The project aims at an adjustment of the current municipal fiscal equalization scheme in Mecklenburg-Vorpommern to current problems in municipal finance. In particular, the project makes three contributions:
(1) A detailed analysis of the tasks and expenditures of municipal jurisdictions in Mecklenburg-Vorpommern is carried out. The study mainly relies on a survey of differences and similarities between jurisdictions in Mecklenburg-Vorpommern and other, structurally similar, German states (Bundesländer).
(2) Long-term trends of state and municipal revenues as well as their distribution between the two levels of government are projected until 2020. The calculations are based on current legal arrangements, according to which the state and municipal level are to be equally affected by revenue trends (Gleichmäßigkeitsgrundsatz, § 5 Abs. 1 Satz 3 FAG-MV1).
(3) While this concept of fiscal equalization is mainly based on fiscal capacity a possible alternative is to determine necessary tasks and corresponding expenditure needs of jurisdictions as a basis for the transfer scheme. This concept, labelled the “2-Source-Model” (2-Quellen-Modell), is discussed from a public finance perspective.
The results of these enquiries are exploited in a reform proposal. Moreover, the analysis is complemented by considerations concerning the optimal size of jurisdictions which might be relevant in terms of a potential reform of the municipal structure in Mecklenburg-Vorpommern.
The projection of vertical fiscal equalization is done in two steps: Firstly, the municipal and state tax revenues are projected not only for the state of Mecklenburg-Vorpommern, but for each German state. The results of this projection are then combined with a population forecast and used in a simulation model for the German fiscal equalization across states (Länderfinanzausgleich). With this model, the allocation of grants paid to Mecklenburg-Vorpommern is calculated up to 2020 on the basis of today’s statutory framework. In the second step, municipal and state revenue is projected separately for Mecklenburg-Vorpommern. The results are then used to determine vertical fiscal equalization payments from the state to the municipal level according to the so called principle of equability (Gleichmäßigkeitsgrundsatz) according to which the state and municipal level are to be equally affected by revenue trends.
The project is based on data from the 11th coordinated population forecast provided by the German Federal Statistics Office (Deutsches Statistisches Bundesamt), the results of the 129th meeting of the tax revenue estimation group (Arbeitskreis Steuerschätzung) and the employment forecast of the long-term sustainability analysis (Tragfähigkeitsanalyse).
The results will flow into the current discussions of reform proposals.
Büttner, Thiess (with Petra Enß, Fédéric Holm-Hadulla, Robert Schwager, Christiane Starbatty and Wiebke Webering), "Der kommunale Finanzausgleich in Mecklenburg-Vorpommern: Langfristige Entwicklung und Reformperspektiven Teil II: Der horizontale Finanzausgleich", ifo Forschungsbericht Nr. 46, 2010, (Abstract)
Büttner, Thiess (with Petra Enß, Fédéric Holm-Hadulla, Robert Schwager, Christiane Starbatty and Wiebke Webering), "Der kommunale Finanzausgleich in Mecklenburg-Vorpommern: Langfristige Entwicklung und Reformperspektiven Teil I: Der vertikale Finanzausgleich", ifo Forschungsbericht Nr. 45, 2010, (Abstract)
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