3.5 Further Information on the Administrative System and Links between the Different Levels and Institutions

Administrative Reform
Reform for all levels of administration has been under discussion mainly since the early 1990s. One issue - especially at the state level - has been the concentration or decentralisation of public authorities and administration, another - in which local authorities have played a pioneering role - has been the introduction of business-management models of administrative control with the aim of improving efficiency ("New Public Management"). In recent years, many local authorities have reformed administration, cutting staff, and spinning off or privatising divisions. This process is not yet at an end and, given the tight financial situation of many local authorities, is likely to intensify.

 

Financial System
The federal system of the Federal Republic of Germany requires the appropriate sharing of fiscal autonomy between the Federation and the states. Basically, the Federation and the states each have to bear the costs incurred in discharging their functions. In the case of functions delegated to the states, the Federation bears the costs. If the states implement federal legislation that involve expenditure, the participation of the Federation can be required by law.
In the overall interests of the economy, the Federation can grant the states financial aid for particularly important investments by states, counties, and local authorities.
The distribution of tax revenue between Federation, states, and local authorities is a central problem crucial for the survival and functioning of the entire governmental system. The sharing of proceeds from taxes and other levies between Federation, states, and local authorities (vertical financial equalisation) and equalisation between financially strong and financially weak states (horizontal financial equalisation) are accordingly issues that causes frequent political controversy. Particularly affected is the local level, for municipal income from taxes and charges is far from sufficient to cover local authorities' financial needs, so that they depend on compensation from higher levels of government. Overall, this is an unsatisfactory state of affairs and an increasing threat to local government autonomy.

Local Government Umbrella Organisations
Local authorities have no direct co-decisional competence at the state or federal level. However, via their umbrella organisations, local authorities play a role in policy making (e.g., through participation in hearings on state and federal bills). Local government umbrella organisations are voluntary groupings which defend the interests of local authorities vis-ā-vis state and Federal Government. They include:

  • the German Association of Cities and Towns (Deutscher Städtetag), grouping major cities,
  • the German County Association (Deutscher Landkreistag), and
  • the German Association of Towns and Municipalities (Deutscher Städte- und Gemeindebund), grouping smaller and medium-sized communities.