Only 57 of the 342 Dutch municipalities expect to have enough money to carry out their statutory tasks after 2026. The municipalities expect that together they will have a structural budget deficit of 1.1 billion euros that year.
Accounting firm BDO warns about this annual review of municipal finances. The accountant looked at the annual accounts and multi-year budgets up to 2027 of all municipalities and noted “a predominantly red financial landscape”.
At first glance, things seem to be going well for the municipalities. In 2022, they together had a surplus of 3.9 billion euros. There was money left over, especially in North Holland, Zeeland and Limburg. This is partly due to staff shortages, which means that some projects cannot be carried out. And partly because municipalities expect cutbacks and are therefore not starting new projects.
Because in 2026 the way the government finances them will change; it has made cuts of 3 billion euros. The tasks that municipalities are given, such as energy transition and housing construction, have now become larger and multi-year. Long-term investments must be made for this.
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Cuts
“The balance is lost,” said Rob Bouman, partner at BDO, on Tuesday morning. He warned against cuts. Hitherto, the blows have often been in sports and culture, areas in which municipalities have a large degree of financial autonomy. BDO suspects that youth care, infrastructure, public space and public order and safety are now also affected.
The accountant further notes that the expectations of the government and municipalities for the coming years differ. About 70 percent of municipal revenues come from the government – own taxes form only a small part – and these are linked to investments by the national government. The more investments in infrastructure and education, for example, the more there will be in the Municipal Fund. With low national investments, less money goes to municipalities. But as of 2027, the Municipal Fund will be linked to the development of the gross domestic product (GDP). The government believes that this will provide more stability.
However, municipalities fear that healthcare costs will rise faster than GDP due to an aging population. This means that more money is needed to implement the Social Support Act, a municipal task. Moreover, they are afraid that increases in wages and prices will not be sufficiently compensated.
In addition, the formation creates uncertainty. It is still unknown what plans a new cabinet has for the Municipal Fund. In the summer, municipalities must draw up the multi-year budget for 2025-2028, which must legally be closed and approved by the municipal council before November 15. Bouman: “Then as a municipality you have to know where you stand.”
A shame
Last year, the Association of Dutch Municipalities called on municipalities not to submit balanced multi-year budgets in protest to provide insight into the shortages. “In the past, a non-balanced budget was considered a mortal sin,” Bouman said. Officially, the province as supervisor must then intervene.
BDO also once again made a ranking of all municipalities by financial condition. The least healthy in that respect are Amersfoort, Heerlen, Eijsden-Margraten and Vlieland. The healthiest are Rotterdam, Capelle aan den IJssel, Noordoostpolder and Valkenburg aan de Geul. This is the sixth time that the accounting firm has financially investigated all municipalities.