The government has confirmed that state budget transfers to municipalities will increase “above inflation” next year.
“In the coming year, municipalities will receive a total of 4,410,588,195 euros, representing a 2.7% increase compared to 2025,” stated a communication from the Ministry of Economy.
The budget proposal’s growth in allocated funds surpasses the projected inflation for this year, which was 2.4% in September according to the INE, and the forecast for 2026, estimated at 2.1%.
The total amount includes a general grant for the Financial Equilibrium Fund (FEF), which is increased by 73.3 million euros, or 2.2%; a specific grant for the Municipal Social Fund (FSM), increased by 3.3%; and a participation of 5% in IRS and 7.5% in VAT revenue.
Furthermore, the government stated that the Parish Financing Fund (FFF) will also grow above inflation, totaling 406,752,496 euros, which corresponds to an increase of 10,147,745 euros (2.6%) compared to 2025.
Overall, transfers to municipalities and parishes will amount to 4,817,340,691 euros, reflecting an increase of 128,161,343 euros (2.7%) compared to the current year.
The budget proposal also includes a boost in the Municipal Emergency Fund (FEM), with its allocation rising from 6 million in 2025 to 10 million euros in 2026.
OE2026? Municipal Association Raises Concerns of Regression
The president of the National Association of Portuguese Municipalities (ANMP) expressed concerns that the 2026 State Budget (OE2026) presents “worrying signs of regression” in matters with significant municipal impact.
In an initial analysis of the 2026 State Budget proposal, Luísa Salgueiro noted the presence of both positive aspects and concerning signs of regression in high-impact municipal matters.
The Socialist mayor, also leading Matosinhos City Hall and seeking a third term in Sunday’s elections, acknowledged that OE2026 adheres to the Local Finance Law, forecasting 4,410.6 million euros for local authorities – 118 million euros more than in 2025 (2.7% increase) – but still less than previous years’ increases.
All municipalities will experience transfers growing above the 2024 inflation rate (2.4%), ranging from 2.74% to 3.1%, responding to ANMP’s demands, she highlighted.
However, Luísa Salgueiro voiced concern over the removal of provisions regarding the School Recovery/Rehabilitation Program, agreed upon with the government in 2022 and present in the current budget law.
“The absence of these provisions is a negative signal concerning the government’s political and budgetary commitment to this essential program for modernizing the school network and consolidating the decentralization process,” she stressed.
For Luísa Salgueiro, the complete execution of the Schools Program should be a priority and cannot continue to be postponed.
“After a thorough analysis, the ANMP will be available to dialogue with the government and the Assembly of the Republic to substantially improve the State Budget proposal for 2026 during the parliamentary debate,” she added.
