Special funds: Too little money is reaching the municipalities

A study by the Ifo Institute indicates that only about twelve percent of the funds from the special fund for infrastructure and climate protection reach the municipal level. The ZDB (Central Association of the German Construction Industry) sharply criticizes this distribution.

The from the Bundestag and Federal Council The approved special fund for infrastructure and climate neutrality (SVIK) is a borrowing authorization of €500 billion, which should be available in addition to investments in the core budget. €300 billion is earmarked for federal investments, €100 billion for the states and municipalities, and €100 billion for investments to achieve climate neutrality by 2045.

After two research institutes concluded, based on analyses of the federal budget, that only a small portion of the funds actually flows into infrastructure and climate protection measures, the Ifo InstituteThe researchers also noted that too little money is reaching the municipalities. "In effect, the municipalities will receive around 60 billion euros, which corresponds to twelve percent of the total volume of the special fund," they stated. However, this is disproportionate to the municipalities' share of investment in the overall public budget, which is over 50 percent.

ZDB sees a clear imbalance

Sharp criticism is therefore coming from the German Construction Industry Federation (ZDB): "This is a clear imbalance – especially considering the documented investment backlog in municipalities, which the KfW Municipal Panel even estimates at 215 billion euros. A course correction is urgently needed here," demands ZDB Managing Director Felix Pakleppa. While the federal government is providing a total of 100 billion euros for the states, they are only passing on an average of about 60 percent to cities and municipalities.

This would leave municipalities with only around 60 billion euros – less than is needed to address the investment backlog. "After more than a year of special funds, people need to see improvements in their local communities, with schools, sports halls, daycare centers, and local bridges being repaired," says Pakleppa. He is particularly critical of the distribution mechanism, which is based on the Königstein Key: "The current key disproportionately favors financially strong regions, while structurally weak municipalities receive virtually nothing."

ZDB demands: "Significantly increase the municipal share"

Even within individual states, the scattershot approach prevails. Pakleppa: "Very few states distribute funds inversely proportional to the financial strength of their municipalities. Yet that would be precisely the right approach, as it would ensure that the money is invested where the need is greatest. Furthermore, we need a consistently streamlined disbursement process. Complex application procedures delay investments and consume funds through transaction costs. And, most importantly, the additionality of the funds must be guaranteed."

As long as many municipalities have structurally deficit budgets, there is a risk that the special fund will merely replace lost equity instead of stimulating new investments. "If the special fund is to be effective, the municipal share must be significantly increased, and the funds must be invested where the need is greatest. The expectations raised by the special fund must be fulfilled promptly, that is, within this legislative period."

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