Gerhard Lehner
The Public Revenue Sharing Scheme as a Budget Policy Tool
The new public revenue sharing scheme, while not affecting the basic structures of financial relations between the territorial authorities, nevertheless includes several crucial changes. It has changed the distribution formula for some taxes, with the result that the federal government will receive the greater part of additional revenues flowing from the tax measures introduced in 2000 and 2001. Less reliance on earmarking implies that the states have more leeway in disposing of their money. Higher fixed per-capita amounts for local government generate more income for the smaller communities. The public revenue sharing scheme does not fully cover all relations between the territorial authorities, and in particular leaves out much of the interdependences between state and local authorities.
Gerhard Lehner is an economist at WIFO. The data were processed and analysed with the assistance of Brigitte Schütz • E-mail addresses: Gerhard.Lehner@wifo.ac.at, Brigitte.Schuetz@wifo.ac.at
CHAPTERS:
Shared federal taxes gain in importance
Revenues from shared federal taxes
Horizontal distribution of revenue shares
Marked west-east gradient in per-capita revenue
shares accorded to states and communities
State levy and need-based funds
Transfers to financially weak territorial
authorities
Transfers from the federal to the state and local
governments
Reimbursement of staff cost and other expenditures
Transfers outside the revenue sharing scheme
[1] A new public revenue sharing scheme came into force at the start of 2001 and will be effective until the end of 2004. It covers three sectors of responsibility:
· apportionment of tax revenues (revenue shares),
· regulation of transfers from the federal to the state and local governments,
· determining the financing of responsibilities (state-employed teachers, income supplements, management responsibilities undertaken on behalf of the federal government).
[2] The scheme falls short of regulating all financial relations between the territorial authorities, even when earmarked subsidies for housing (which were negotiated jointly with the scheme) are considered: several transfers are covered by other laws and agreements, and the financial relations between the state and local governments are not included in the scheme.
[3] In its basic structures, the new scheme corresponds to previous efforts, even though the framework for financial relations between the federal, state and local government has decidedly changed over the past few years. A fact that is reflected in the intra-Austrian Stability Pact, which provides an important legal framework to that end. The pact prescribes budget surpluses/deficits for each of the territorial authorities, which will ensure a rise in tensions since both states and communities have little margin in designing their respective revenues.
[4] Consequently, the revenue sharing scheme will further gain in importance. Its intention is to help ensure the financing of responsibilities undertaken by each territorial authority and to mitigate rather than aggravate regional differences. Nevertheless, its compensatory function takes a backseat to its distributory function: the scheme provides for the distribution of tax revenues of more than ATS 600.9 billion (1999) and transfers of about ATS 90 billion. It is thus the key financing source for the states and communities and takes a critical part in the observance and operation of the intra-Austrian Stability Pact.
[5] This report studies, first, the effects to be expected of the changes made in the new scheme (also with a view to the Stability Pact). Secondly, it analyses whether the regulations are suited to support the joint objectives and targets of all three government levels and whether they can bleed off some of the tensions. As a third aspect, developments in the 1990s are summarily compared with the trends to be expected from the new scheme (for 2002).