Investment backlog in Germany’s schools: Coronavirus crisis is putting pressure on municipalities

• Municipal investment backlog in schools grows to EUR 44.2 billion
• At the same time, schools are the largest area of municipal investment, with EUR 9.8 billion
• Rising investment still fails to meet growing needs in the school sector and is being hampered by the coronavirus pandemic

Rising investment needs have caused the investment backlog in Germany’s schools to increase from EUR 42.8 billion in 2018 to now EUR 44.2 billion. Although municipalities have recently aimed to invest EUR 9.8 billion in schools, twice as much as in 2015, their investment plans have failed to keep pace with growing needs. That was the finding of a special analysis conducted by the KfW Municipal Panel 2020. In addition to the regionally uneven development of student numbers, the main reasons for the growing need for investment are additional upgrades required by statutory regulations and rising standards. Necessary repairs to existing buildings and limited capacities in construction and public administration also make it difficult for municipalities to start new school construction projects.

Furthermore, the coronavirus crisis is threatening to weigh on municipalities’ finances. Revenues are expected to drop while expenditures rise, which would significantly reduce municipal investment capacity. That will jeopardise their ability to continue increasing investing in schools.

“The coronavirus crisis could define a sad turning point in the positive development of municipal investment in the school sector and turn into a prolonged endurance test for school infrastructure. A shortage of funds threatens to derail the necessary digital modernisation of schools. That makes it so important to strengthen municipalities’ planning and investment capacity during the coronavirus crisis. It is an important contribution to a well functioning school infrastructure in Germany”, said Dr Fritzi Köhler-Geib, Chief Economist of KfW.

The report and further information can be accessed at Economics in Brief

The database:
The KfW Municipal Panel is an annual survey conducted by the German Institute for Urban Affairs (Difu) on behalf of KfW Group since 2009. The representative survey is directed at the municipal treasuries of cities with district status, regional districts and district towns with more than 2,000 inhabitants and covers the core areas of municipal finances, investment activity and its funding. The main survey for the KfW Municipal Panel was started in September 2019, and a supplementary survey on the impacts of the coronavirus crisis followed in April 2020.