The federal government is proposing a new measure to financially support states and municipalities regarding changes in public service laws, such as social assistance. Under the draft resolution, the federal government would compensate states and local governments by 75 percent for any additional costs incurred, provided that the ensuing burden exceeds an annual threshold of 250 million euros.
This proposal emerged from a draft resolution dated June 22th for the Prime Ministers’ Conference, which was reported by the “Rheinische Post”. The draft stipulates that if federal performance laws-or any other federal laws with financial consequences-are revised or introduced during the legislative term, and if these changes cause significant shifts in the financial responsibilities of the various state and local levels, 75 percent of the resulting impact would be covered for both states and municipalities.
The compensatory requirement is contingent upon the size of the financial impact. The draft resolution specifies that compensation for a burden or relief resulting from a new or amended law only applies if the effects on the households of the municipalities and states total at least 250 million euros annually after the law comes into force. Furthermore, the compensation is intended to be managed through adjustments to Value Added Tax (VAT) mechanisms, with tax legislation itself being exempt from this scheme.
This initiative builds upon the federal government’s existing commitment to the principle of causality. This principle dictates that the government level responsible for initiating new social benefit laws or costly amendments to existing ones-which is typically the federal government-should bear the financial costs associated with those changes.
