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State Supervision of Local Budgets: From Forbearance to No Concession

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The Future of Local Self-Government

Part of the book series: Palgrave Studies in Sub-National Governance ((PSSNG))

Abstract

To guarantee fiscal sustainability of municipalities, all countries establish fiscal regulations and supervision. However, there is no guarantee that such regulation will be effective as the German state North Rhine-Westphalia shows. For decades, fiscal supervision suffered due to weak rules and inadequate implementation. In 2011, the state changed its supervisory system in favour of stricter rules. This chapter identifies causes for the persistence of an obviously failing system and reasons for its transformation. Persistence refers to political considerations and excessive demands in practice. The institutional change was caused by the global financial crisis making the old system unworkable and changing the actors’ mindsets. The state reacted by strengthening rules and their implementation simultaneously. Despite positive fiscal effects, the reform had negative impacts on local autonomy.

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Notes

  1. 1.

    The Chapter builds on the research project “Finanzaufsicht 2020”, financially supported by the Bertelsmann Stiftung. Interviews were conducted between 2014 and 2016 involving more than 100 experts in different settings such as bilateral interviews or workshops.

  2. 2.

    Preventive instruments are the right to request information, approval of loans and budget plans. Among repressive instruments, denial of loans and budgets or the enforcement of austerity measures are relevant.

  3. 3.

    Interview with District Government A, conducted on 15 December 2014; interview with City C, conducted on 24 February 2015.

  4. 4.

    Interview with County A, conducted on 26 January 2015.

  5. 5.

    Streeck and Thelen (2005) distinguish four types of institutional change. Firstly, new rules can entirely replace existing ones (displacement). Secondly, rules are preserved, but modified and expanded (layering). Thirdly, rules remain intact, but their effects change due to altered framework conditions (drift). Fourthly, rules remain the same, but are applied differently (conversion).

  6. 6.

    Interview with the Ministry of the Interior, conducted on 28 October 2014; interview with Municipal Umbrella Organisation A, conducted on 24 February 2015.

  7. 7.

    Interview with City A, conducted on 10 March 2015; Interview with City B, conducted on 26 March 2015.

  8. 8.

    Interview with Municipal Umbrella Organisation A, conducted on 24 February 2015.

  9. 9.

    Interview with District Government A, conducted on 15 December 2014; Interview with District Government B, conducted on 16 December 2014.

  10. 10.

    Interview with Municipal Umbrella Organisation B, conducted on 27 January 2015.

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Authors and Affiliations

  1. Technical University of Darmstadt, Darmstadt, Germany

    Christian Person

  2. Technical University of Applied Sciences Wildau, Wildau, Germany

    René Geissler

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  1. Christian Person
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  2. René Geissler
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Correspondence to Christian Person .

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Editors and Affiliations

  1. Lund University, Lund, Sweden

    Tomas Bergström

  2. University of Potsdam, Potsdam, Germany

    Jochen Franzke  & Sabine Kuhlmann  & 

  3. Ghent University, Ghent, Belgium

    Ellen Wayenberg

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Person, C., Geissler, R. (2021). State Supervision of Local Budgets: From Forbearance to No Concession. In: Bergström, T., Franzke, J., Kuhlmann, S., Wayenberg, E. (eds) The Future of Local Self-Government. Palgrave Studies in Sub-National Governance. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-56059-1_17

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