Budgetary freeze for the 2019 financial year

Lord Mayor Dr. Thomas Nitzsche had to issue a budget freeze for the 2019 financial year. This decision was based on the current figures from the second quarter of 2019, which show an expected deficit of 15 million euros. An amount of 4.78 million euros is blocked.

The last time there was a budget freeze was in 2014, which concerned a sum of 1.4 million euros, and before that, in 2004, there was a freeze of 3.3 million euros.

Justification

A comparison of income and expenses shows a deterioration in the budget result of around 15 million euros. The largest share results from the lower income from trade tax. Trade tax is a difficult variable to calculate within tax revenue. "We have a shortfall in trade tax revenue of around 10 million euros, which we did not expect and cannot easily compensate for. This can be explained, among other things, by a decline in trade tax prepayments, which also reflects the decline in economic expectations," explains the Lord Mayor. Within five years, the shortfall in revenue is expected to total 23 million euros; some of the tax decline will be offset by higher key allocations. In addition, according to the May tax estimate, the share of income tax is 1 million euros lower than planned.

On balance, there was a deterioration of a further 4 million euros in material and personnel costs. This includes unpaid expenses from the previous year for school equipment (approx. 1 million euros) as well as additional costs in the area of youth welfare of approx. 0.9 million euros. Income from social security deteriorated by around 1.0 million euros due to declining reimbursements in the area of accommodation costs. At the same time, social security expenses increased by 2.4 million euros in the area of integration assistance. On the other hand, savings in personnel costs will mitigate the anticipated shortfall.

Where should savings be made?

In order to counteract this development and to ensure the financial ability to act, savings measures must now be taken. However, the freeze only applies to individual items in the budget. "Within the administration, we want to block parts of the budget carryover from the previous year in the area of material costs. In addition, however, we also want to save on fees - for example for building rents or infrastructure maintenance - for our own operations and personnel costs. This brings us to an amount of 4.78 million euros," explains Head of Finance Benjamin Koppe. "With this consolidation concept, which will be presented to the finance committee and city council for their information, we deliberately do not want to make cuts in the area of voluntary services approved by the city council, but rather temporarily limit administrative expenditure," adds Koppe. The further budget development for 2019 and the trends that are already emerging will be closely monitored in order to be able to react quickly and take further measures if necessary.