The German states and the Federal Ministry of Finance are engaged in an ongoing dispute over the future financing of local rail passenger transport. At the heart of the conflict is the states' demand for billions of euros in additional federal funding to offset steadily rising operating costs and prevent the cancellation of train services.
While transport companies and state transport ministers warn of significant service cuts for passengers, Federal Finance Minister Lars Klingbeil points to existing legal regulations and the upper limits enshrined in the federal budget. The push for the government's draft federal budget for 2027 has further exacerbated the differences between the federal and state governments, with no mutually agreeable solution in sight.
Initial situation and demands of the federal states
The current funding shortage stems from general cost increases in the transport sector. Both personnel costs and expenses for materials and energy have risen significantly more sharply in recent years than originally projected in the financial plan. The German states, which commission regional rail services from various railway companies and largely finance them through federal regionalization funds, are facing substantial funding gaps. Since ticket sales revenue falls far short of covering actual operating costs, the sector is dependent on uninterrupted public funding.
To maintain the current level of service for regional trains and S-Bahn services beyond 2026, the German states are requesting an increase in regionalization funds of €14 billion for the period from 2027 to 2031. However, Federal Finance Minister Lars Klingbeil's draft federal budget for 2027 does not include any further federal funding beyond the already allocated €13,8 billion. According to the Finance Ministry, the federal government has fulfilled its legal obligations, and therefore the responsibility for any necessary timetable adjustments lies with the states, which have been responsible for organizing and commissioning local public transport services since the 1996 railway reform.
Warnings from railway companies about service reductions
Railway companies across Germany are concerned about the uncertain financial situation. Industry representatives, including the Mofair association representing independent railway companies, and market participants such as the ÖBB subsidiary Arverio, are pointing to the economic burdens. Arverio operates numerous regional express and regional train lines in Bavaria and Baden-Württemberg, including routes from Munich to Lindau, Augsburg, Ulm, and Würzburg, as well as from Stuttgart to Karlsruhe and Nuremberg.
According to company executives and industry associations, insufficient funding is leading state transport ministries to compile lists of potential route and service reductions. If the funding gap is not closed, widespread cancellations of train services are imminent. This would result in reduced service on alternative routes or in rural areas, while remaining trains would operate at higher occupancy rates.
Impact of track access charges and network infrastructure
The increasing track access charges are also straining the budgets of the federal states and railway companies. These charges function as a toll for rail access, which railway companies must pay to DB Infrago, the infrastructure company of Deutsche Bahn, for using the rail network. According to forecasts, these charges could increase by more than three billion euros for local public transport by 2031. In North Rhine-Westphalia, the resulting additional funding requirement for the coming years is estimated at approximately 1,2 billion euros.
State politicians criticized the system whereby a considerable portion of the regionalization funds paid by the federal government to the states flows directly back to the state-owned Deutsche Bahn via track access charges. Furthermore, the poor condition of many sections of track and the associated infrastructure deficiencies regularly lead to delays and train cancellations. To maintain service, transport companies often have to organize costly replacement bus services, which further increases operating expenses. Should budget cuts lead to train cancellations, the risk would also increase that the remaining services would be burdened with even higher track access charges to compensate for the shortfall in infrastructure costs.
Discussions at the political level and outlook
The conflict is being viewed with concern in state parliaments. Representatives of state parliament committees emphasize that cuts to train services run counter to the existing mobility needs in metropolitan areas and rural regions. While the federal government points to the formal framework of the distribution of responsibilities, industry representatives and state politicians are pinning their hopes on the upcoming budget negotiations in the German Bundestag, where the federal government's draft budget could still be amended.
No agreement has yet been reached between the federal and state governments. Should the draft budget be adopted in its current form, the states would have to decide whether to use their own state funds to compensate for the shortfalls or to reduce train services on various routes.