Tuesday, January 8, 2013

The Slush Fund Story

There is a fight of sorts....lining up in Germany....between various states.  If you hadn't really visualized it....there are some German states which have industry and business, and some which don't.  So, some states make a vast amount of money, and others under-perform (meaning that they need cash from someone else).  For years and years, it's been a national practice in German to take the money from each state and kind of split it up in a 'fair fashion'.  This week, Hessen and Bavaria came out and said they have problems with this practice.

The Constitutional Court is getting the complaint and there's a fair amount of research that will be required for this episode.  I wouldn't expect any quick or hasty decision by the court.....this might drag all the way into 2014.

How much are we talking about?  Well...if you take the public numbers (using Hessen and Bavaria)....one comes to the impression that it's somewhere around 1 to 1.5 billion Euro from each, for each year.

A slush fund?  Well....each state has a funding deal where they can prioritize and do things differently in each state.  For example....in the Rheinland Pfalz area, a lot of money goes towards local pools and paved trails (recreational purposes).  In other states, a fair amount of money goes to cultural events and opera.  Some states use their slush fund for children's projects....more than other states might.

If you asked the typical German....most would admit no real knowledge over the funding or how it works.  You might find one German out of twenty who knows of its existence and the general function of how wealthy states carry the poorer states.

Where this goes?  Well....if the Constitutional Court determines that it is completely unfair and throws it out, then the poorer states will immediately start to have problems with their special projects and future funding problems.  More competition for each project will occur and you might see one children's support group fighting an opera group....just to get the funding to run their stuff.

Hessen and Bavaria?  Well....they'd start to keep the billion Euro each (yearly) and spread around more special interest projects.  They might even target tourism and try to entice more people to visit and spend money.....thus doubling up on their investment.

Could it stay completely as it is today?  Yeah, the Court could determine it's all in support of the German Constitution and people....just leaving the mess as it is.

I'm pretty sure a couple of the judges are curious about how this started and there's going to be a fair amount of research to discover the roots to this.

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