What are indicators of public finance statistics?

To assess the financial situation of the Länder budgets, indicators of public finance statistics are used more and more often. Their function is to provide information on the current situation, the structure as well as the trend and prospects of the public budgets of a Land. Indicators of public finance statistics were an important data basis for the Berlin judgment of the Federal Constitutional Court (BVerfG 2 BvF 3/03) of 19 October 2006. At the time, the Land of Berlin took legal action to be granted supplementary federal grants for special needs to be able to consolidate its budget. According to the constitution, consolidation aid can be granted only if the budgetary hardship of a Land is considered as extreme when compared with other Länder. Indicators used to assess a budgetary hardship of Berlin were the ratio of interest to tax revenue, the net borrowing requirement to expenditure ratio, the debt, and the trends of primary revenue and expenditure. The Federalism Commission II, too, uses indicators with the purpose of introducing a standard debt limit between the Federation and the Länder. Other working groups attempt to set up comparable data bases and to develop budget ratios. The working group on “budget analysis for Bremen, Saarland, Schleswig-Holstein” set up by the Federalism Commission II on 14 February 2008 developed 96 financial indicators and budgetary projections allowing comprehensive analysis of those Länder budgets. The goal of that working group was to examine whether the three Länder are able to consolidate their budgets on their own by 2019 to be able to do without new borrowing by that time.

For more detailed methodical explanations on indicators of public finance statistics please refer to the article “Indikatoren zur Beurteilung der Leistungsfähigkeit öffentlicher Haushalte”, Dietz, O., Wirtschaft und Statistik 10/2008 (to be published in early November 2008).