Financial equalization: Census costs some federal states hundreds of millions of euros

The population figures recorded in the census mean major financial losses for some federal states. This was the result of a survey by the German Press Agency. The states whose population numbers were revised downwards more than the national average must therefore expect a drop in revenue in the millions and even additional payments.

The Ministry of Finance in Lower Saxony is assuming annual revenue shortfalls “in the low three-digit million range”. The background to this is the 2022 census data collection. It emerged that around 7.94 million people live in Lower Saxony. That is around 170,000 fewer than had been calculated based on previous data. The state’s share of the total population in Germany fell as a result – which has a negative impact on tax revenues via the federal fiscal equalization system.

Bavaria has around 290,000 fewer inhabitants

Other states are in a similar situation: In Hesse, too, the shortfall in revenue is likely to be “in the lower three-digit million range,” the local finance ministry announced. In Berlin, the Senate is gradually preparing for up to 550 million euros less per year by 2028. The finance authority in Hamburg estimates its shortfall at 190 million euros per year, while in Mecklenburg-Western Pomerania it is around 180 million euros less per year from the state financial equalization scheme. In comparison, the expected annual shortfall of 15 to 25 million euros in Saxony-Anhalt seems almost manageable.

In view of the census figures, Bavaria is also likely to be one of the losers. The population there was revised downwards by around 290,000 inhabitants or 2.2 percent. Nationwide, the decline was only 1.6 percent. The Ministry of Finance in Munich is still examining the consequences of this development.

Some countries get more financial leeway

However, there are also winners: The decline in population numbers in the most populous federal state of North Rhine-Westphalia is smaller than at the federal level. The Ministry of Finance therefore expects additional revenues totaling around 580 million euros retroactively for the years 2022 and 2023 alone, although the new census for these years is only included in the calculation on a pro rata basis. Baden-Württemberg also expects relief due to the new population figures, without specifying any amounts.

The proportion of residents in Rhineland-Palatinate has also increased. As a result, they expect additional revenue of around 50 million euros per year. In addition, there will be “limited positive repercussions” for previous years. The federal and state governments are currently discussing when the changes will have an impact on the budget. Thuringia estimates its “census effect” at around 130 million euros extra per year.

Saarland is expecting around 200 million euros more this year. Of this, 30 million euros will go to the local level, said Finance Minister Jakob von Weizsäcker (SPD). Prime Minister Anke Rehlinger (SPD) said the additional money would give Saarland “a little more breathing room” and “more room for political decisions”. But it does not mean that “if we get more, we will have more to spend”. The next few years will continue to be characterized by consolidation.

Census data are also applied retrospectively

The Federal Ministry of Finance does not have a central overview of how the distribution of federal funds to the federal states will change as a result of the new census data. According to a spokesperson, the distribution of sales tax and the federal government’s allocations to the states based on population are primarily affected.

The new population figures will have their full financial impact from this year onwards. For the final accounting for 2022 and 2023, the census will only be taken into account by one third in the first year and two thirds in the second year. This means that the states with a high population decline will have to pay additional payments, while the profiteers will be in for an unexpected boost.