The city of Budapest is facing its worst financial crisis in decades. City officials say that to avoid bankruptcy, they will stop paying taxes to Hungary's finance ministry and seek a loan to keep essential services running.

The city's mayor, a member of the opposition party, is pointing the finger of blame at the policies of Prime Minister Viktor Orban and is planning to take his Fidesz-led government to court.

The city of Budapest is losing cash rapidly, not because of wastefulness, according to the city's deputy Mayor. He blames a tax the city pays to Hungary's national budget, the so-called 'solidarity tax.'

"During the past city administration, which was part of the prime minister's ruling party, the financial agreement differed," said Ambrus Kiss, Budapest's Deputy Mayor. "At that time, the city of Budapest's solidarity tax was $29,000; now we pay $168 million. It's hard not to see the political motivation behind these decisions."

Budapest's opposition-led administration says the Orban government also deprived the city of its primary income source when it cut business taxes by 50 percent during the Covid-19 pandemic; the tax cuts remain in effect today. City officials say the lack of funds has blown a hole in the city's balance sheet.

"Between 2020 and 2022, the city of Budapest has lost more than $230 million from the tax cut," said Deputy Mayor Kiss. "Half of that money is taxes that small business owners should have paid. The remainder from large companies and the Orban government has not reexamined this policy."

Deputy Mayor Kiss says the business tax cut and the solidarity tax have pushed Budapest to the brink of bankruptcy, threatening the paychecks of 27,000 city employees and straining some of the city's essential services.

Budapest city officials expect the municipal budget deficit to surpass $200 million by August, and they could run out of funds by September. That's why the city's mayor, Gergely Karacsony, is seeking a loan to maintain liquidity. Still, there is another challenge. Prime Minister Orban's government needs to approve the city's financial plan.

Péterné Boros heads the union representing municipal workers and says the city's finances have never looked so grim.

"Instead of giving funds to the city of Budapest, as the Orban government does with other municipalities, they take it away," said Boros, the President of the Hungarian Civil Servants Trade Union. "The solidarity tax is a big problem, and then you add to that inflation, and we end up in this situation."

However, the Orban government is accusing the Budapest city mayor of squandering resources. It says the city's budget surplus was when Karacsony came into office. The government points to the 15 percent pay hike for municipal employees and the Chain bridge remodeling as examples of bad management. But city officials are defiant.

"We invested $46 million on raises across the board," said Deputy Mayor Kiss. "If we didn't, we would lose employees. Who would work for us? So that is not a waste of money. It's an investment. Prices in this country have soared this year by 40 percent. People need to buy food."

City officials say they will take the Orban government to court in the coming weeks, seeking a review of the solidarity tax. In the meantime, Budapest says it will not contribute to the national purse until these matters are resolved.

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