Austria's Federal Government Faces State Opposition Over FLAF Funding Cuts

The Austrian coalition government has presented a double‑budget for 2027‑28 that includes a reduction of the employer contribution to the Familienlastenausgleichsfonds (FLAF). The plan aims to save about €440 million by cutting the contribution by one percentage point from 2028 and to refill a €600 million gap with €200 million from state taxes, according to State Secretary Barbara Eibinger‑Miedl.

Several federal states have voiced criticism. Vienna’s finance councilor Barbara Novak warned that the cuts would strip the city of €70‑80 million in annual earnings. Governors of Vorarlberg, Upper Austria, Salzburg, Burgenland, Lower Austria and Tyrol echoed concerns that the loss of FLAF revenue would strain regional budgets and called for the federal government to compensate the shortfall. They stressed the need to honour existing financial equalisation agreements and the stability pact signed in November.

Federal Finance Minister Markus Marterbauer defended the measure as essential for reducing labour‑related costs and boosting competitiveness, while also pledging that core FLAF benefits will be maintained. Opposition parties argue that the broader budget package does not contain enough measures to put Austria on a sustainable growth path.