The federal government is debating the 2024 budget. Expenditure and income diverge. Should the sensitive federal-state financial relationships serve as a quarry for consolidation?
Apparently yes, according to the traffic light vote in the budget committee of the Bundestag: The federal states should finance themselves “more independently again in the future”. We, as Northern finance ministers and senators, can only advise against this course.
1. The debt brake regulations of the federal states are stricter than those of the federal government. The federal government has a residual debt margin in normal times, the states do not. Perhaps some things would relax at the federal level compared to the states if the states were left with the remaining 0.15 percent of gross domestic product as residual debt.
2. The current high federal deficits caused by the crisis are not caused by higher payments to the federal states. At the end of the current financial planning period, the current payments from the federal government to the states are only around seven billion euros higher than in the pre-crisis year of 2019. The impression created in Berlin is different.
3. The task-adequate financing of the federal states and municipalities depends almost exclusively on joint federal-state decisions on the structure and distribution of taxes. Conceivable financing alternatives of the countries, such as the reduction of environmentally harmful subsidies, the reduction of justice gaps in the tax system or the reform of the debt brake, would have to be decided on together. And the federal government shows no willingness to do so.
4. As a rule, additional costs initiated by the federal government are compensated for by fixed amounts that are limited in time and are insufficient. Example Deutschlandticket: The reinforcements in favor of the federal states take into account the public transport share of the federal tax revenue guaranteed in the Basic Law.
However, as long as this is not structurally and dynamically secured, the common goals will not be achieved. The result is then absurd: one agrees with the federal government on a joint Germany ticket and in poorer countries local transport has to be canceled for counter-financing.
>> Also read: Defeat for the Greens, triumph for the Liberals? How the coalition committee splits the traffic light
If the traffic light wants to score points as a progressive coalition, it needs broad acceptance for an ecological transformation that works economically and socially. This acceptance will only exist if the local people feel that services of general interest work.
With an administration that is close to the citizens, a police presence, fast court proceedings. Schools and day care centers must guarantee good education and reliable care, municipalities must have free funds to organize sports, fire brigades and cohesion. Added to this is the great challenge of integrating refugees. All topics that move countries and municipalities on site.
The federal states need more funds from the federal budget for public transport in the long term
If the traffic light wants to be successful as a progressive coalition, it must also ensure that the federal states and local authorities are also financially able to help organize the achievement of the climate goals and to support them with social and infrastructure measures. This requires more from the federal budget for public transport in the long term, because the federal states and municipalities will not be able to manage the mobility turnaround on their own.
In addition, the federal states and municipalities are faced with enormous challenges in terms of their personnel costs and pension burdens if wage agreements are expected to be high – the federal government’s proportion of personnel costs is comparatively low. In such a situation, it is irresponsible to put additional pressure on the part of the federal government against the states and local authorities.
It is therefore still important for the states that when the states and local authorities take on new tasks for political reasons, there is also permanent and dynamic compensation for the burdens.
Only the long-term funding of such services gives everyone involved the urgently needed planning security – whether with the Good Day Care Act, refugee financing or public transport. And the federal government needs the necessary votes in the Bundesrat for its policy.
Anyone in the federal government who wants to use the financing of states and municipalities as a quarry in the crisis has not understood that right now people are expecting good federal cooperation between the levels, not a new federal-state dispute. The progress coalition can only be successful with the federal states.
The authors: Andrew Dressel is finance senator in Hamburg (SPD), Heiko Geue is finance minister in Mecklenburg-Western Pomerania (SPD), Gerald Heere is finance minister in Lower Saxony (Bündnis 90/Die Grünen), Monica Heinold is finance minister in Schleswig-Holstein (Bündnis 90/Die Grünen) and Dietmar Strehl is Finance Senator in Bremen (Bündnis 90/Die Grünen).
More: How the traffic light could save around 79 billion euros