Introduction
 

As stated in Article 20(1) of the German Basic Law (BL), Germany is a federal state. Federal laws are made in bi-cameral cooperation between the Bundestag and the Bundesrat. The Bundestag is directly elected by universal suffrage under a mixed proportional framework where some members of the Bundestag are elected by plurality system and others by proportional representation from party lists. The Bundesrat is composed of representatives of the Länder governments. The number of representatives of a Land in the Bundesrat is in relation to the number of inhabitants of that Land; it ranges from 3 to 6 votes per Land adding up to a total of 69 votes in the Bundesrat. Both chambers can initiate new legislation. According to Article 77 BL, "consent bills" (i.e. bills amending the constitution or impinging in a particular manner on the finances of the Länder or on their organisational and administrative jurisdiction) can only come into being if the Bundesrat and Bundestag are in agreement. As the underlying assumption in the BL is that bills generally do not require Bundesrat consent, all "consent bills" must clearly be stipulated in the BL. By consequence, all other bills are "objection bills" where the Bundesrat may table an objection which can be overturned by the Bundestag.

The Länder are guaranteed their own constitutions and the municipalities pursue self-governance within the limits of the laws. There are 16 Länder (federal states), 401 Kreise (counties at intermediary level; subdivided into 107 'kreisfreie Städte' and 294 counties ['Landkreise']) and 11,054 Gemeinden (municipalities at local level). Cities with more than 100,000 inhabitants have both county and municipal responsibilities. Yet it should be noted that there are a few cities, called kreisfreie Städte, with less than 100,000 inhabitants which enjoy a similar status. Those cities attain their status based upon the Land's allocation of institutional and administrative responsibilities. In terms of constitutional law, the municipalities and counties are regarded as institutionally belonging to the organisational body of the Länder. In practical and functional terms, however, the municipalities constitute a “third" level of governance at which the majority of public tasks is carried out. Local authorities enjoy a constitutional guarantee of local self-administration which implies the right “to regulate all local affairs on their own responsibility, within the limits prescribed by the laws" (Article 28 Basic Law).  

The BL specifies the relationship between the federal level (Bund) and the Länder. Following Article 30 BL, the exercise of state powers and the discharge of state functions lies in the responsibility of the Länder, unless otherwise provided or permitted by the BL. As far as legislative powers are concerned, the Länder have the right to legislate insofar as the BL does not confer legislative power on the Federation (Article 70). The matters under exclusive Federal legislative power are listed in Article 73 BL; on those matters, the Länder may only legislate when they are explicitly authorised to do so by federal law. Article 74 BL identifies the subjects which fall under concurrent legislative competence. According to Article 72 BL concurrent powers are those under which "the Länder shall have power to legislate so long as and to the extent that the Federation has not exercised its legislative power by enacting a law." All Länder, irrespective of their size, enjoy the same degree of legislative power under the BL.

Most legislation is enacted at the federal level, but across all fields of administrative functions, the Länder are clearly the predominant bodies, while federal administrative powers, defined in Arts. 87-90 BL are classified as exceptions to that rule. The administrative role of the Länder is defined in Art. 83 of the Basic Law, which confers upon them both the right and the duty to “execute federal statutes as matters of their own concern in so far as this Basic Law does not otherwise provide or permit". Furthermore, articles 84 and 85 BL differentiate between administrative functions to be performed by the Länder as matters of their own concern (under general administrative rules requiring the Bundesrat's consent and subject to federal supervision relating to legal standards only), and other matters in which “the Länder execute federal statutes as agents of the Federation" (subjecting them "to the instructions of the appropriate highest federal authorities" and to federal supervision dealing also with the "appropriateness of execution").

In 2006, Germany embarked on a major reform of its Basic Law with regards to the relationship between the federal level and the Länder. The goal was to strengthen the legislation by making a clearer distinction of the competences, limiting the scope of consent by the Bundesrat, financial and budgetary reforms, and strengthening the role of the Länder in European legislation.

The system of concurrent powers changed, with the purpose of disentangling competencies and increasing governance efficiency. Changes concern both the catalogue as such and the system of concurrency. Several issues in Article 74 (1) BL have been removed and transferred either to the Länder or to the exclusive federal legislative power with the result that there are now 31 areas allowing concurrent legislation:

Punishment for crimes, regulation of the notary publics, as well as regulation of assembly, regulation of nursing, homes and homes for the elderly and disabled were removed from the catalogue and transferred to the Länder; weapons and explosives and the care of those injured or affected by war were added to the exclusive federal powers. The concurrent powers of Article 74a BL dealing with salaries and benefits of all public employees were deleted. While “salaries and benefits of all public employees" are now within the competence of the Länder, “provisions concerning the status and duties of civil servants of the Länder, local governments, and other public corporations including judges" were added to the concurrent powers (Article 74 (1) BL). The most important change incurred by the reform is that the Länder were granted the right to deviate from federal legislation (Article 72 (3) BL) in six fields (including the admission to higher education and environmental protection). This opting-out procedure is an absolute novelty in the German federal system. Due to the difficulties of power delineation and the necessity requirement described above, the framework power of Article 75 BL was completely abolished.

The reform of the federal structure also entailed some changes regarding its relationship with the EU. These concerned the question of how to distribute payments resulting from European Union sanctions for national budget deficits, and a clarification and strengthening of the role of the Länder in EU legislation according to Article 23 BL. In policy areas of exclusive Länder powers such as schools, culture, and broadcasting the Länder now appoint an EU representative through the Bundesrat.

With regard to areas where Länder administrate under federal oversight (Article 84), and those where Länder execute policies on federal commission (Article 85), the veto power of the Bundesrat was replaced by a right to derogate in case the Federation wants to set up its own administrative authorities implementing federal legislation. In other areas, the Länder can appoint a representative only after consultation with the federal government. The attempt to reduce the number of laws requiring consent and hence the veto power of the Bundesrat has only partially been successful. In fact, in some case veto rights have even been added or extended.

2009 saw a second stage of reforms, which did not as much readjust the responsibilities between the Länder and the Bund but addressed the system of intergovernmental finances. Now, according to Article 84(1) BL, it is no longer possible for the federal level to entrust any tasks onto the municipalities.

The distribution of taxation competences is laid down in Article 104 ff. BL. The Länder collect the vast majority of the taxes in Germany. Additionally, 75% of VAT revenues are redistributed across the Länder to ensure a uniform standard of living across the country (Art. 106 BL). The total revenue of the Länder in 2018 amounted to 390.3 billion Euros (in 2018), while the municipalities revenues amounted to 258.4 billion Euros (in 2017)[1]. The Länder's own-resource taxes equalled 23.9 billion Euro in 2018. The main Länder taxes are the land purchase tax (about 14.1 billion Euro) and the inheritance tax (6.8 billion Euro). The revenue autonomy of the Länder (calculated as the share of subnational own revenues out of own revenues plus grants) was 60% in 2013.[2] The Länder's total revenue includes the VAT (110.8 billion Euros in 2018), the personal income tax (about net 60.4 billion Euros in 2018) and the corporate income tax.[3] The local government revenue consists to 74% of taxes collected by the municipalities themselves. Their own resource taxes comprise the local business tax, property tax and other local taxes. This amounted to a total of about 243.8 billion Euros in 2017. Regarding the mixed tax income, local governments raise personal income tax, VAT and the tax on interest.

Central level

Legislative and administrative responsibilities of the Federation (Bund)

The Bund exercises legislative authority solely in those areas assigned to it under the Basic Law (Article 73), inter alia in those areas which are the prerogative of a sovereign state: foreign policy, defence, currency, citizenship, freedom of movement, air transport, post and telecommunications services, industrial property rights, federal statistics, etc.

According to Article 87 of the Basic Law, the exercise of executive powers by the federal authorities is limited to a few areas such as foreign affairs, administration of federal waterways and shipping, social insurance institutions extending beyond the jurisdiction of a Land, federal corporations and institutions, etc.

Regional level

Legislative and administrative responsibilities of the Länder (federal states)

• The exercise of state powers and the discharge of state functions is a matter for the Länder, except as otherwise provided or permitted by the Basic Law; they are thus responsible for implementing federal legislation.

• The Länder have the right to legislate in all areas which are not vested solely in the Federation by the Basic Law.
• Federal and regional powers sometimes overlap in areas such as justice, social welfare, civil law, criminal law, labour law and economic law.
• The Länder have exclusive legislative powers with regard to culture, education, universities, local authority matters and the police. However, a new law passed in 2019, coined the “Digital Pact" (“Digitalpakt Schule"), gives the federal government the right to provide direct financial assistance to municipalities to promote digital infrastructure in schools and thus weakens the exclusive cultural sovereignty of the Länder to some extent.
  
   

Intermediate level – Kreise und kreisfreie Städte

Mandatory powers (under federal and Land legislation)

• Building and maintenance of secondary roads, public passenger transport, car registration, driving licences;
• Spatial planning at district authority level, construction affairs (building permits, building inspection);
• Fire protection, disaster control service, rescue services;
• Nature and landscape protection, maintenance of nature parks;
• Social welfare and youth welfare;
• Building and maintenance of hospitals;
• Building and maintenance of secondary schools and technical colleges;
• Household waste collection and disposal;
• Food supervision, animal protection;
• Treatment of aliens (entrance, residence, surveillance, etc.)

 

Optional powers (in accordance with the principle of local self-government)

• Support for cultural activities
• Construction of pedestrian areas and cycle lanes
• Support for pupil exchanges
• Construction and maintenance of public libraries
• Promotion of economic activity and tourism
• Management of adult education colleges (Volkshochschulen)
  
   

Local level

Administrative responsibilities of the local authorities

Local authorities are largely responsible for the following sovereign rights:

• Personnel sovereignty grants the municipalities the right to select, engage, promote and dismiss staff
• Organisational sovereignty encompasses the right of the municipalities to organise the administration themselves
• Planning sovereignty grants the municipalities the power to organise and shape municipal territory under their own responsibility by drawing urban development plans (land use and building plans)
• Legislative sovereignty entails the right to pass municipal bylaws
• Financial sovereignty entitles the municipalities to be responsible for managing their income and expenditure
• Tax sovereignty grants the municipalities the right to raise locally-applying taxes such as dog tax, entertainment tax, land tax, second place of residence tax.

 

Optional powers (in accordance with the principle of local self-governance)

• Incentives for local economic activity
• Incentives for housing, establishment of social welfare infrastructure
• Building and maintenance of public transport infrastructure
• Cultural affairs and sport facilities
• Management of energy supply utilities
• Twinning arrangements with local authorities in other countries

Mandatory powers (under federal or Land legislation)

• General security
• Health care and veterinary affairs
• Town planning, construction affairs and maintenance of the local authority road network and green areas
• Construction and maintenance of primary schools
• Maintenance and management of waterways, sewage disposal
• Social welfare and youth welfare
• Construction of recreational and leisure areas
• Urban development and regeneration

State powers devolved to urban municipalities and medium-sized towns

• Registration of births, deaths, marriages and same-sex partnership, issuing of identity papers
• Running of elections
• Census taking and registration formalities for non-Germans
• Registration of vehicles, urban traffic management
• Supervision of food quality, hotels, restaurants and public houses

Mandatory powers (under federal or Land legislation)

• General security
• Health care and veterinary affairs
• Town planning, construction affairs and maintenance of the local authority road network and green areas
• Construction and maintenance of primary schools
• Maintenance and management of waterways, sewage disposal
• Social welfare and youth welfare
• Construction of recreational and leisure areas
• Urban development and regeneration

State powers devolved to urban municipalities and medium-sized towns

• Registration of births, deaths, marriages and same-sex partnership, issuing of identity papers
• Running of elections
• Census taking and registration formalities for non-Germans
• Registration of vehicles, urban traffic management
• Supervision of food quality, hotels, restaurants and public houses

[1] https://www.destatis.de/DE/Themen/Staat/Oeffentliche-Finanzen/EU-Haushaltsrahmenrichtlinie/Tabellen/oeffentlicher-gesamthaushalt.html

[2] CEPS. 2014. Division of powers between the European Union, member states, candidate and some potential candidate countries, and local and regional authorities: Fiscal decentralisation or federalism

[3] https://www.bundesfinanzministerium.de/Content/DE/Standardartikel/Themen/Steuern/Steuerschaetzungen_und_Steuereinnahmen/2016-01-29-steuereinnahmen-kalenderjahr-2015.pdf?__blob=publicationFile&v=2