Negotiations about the City of Helsinki 2025 budget begin
According to the Helsinki City Strategy, responsible finances are the basis for sustainable growth. Helsinki has managed its finances responsibly, which means that the finances have remained strong and there has been no need for any sudden moves due to the changing market conditions. The effects of the health care, social welfare and rescue services reform on Helsinki’s tax funding are significant and will become visible during the next financial planning period 2025–2027.
Budgeted operating expenses to increase in line with the principle of accountability
In accordance with the urban strategy, the 2025 budget is based on the principle of accountability regarding the growth in operating expenses, where the increase in operating expenses is linked to changes in the cost level and population growth, as well as the productivity target set in the strategy.
In the Municipal Helsinki income statement, external operating expenses will increase by 8.1% in 2025 compared to the 2024 budget. The operating expenses will increase because of Helsinki’s new employment management tasks due to the employment services reform and changes in municipalities’ financial responsibility for unemployment security, for which financial compensation will be received in the form of central government transfers to local government. When the effects of the employment services reform and some technical changes made to the budget are eliminated from the increase in operating expenses, the actual increase in operating expenses is 4.1%. The increase is in line with the principle of accountability set in the strategy.
In the 2025 budget, operating expenses have been increased in basic public services in particular, where population growth will most directly affect the costs.
Health care, social welfare and rescue services reform influences Helsinki’s tax funding
Local income tax revenue for 2025 is expected to be EUR 1,080 million, corporation tax revenue EUR 435 million and real estate tax revenue EUR 376 million. The local income tax and real estate tax rates have not been changed from the 2024 level in the 2025 budget.
The changes in central government transfers linked to the health care, social welfare and rescue services reform will continue to have a significant impact on central government transfers to municipalities in 2025. In 2025, Helsinki is expected to receive EUR 297 million in central government transfers.
The annual contribution margin of Municipal Helsinki will decrease to EUR 478 million in 2025, compared to some EUR 550 million in 2024 and clearly higher before that. This is due to the slow increase in tax revenue in 2025 caused by the change in the health care, social welfare and rescue services funding model and the increased operating expenses. The annual contribution margin is expected to decrease from the 2022–2023 level in the 2025–2027 financial planning period.
Investment programme at a record high level
The level of investments for the fiscal year has been set in line with the deficit limit for the operations during the council term and the cash flow from investments. In 2025, the investment expenditure of Municipal Helsinki will total EUR 983 million. In 2023, the actual level of investments was EUR 849 million.
The investment programme is based on securing funding for ongoing projects and statutory services and enabling effective growth investments to support urban development. Investments enable housing and facility development, sustainable urban development and an increase in the attractiveness of the city centre and regional centres. Balanced development of the different areas in the city will be supported by investing in urban renewal, transport links and versatile housing production.
Creating the conditions needed to meet the housing production targets makes up a significant part of the investments. They are outlined in the land use, housing and transport agreement between the state and the municipalities of the Helsinki metropolitan area and the Helsinki housing programme and the related land use programme.
Helsinki will have to make more investments with debt financing
As a result of the decreasing annual contribution margin, the city’s cash flow from operations and investments, which is the best indicator of deficit and surplus in a constantly growing city, will remain negative by around EUR 500 million in the coming years. In the financial plan, the deficit in cash flow from operations and investments is covered primarily by borrowing and partly by the city’s cash assets.
During the 2025–2027 financial planning period, Helsinki’s pool of loans is estimated to increase by a total of EUR 836 million. If realised, the city’s pool of loans will increase by about 2.5 times from the level at the end of 2023 by 2027. According to the financial plan, the pool of loans will increase to some EUR 2,250 million (EUR 3,195 per resident) by the end of 2027. At the end of 2023, the pool of loans stood at EUR 906 million (EUR 1,342 per resident).
In the budget, the operations of the City of Helsinki are divided into Municipal Helsinki and the Social Services, Health Care and Rescue Services Division, which is funded by central government transfers. The financing for health care, social welfare and rescue services consists of non-earmarked funding from the state, client charge income and other operating income. Municipal Helsinki comprises the Education Division, the Urban Environment Division, the Culture and Leisure Division, the City Executive Office and the unincorporated county enterprises. Budget negotiations will take place in October, after which the Mayor’s budget proposal will be published.
