Development of the Saxon Public Budget – Risks in Public Staff Area?

Tasks

The consequences of demographic change present specific challenges for the Free State of Saxony. An aging and simultaneously shrinking population contains the risk of a declining employment potential and lower economic performance which cause smaller public revenues. However, expenditures are likely to remain more or less the same in the following years. Against this background, we examine the development of the Saxon budget by the year 2030. The project addresses the question of the financial options of the Free State of Saxony to deal with the described challenges and the resulting implications for each expenditure area.

Methods

To answer these questions, we predict revenues and expenditures of the Free State of Saxony separately for the key budget items based on the regional development up to the year 2030. Finally, we compare both variables.

Data and other sources

The analysis is based on the Saxon budget plan for the double budget 2019 and 2020.

Results

The results indicate a budget deficit for the Free State of Saxony of nearly 1,0 billion EUR by the year 2030. Even though, public revenues are expected to increase significantly in the following years, expenditures may grow more strongly. This is primarily due to the missing possibility to finance public expenditures by reserves beginning in 2021. Hence, the Free State of Saxony will be faced with the challenge of identifying fiscal saving potentials to ensure a balanced budgetary result. One possibility is the reduction of personnel resources or voluntary expenditures for investment and economic promotion.