The composition of municipal expenditure in Germany – A consideration over 30 years

This article, however, sheds light on the expenditure side to get to the bottom of the question of how municipal expenditure is divided between various tasks and how the values have shifted over time. To this end, the development of expenditure shares by task since the early 1990s is examined. In addition to the shares of certain expenditure in total expenditure, the development of per capita expenditure and expenditure relative to gross domestic product is also examined. The article also looks at how the level of total municipal expenditure has developed.

The results show that (inflation-adjusted) municipal expenditure per capita remained virtually unchanged in the 1990s and early 2000s. Between 2004 and 2022, however, expenditure increased by 40 percent and rose again significantly in 2023 and 2024. Relative to gross domestic product, the level of the early 1990s was reached again recently and even significantly exceeded last year.

There have been considerable shifts in the composition of municipal expenditure over the past 30 years. The overall category of social affairs and youth has become significantly more important, with its share of total expenditure increasing by half to 38 percent. This is due to the expansion of childcare, but also to the increase in social benefits. Of particular concern is the enormous growth in the central administration category, whose share also increased by around half to 21 percent. There was a significant decline in expenditure on shaping the environment (from 34 percent to 20 percent), which includes road construction, for example. Expenditure on financial management also fell significantly, reflecting the favorable interest rate trend. The proportion of expenditure on schools and culture as well as health and sport also fell.

Personnel expenditure per inhabitant remained largely constant in the 1990s and 2000s. Since the beginning of the 2010s, however, the inflation-adjusted figure has risen by 44 percent. As total expenditure by local authorities also increased, the share of personnel expenditure in total local authority expenditure has remained constant at around 25 percent. Real investment halved in the 1990s and early 2000s. An upward trend has only been visible since the end of the 2010s. However, their share of municipal budgets remains at a low level of around 12 percent.