A windfall is on the way

Why the States Are the Secret Budget Winners

The measures enshrined in the dual budget will bring the federal states a significant increase in revenue.(Bild: APA/FLORIAN WIESER)

The federal states are coming out ahead in the dual budget. Thanks to the measures, considerable additional revenue is flowing into their budgets. But there’s more to the openly played-out disputes than meets the eye—in Upper Austria, for example, an important election is coming up.

“A lot of trust has been destroyed,” criticized Governor Thomas Stelzer after he and his counterparts reached an agreement with the federal government on reducing non-wage labor costs. Salzburg Governor Karoline Edtstadler lamented the finance minister’s “take it or leave it” approach. For a long time, the states resisted helping to finance the agreed-upon reduction in non-wage labor costs. They argued that since the federal government had mandated the cuts, it should now also finance the relief. However, a look at the numbers shows that the states are actually recording some additional revenue “thanks” to the dual budget.

The measures enshrined in the two-year budget will bring the federal states an increase in revenue of 116 million euros in 2027, and 312 million euros in 2028. The reason: The revenue shares of the states and municipalities rise when the federal government—as is currently the case—increases taxes and levies. On top of that, the states also benefit from the reduction in non-wage labor costs, as they are major employers themselves. The reduction will yield 100 million euros in 2028.

These are the effects of the dual budget, though the revenue shares would have risen anyway. In 2028, the states will rake in 629 million euros more than the previous year; the following year, it will be nearly a billion more.

There’s a bit of a show involved, too
Take the money, but don’t help fund it? It’s part of Austria’s culture that the states fight vigorously for their interests—and there’s a bit of a show involved as well. Governor Stelzer, in particular, currently enjoys standing up to the federal government and voicing criticism—he has an important state election to win in a year. The FPÖ is strong, and with poor federal poll numbers, the ÖVP fears significant losses—including the loss of the governor’s seat—even in its core stronghold of Upper Austria.

Meanwhile, some in the (federal) ÖVP fear that Stelzer might stir up internal party debates if it serves his interests. The goal is to draw a clear line against the federal government’s course, which is unpopular with the public; the dispute over reducing non-wage labor costs may have been just a taste of things to come.