MIL OSI Translation. Government of the Republic of France statements from French to English –
Source: Canton of Neuchatel Switzerland
09/25/2024
The State Council presents its 2025 budget project, in a situation still marked by a favorable economic climate. Despite the increases in expenses in certain areas of activity, the income statement shows a surplus of revenue of 29.9 million francs and meets the requirements of the debt brake. Significant investments are also expected. In addition, a further reduction in the tax scale is proposed.
After three accounting and budgetary years particularly marked by a favourable economic context, the 2025 budget of the State of Neuchâtel presents a surplus of revenue of 29.9 million francs on a total of 2.5 billion in expenses. Fulfilling the requirements of the debt brake, it makes it possible to amortize 1% of the State’s overdraft while ensuring the self-financing, up to 71.2%, of a significant investment envelope.
Significantly up on previous years, investments amount to nearly 147 million, with a decisive share representing 5.2% of revenues. While an envelope of this size represented an additional challenge in terms of self-financing, it reflects the many projects started in recent years that are now in their implementation phase. For the Council of State, this is a decisive period during which investment expenditure will have to remain at a high level in order to meet the major challenges of modernizing, making the canton more attractive and improving its infrastructure.
Positive revenue dynamics
Despite some signs of slowdown already perceived in the Neuchâtel economy, tax forecasts continue for the time being to benefit from the good economic situation, the fall in unemployment and inflation. Tax revenues should therefore remain at a level close to 2023, a sign of positive dynamics of resources that will help to mitigate significant increases observed in several areas of expenses.
Among other important sources of financing, the 2025 budget benefits from a significant increase in revenues received by the Canton as part of the federal financial equalization and takes into account an improvement in the outlook linked to a resumption of ordinary payments from the Swiss National Bank (SNB). While they allow us to approach 2025 with a certain serenity, these developments nevertheless call for the greatest caution given the high level of uncertainty that characterizes them and the total lack of influence exercised by the Canton. This caution is all the more important given that multiple issues are currently threatening the stability of public finances.
Need to control loads
As a sign of the many challenges that the Canton is currently facing, the 2025 budget includes significant increases in charges, particularly in the social and health sectors, where demographic change is now clearly having an impact. The rise in health costs requires, in particular, ever-increasing resources allocated to health institutions, but also to health insurance subsidies or in the area of supplementary benefits.
Expenditure is also increasing in the area of training, or in that of mobility with allowances paid to public transport companies which continue to grow. In addition to these, there are the many additional efforts that the Canton has committed to making in climate protection.
Finally, the redistribution to the municipalities of half of the federal contribution for the compensation of geotopographical overloads, which represents a burden of more than 10 million francs for the Canton, is not subject to any compensation this year and is therefore fully assumed by the State budget.
Faced with these major challenges, it is now imperative that the Canton of Neuchâtel controls its expenses and achieves a sustainable clean-up of public finances.
Compensation for cost increases and reduction of the tax scale
The 2025 budget remains impacted by inflationary pressure which, despite a clear slowdown observed in recent months, still has significant effects on many areas of State activity as well as on household purchasing power. For 2025, the Council of State therefore proposes full compensation for the increase in civil service salaries. It also proposes catching up on the indexation reserve that had to be maintained in 2024. A measure that has an overall impact on the State budget of around 30 million francs.
Furthermore, convinced that Neuchâtel taxpayers must also benefit from the good economic situation and its positive financial consequences for the State and the municipalities, the Council of State invites the Grand Council to adopt a new temporary reduction in the personal income tax scale, at a rate of 1%, which is added to the previous one. This proposal, the financial implications of which are already included in the 2025 budget, should allow the canton to continue this logic of modest progress in order to maintain and improve its attractiveness.
Efforts still needed in the medium term
The 2026-2028 financial and task plan still shows significant deficits of between 30 and 50 million, which do not include the potential deferrals of charges from the Confederation to the cantons or the impact of the responses to the various cantonal initiatives. These worrying projections and prospects should encourage the State to conduct a prudent financial policy in order to maintain sufficient room for maneuver to react in the event of an economic downturn. Significant additional efforts will therefore be necessary during the next legislature to guarantee the stability of public finances, an essential condition for being able to respond effectively to future challenges without jeopardizing compliance with the debt brake.
EDITOR’S NOTE: This article is a translation. Apologies should the grammar and/or sentence structure not be perfect.