Hesse overhauls €7.4 billion municipal finance plan for 2026
Hesse has announced major changes to its municipal financial equalisation scheme (KFA) for 2025 and 2026. The updates include a €300 million emergency aid package next year and a record €7.4 billion fund in 2026. These measures aim to help towns and cities cope with shifting populations and financial pressures.
The revised KFA now recognises both shrinking and growing communities. A new supplementary allocation will give extra support to areas with a high proportion of children under six. This targets places where demand for childcare and schools is rising.
A settlement index will also launch in 2026 to better assist rural districts. The system will distribute funds more precisely, focusing on infrastructure, healthcare, and education. Discussions with local authorities on the exact distribution are still ongoing.
The 2026 fund of over €7.4 billion marks the largest ever allocated by the state. This follows a €300 million immediate aid package in 2025, designed to ease pressures from falling refugee costs and demographic shifts. The adjustments aim to stabilise finances for struggling municipalities while supporting key public services.
The new KFA rules will provide targeted relief to both urban and rural areas. Municipalities with young families and shrinking populations stand to benefit most. Final details on funding distribution will be confirmed after further talks with local leaders.
