The OECD Best Practices for Effective Public Expenditure Control and Their Applicability to the German Länder: The Case of Schleswig-Holstein

Abstract

While German public finances have remained more resilient than other EU countries throughout the recent crisis, fiscal flexibility has become increasingly limited for its regional governments which deliver most public service. The recent introduction of a balanced-budget requirement (‘debt brake’) for state governments by 2020 will provide additional fiscal stress on underfunded public services like infrastructure, research and education as well as local finances. This article discusses how seven trends in expenditure management (Blondal 2003) - namely medium-term budget frameworks, prudent economic assumptions, top-down budgeting, central input control relaxation, performance budgeting, transparency and modern management practices - can be of help to improve state-level finances in Germany. The state of Schleswig-Holstein is used as a case study to illustrate the challenges faced by German states.