Local authorities: the Court of Auditors calls for “containing” spending

The overall financial situation of local authorities was "less favorable" in 2024 but "remained solid" despite significant disparities, the Court of Auditors analyzed on Friday, calling for "determined action to contain their operating expenses" in 2026.

In its 2025 report on local public finances , the Court reaffirms its analysis of the "strong contribution" of local authorities to the increase in the public deficit in 2024, which is around 170 billion euros, despite their very limited share in the latter.

Between 2023 and 2024, the financing needs of municipalities, inter-municipal authorities, departments and regions, which represent 18% of public spending and 60% of public investment, increased from 5 to 11.4 billion euros. This is only 0.4% of GDP, but the public finance programming law for 2023-2027 provided for "a decrease in volume of 0.5 percentage points in their operating expenditure" .

This increase in the need for financing – local authorities not being authorized to borrow for their operations – reflects, according to the Court, a "growing scissors effect between the dynamics of their operating and investment expenditure" and that of their operating revenue.

In 2024, operating expenses increased more (+4.1% or 2.1% after inflation) than operating revenue (+2.7%), driven by municipalities and inter-municipalities.

A situation which, according to the Court, can be explained in particular by an increase in personnel costs, but also in goods and services themselves driven by the persistence of the effects of inflation , as well as by the growing weight of social benefits paid by the departments.

"Staff costs were driven by the pay rises decided by the State but also by management choices made by local authorities," Pierre Moscovici, First President of the Court, stressed at a press conference.

At the same time, revenues have slowed, but "remain driven by the increase in direct taxes" such as property taxes, the base of which is automatically indexed to inflation.

These revenues were, however , "slowed down by the fall (-33% over two years) in revenues from transfer taxes" (DMTO) levied on real estate transactions in a market in the midst of a crisis, and mainly allocated to the departments, as well as by "the stability of VAT" .

Ultimately, the overall financial situation of local authorities remains "solid" , even though they have "continued to draw on their cash and increased their debt" . "Debt still represents the equivalent of a small proportion of GDP, 7.4% including unions" , acknowledged Pierre Moscovici.

Behind this "generally healthy" situation, however, lie growing divergences between the different categories of communities and within each stratum.

The municipal block, which represents nearly 60% of operating expenses, "is undeniably in good financial health," underlined Pierre Moscovici, even if 5,376 municipalities have negative net savings.

The situation in the regions, on the other hand, is "less favourable" and that of the departments "increasingly unfavourable" . Depending on the criterion used, between 12.5% ​​and 33% of departments are experiencing an "unfavourable situation, if not one of great fragility" .

The composition of their revenues, "cyclical and volatile" , is "unsuited to that of their expenses, which are overwhelmingly social, rigid and increasing" , recalled Pierre Moscovici.

"The divergence of financial situations between communities reveals a lack of fairness in the distribution of resources between, on the one hand, a municipal bloc with significant tax resources, and on the other, regional departments which have largely exhausted very limited tax powers," he added.

The Court nevertheless recommends financial participation from local authorities for 2026. "Local authorities are not, by far, primarily responsible for the situation, but they are responsible for the deterioration of the situation and must also participate in the collective effort," stressed Pierre Moscovici, calling for "determined action to contain their operating expenses (...) while taking into account disparities."