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Hungarian Cities Facing Massive Deficits Due to Gov’t Cuts, Rising Energy Prices

picture of Miskolc, Hungary

Due to austerity measures imposed by the government and rising energy prices, the losses to cities with county status could be in the hundreds of billions of forints, leading to huge deficits in municipal budgets. The Fidesz president of the Association of Cities with County Rights (MJVSZ) does not even dispute the issue.

The budgetary deficit for the twenty-three cities with county status cannot be calculated yet, but it is certain that their coffers in 2022 will be tens of billions of forints lower than in 2021. Although MJVSZ attempted to total up the precise figures, association president Károly Szita, the Fidesz mayor of Kaposvár, told Népszava that they had not yet come up with specific numbers.

It is certain that towns and cities will only get half of their usual income from enterprises this year, as the government has set the maximum local business tax at 1% instead of the previous 2%.

Szita claimed that the upside to this was that companies have been able to retain positions because of their lower tax burdens, but even he acknowledged that this measure caused a significant loss of revenue for local governments. At the same time, energy prices are rising significantly this year, and cities and towns also have to find funds to cover the increase in the minimum wage, which will put an additional strain on municipal budgets.

Károly Szita added that the group would meet with Péter Banai, the relevant State Secretary at the Ministry of Finance on Tuesday, and hoped that the government would respond positively to their concerns.

Pál Veres, mayor of the northeastern city of Miskolc, said at a town assembly that the combined deficit caused by the withdrawal of govenment funding could reach 150 billion Ft. (US $469 million) in Hungarian cities with over 25,000 inhabitants, or 32 cities in total.

Miskolc’s local government has determined that, according to their calculations, austerity cuts mandated by the government will cause a loss of 3.2 billion Ft. ($10.0 million) in the city’s revenue, while their expenditures will increase by nearly the same amount due to rising energy prices.

In other words, Miskolc is expected to run a deficit of around 6 billion Ft. ($18.8 million) for 2022. The city decided to take advantage of an opportunity provided by law and submitted a separate request to the government for this amount.

Miskolc Mayor Pál Veres pointed out that the government issued a set of guidelines for receiving compensation in 2021, but no opposition-led cities received any of this money. However, 11 Fidesz-run cities did receive financial subsidies, with most of the compensation going to government party-controlled Debrecen despite the city having collected large tax revenues last year.


Posted in Domestic

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