2. The federal government intends to provide financial relief for municipalities through task reductions and standard reductions. The resulting savings at the state level will be passed on by the state to the Saarland municipalities as a first step (in particular, any regulations on integration assistance, aid for reducing old debts under the State and Municipal Relief Act).
3. To overcome the dramatically deteriorating municipal financial situation evident nationwide, a coordinated solution concept is required. These processes are underway at the federal level under the working title Future Pact for Municipal Finances. Saarland will consistently advocate for a corresponding solution at the federal level.
4. There is a special responsibility for comprehensive task review and the generation of related resource gains at various levels: An independent commission shall develop related proposals for solutions – the resulting financial leeway at the state level should, in particular, be used step by step to stabilize the municipal financial equalization system based on actual needs.
5. Among other things, the LuKIFG funds are an important support to overcome the investment backlog at the municipal level, but they are not sufficient, especially for a sustained increase in the investment level. Therefore, the state intends to provide municipalities with additional lump-sum investment funds amounting to EUR 27 million per year from 2028 at the latest. This will increase the LuKIFG funds, conceptually focused on a seven-year period with EUR 111 million p.a., by approximately 25%. Half of the amount can be brought forward to the year 2027, provided that there is a necessity for an additional appropriation for the 2027 fiscal year for other reasons.
