Actually, the financial equalization negotiated last in 2016 should have been renegotiated two years ago, but in view of the pandemic it was agreed to extend the old modalities. Roughly calculated, the distribution is currently 68 percent federal, 20 percent federal states and twelve percent municipalities.
Of course, these figures only partially reflect reality. Because if you include transfers, according to KDZ calculations, the federal government only has 53 percent, the states 30 percent and the municipalities 17 percent. The states benefit from the direct transfers from the federal government, most of which are spent on state teachers. There are also, for example, hospital financing and care funds.
Financial equalization negotiations
The political debate between the federal, state and local governments regarding the respective share of tax revenue begins in Austria on Monday. During the pandemic, the applicable financial equalization was continued unchanged. The negotiations will be the first in six years.
Nevertheless, the federal states have made it clear in advance that they want a larger share of the tax cake. If you look at the joint federal taxes for 2021, the sums involved are enormous – they were 93.3 percent. The countries want a larger share of the cake with the argument of additional expenditure in the areas of care, health, education or climate protection.
Climate protection should play a bigger role
The latter area is also to be mapped centrally for the experts interviewed by the APA, as it has so far only been a side note in financial equalization. Mitterer from the KDZ, which specializes in public finance, is in favor of a climate protection fund that should be structured similarly to the existing residential water management fund. She points out that 30 percent of public investment comes from municipalities and that there is huge potential in terms of thermal rehabilitation. The expansion of public transport also requires money.
Schratzenstaller also believes it is necessary to make the financial equalization greener. She thinks regarding an ecological component in the property tax. There was also a need for cross-level climate governance. As far as the property tax, which only benefits the municipalities, is concerned, both experts see a need for reform for a long time anyway. Schratzenstaller reminds that this should have been addressed in the last financial equalization. Happened but just as little as with the task orientation or the state reform. Mitterer also hopes for more income from a reform for the municipalities.
Big hit coming or not?
The negotiations are starting comparatively late this year, even if – as Brunner emphasizes – there is still time until autumn. But Mitterer considers it “unrealistic” given the short lead time that there will be a big hit. Schratzenstaller does not want to accept the time argument. Then one should choose a shorter period for the financial equalization this time and work out a major reform in one or two years.
Brunner had previously said that if the federal states wanted more money, they would also have to take on more tasks: “If you want more funds, that also means more responsibility.” Such an allocation of funds cannot be a one-way street. “If we talk regarding changing the distribution key, then we also have to talk regarding structural reforms,” says Brunner. This might be, for example, that the federal states would have to take on more tasks. The Finance Minister would have ideas regarding this, but he does not want to communicate them before the official start of negotiations: “That would be unfair.”
Retirement age not an issue
The finance minister is not planning any major structural reforms, even with reference to the government program for pensions. In any case, there are no plans to raise the starting age. Now would not be the right time for that. Instead, Brunner relies on other measures that actually bring the actual retirement age closer to the statutory retirement age. But he only wants to rely on incentives to stay in working life: “Something will come in the next few months.” So little has happened there anyway. In the past decade, they have “won” 2.5 years here.
Schratzenstaller sees it as crucial to combine responsibility for expenditure and income. Apart from the housing subsidy amount, the federal states would have almost no income of their own. Here she can also imagine a certain tax autonomy, with the municipalities, the property tax would be a candidate, with the states, for example, the motor-related insurance tax.
Countries cautious regarding tax anatomy
Of course, in contrast to the previous negotiations, tax autonomy was no longer an issue, even in the ÖVP-led countries. However, Brunner would not fundamentally shut himself off: “You can talk regarding anything.” Task orientation, the pilot project for childcare for which has failed miserably in the period now ending, does not seem to be a major concern this time.
Even the long-running tiered population key (ABS) is likely to stay in the background this time. The point here is that larger communities get more money because of their central local functions. Mitterer from the KDZ, which is close to the Association of Cities, says that there is not much that can be reduced here. Traditionally, the large federal states with few larger cities such as Lower Austria have little joy with the ABS.
Subgroups following kick-off
From a purely technical point of view, the start on Monday in the late followingnoon is basically just a kick-off event. Then it goes on in subgroups. States and municipalities have already nominated their negotiating teams, as have the cities. Vorarlberg’s governor Markus Wallner (ÖVP), his colleagues from Upper Austria and Burgenland, Thomas Stelzer (ÖVP) and Hans Peter Doskozil (SPÖ), Vienna’s financial councilor Peter Hanke (SPÖ) and St. Pölten’s mayor Matthias Stadler will play central roles (SPÖ).