Dutch municipalities face €2 billion funding gap by 2029, accounting firm warns

Local governments across the Netherlands are anticipating a significant funding gap in the coming years, with projected deficits totaling two billion euros from 2025 through 2029. The figures come from BDO’s annual review of the financial health of Dutch municipalities.

BDO says the state of local government finances is uneven: over a third of municipalities are planning for ongoing surpluses, while the rest collectively expect shortfalls amounting to 3.4 billion euros.

Dutch municipalities ended 2024 with a joint surplus of two billion euros, largely driven by incidental gains, delayed transfers of funding, and limits on spending that prevented full implementation of planned projects. The much-feared budget cliff in 2026 has also been avoided, in part because the national government provided extra financial support.

BDO warns that underlying risks persist, particularly around youth care, where expenses remain a major pressure point. Central government funding is set to be reduced from 2028, even as municipalities find these costs increasingly hard to manage.

BDO also notes that many municipal budgets fail to set aside sufficient resources for essential investment in public buildings. The firm cautions that without intervention, these pressures will intensify and undermine quality of life. At the same time, municipalities face mounting costs linked to climate adaptation and the shift to sustainable energy.

Marc Steehouwer, chair of the Government sector group at BDO, cautions against taking the figures at face value. A projected surplus, he says, does not automatically mean a municipality is in good financial shape.

Variations between positive and negative balances largely reflect how local governments structure their budgets, an area where they enjoy considerable leeway. Municipalities may decide to include savings targets, use reserves, or delay investment plans, he notes, choices that blur any straightforward assessment of their true financial health.

He believes the upcoming municipal elections in March present an opportunity to bring more realism to local budgets. “Municipalities often focus excessively on financial figures and too little on prioritizing social goals. Since some plans go unfulfilled year after year, funds remain unused, which partly accounts for the surpluses observed in recent years.” According to him, it will be the responsibility of the incoming councils to address this issue.