Finance Minister: There will have to be cutbacks

According to Finance Minister Hartmut Vorjohann (CDU), Saxony is facing difficult times with regard to its financial situation. "There will have to be cutbacks," the minister told the German Press Agency. As things stand, the double budget will not be ready until mid-2025. Until then, provisional budget management applies - during this time, expenditure may only be made in accordance with the strict rules of the Saxon constitution.

Everything that costs money is subject to reservation

In the coalition agreement of the planned minority government of the CDU and SPD, everything that costs money is subject to reservation, Vorjohann clarified. If Saxony were to maintain the current status quo in terms of spending, there would be a shortfall of around two billion euros per year. Wishes going beyond this were not even included. In view of its own problems, the state could not really help with the difficult financial situation of the municipalities either.

"The real cause of the financial problems at municipal level was not set in motion by us, but by the federal legislator with ever-improving standards in social policy," emphasized the Minister. If there is an economic downturn at the same time, this can no longer be adequately financed. "My great concern is that not much more can be invested in the municipalities."

Minister: politicians must not always put new things in the shop window

"It is important that politicians do not always put new things in the shop window," said Vorjohann and called for a consolidation of the existing range of services. For example, he could understand the local authorities' displeasure at the planned free pre-school year in Saxony. In this country, a good 95 percent of children are already in daycare anyway. There is no need for an additional offer.

The minister advocates a different set of priorities: first investment in infrastructure, then further expansion of the welfare state. "In eastern Germany, the infrastructure is still reasonably good. A lot of money has been invested in renovations here over the past three decades. The problem exists more in western Germany."

Debt brake should rather be strengthened

According to Vorjohann, this is not related to the debt brake. "After the end of the Cold War, there was a 'peace dividend'. The money flowed primarily into social policy and should have gone more into infrastructure. We don't need to soften the debt brake, we actually need to strengthen it and commit ourselves to investing a minimum amount of funds in infrastructure."

Vorjohann sees four main ways in which Saxony can balance the existing budget deficits. In the long term, there will be no way around staff cuts. This is also necessary in view of the needs of the private sector. In view of the shortage of skilled workers, the state must also reduce its share of the workforce. It is about protecting the economy and not competing with each other.

Minister names possible sources of funding for gaps in cover

Another point is the generation fund with which Saxony is providing for the future pension entitlements of civil servants. Instead of around 1.1 billion euros, 270 million euros less will now be transferred annually, said Vorjohann. In addition, the repayment of remaining loans from the coronavirus pandemic could be divided into almost equal annual installments. Instead of 460 million euros in the coming years, only 330 million euros would then be due.

A reduction in the so-called budget equalization reserve is viewed critically by Vorjohann. It currently still contains around 1.2 billion euros. "You can never be completely empty when it comes to the budget equalization reserve. It can always happen that you have additional expenditure due to certain developments in the current budget." If there is nothing left in the reserve, harsh cuts such as a budget freeze are unavoidable.

Vorjohann: We have already lived beyond our means

The minister said that Saxony had already drawn on reserves when drawing up the dual budget for 2023 and 2024. In this year's budget, one billion euros came from reserves. "This means that we have already lived one billion euros beyond our means. At some point, all reserves will be used up. Then you no longer have a buffer." If there is also an economic downturn, the situation is dramatic.

Vorjohann rejected calls to take on debt. "Our constitution does not allow for debt. The stakes are high for all those who want to change this," he said, referring to the two-thirds majority required in the state parliament. He considered the high hurdles for amending the constitution to be wise. "Getting into debt is only ever a short-term solution. It only buys time. Unpleasant decisions are only postponed."

According to Vorjohann, the plans for a special fund contained in the coalition agreement do not change the facts. "We can't take on any new debt for this either. The special fund can only be fed from money that is left over. Because there will be nothing left over, nothing can be paid in over the next two years. So far, the special fund only exists on paper. With the existing holes, I don't see any scope for this at the moment."