Deficit Procedure – Legal Background and Areas of Application
The deficit procedure is a term found in public law, particularly in the area of municipal levy law. It refers to an approach for determining and covering shortfalls (deficits) that arise from the underfunding of public institutions, for example in relation to charges for the use of municipal facilities (such as daycare centers, public transport, or water/sewage). The deficit procedure plays a significant role, particularly in the context of fee and contribution collection as well as in municipal budgeting. Below, the legal foundations, practical significance, and legal issues are explained in detail.
Legal Foundations of the Deficit Procedure
Statutory Foundations
The deficit procedure is not explicitly regulated by law but arises from budgetary and levy-related provisions, especially from specific statutes on municipal levies of the federal states (e.g., Municipal Levy Laws), municipal budget law, and general principles of public levy law. The decisive bases are often §§ 1 et seq. of the Municipal Levy Law of the respective federal state, the municipal budget law (e.g., Municipal Code, Budgetary Principles Act), as well as the connectivity principle.
Case Law and Principles
Case law, for example by administrative courts and higher administrative courts, has specified how municipal bodies may calculate deficits and distribute them among the public or users. The requirement for informational disclosure, the cost coverage principle, and the equivalence principle are key legal standards for the deficit procedure.
Implementation and Significance of the Deficit Procedure
Process and Responsibilities
Within the framework of the deficit procedure, it is first determined to what extent the operating or facility costs are not covered by own funds, grants, or ongoing revenues. The deficit thus determined can, based on statutory provisions, be distributed to users or members of a municipality through fees, contributions, or levies. Responsibility for implementation lies with the municipal administrations or their budget and treasury departments.
Types of Costs and Deficit Calculation
To determine the so-called “eligible deficit,” eligible costs (operating costs, imputed costs) and revenues are compared. Non-eligible costs, such as voluntary social benefits, are—unless expressly allowed by law—not generally passed on to users. The calculation bases must be transparent and comprehensible to ensure legal certainty.
Legal Issues and Challenges in the Deficit Procedure
Lawfulness of the Deficit Levy
A central issue is the lawfulness of passing deficits on to fee-payers or those liable for contributions. The standards for this are the connectivity principle and the prohibition of overcompensation (no overfunding of public facilities through fees) and the cost coverage principle (no fee financing of voluntary services).
Unlawful deficit levies can give rise to users’ claims for fee reimbursement and lead to administrative court proceedings. Municipal statutes governing fee and contribution calculation must, therefore, meet strict formal and substantive requirements.
Transparency and Information Obligations
The administration is obliged to document the deficit calculation in a comprehensible manner. Affected parties are entitled, under administrative procedural law, to inspect the calculation bases and to a transparent statement of costs. This is derived from the principle of fair administrative proceedings and the information rights according to the Freedom of Information Act.
Constitutional Aspects
The deficit procedure is constitutionally relevant when it touches upon aspects of equal treatment (Art. 3 Basic Law) or the protection of property (Art. 14 Basic Law, for example in the context of fees and contributions). The case law requires that any deficit levy is always proportionately structured and in line with the equivalence principle—the fee must not be disproportionate to the expense.
Fields of Application and Practical Examples
Municipal Facilities
The deficit procedure is widely applied in the financing of kindergartens, schools, swimming pools, public transportation, or water supply and sewage disposal. It is regularly examined which costs may be passed on to users according to the principle of fee/cost coverage.
Special-Purpose Associations and Levy Procedures
In special-purpose associations, municipal amalgamations, or public law corporations, deficits are also passed on to member municipalities within the framework of levy procedures. The distribution is usually calculated according to a fixed key (e.g., population, share of use).
Expert Assessment and Distinctions
Distinction from Other Procedures
The deficit procedure differs from pure cost allocation, as it specifically distributes a shortfall (“deficit”) after offsetting revenues and expenses. It must also be distinguished from the ability-to-pay principle (as in income tax or wealth tax) and from the solidarity principle (especially in social contributions).
Applicable Regulatory Areas
Numerous areas of law are affected, in particular public budget law, municipal levy law, administrative procedural law, and in some cases constitutional law.
Summary
The deficit procedure is a central instrument in public budgetary and levy law, employed by municipalities and public corporations to cover financing deficits. Its implementation is subject to strict legal requirements, particularly with regard to cost coverage, transparency, and the determination of levy procedures. Faulty deficit procedures can result in significant legal and financial consequences. Meticulous compliance with legal and judicial requirements is therefore fundamentally important for the lawful application of the deficit procedure in the public sector.
Frequently Asked Questions
Which legal foundations govern the deficit procedure in Germany?
The deficit procedure in Germany is primarily based on the Act on Administrative Offenses (OWiG) and the Code of Criminal Procedure (StPO) as well as supplementary special statutes, particularly in tax law (§ 167 Fiscal Code), road traffic law, and administrative law. The central legal core is the procedural principle that the actual damage or shortfall is determined and asserted against the accused, provided a violation is established (such as cash deficits or unproven revenues). The burden of proof lies with the authority or the prosecuting party; in particular, documentation and cooperation obligations are established by law. The legal foundations also restrict the application of the deficit procedure through the principle of proportionality and procedural rights such as the right to be heard, the right to inspect files, and the procedural possibility for the accused to present counter-evidence.
What procedural rights does the affected person have within a deficit procedure?
The person affected by a deficit procedure has extensive procedural rights. Of central importance is the right to be heard, which ensures that the individual can respond to allegations made against them (§ 103 para. 1 GG, § 46 OWiG). There are also rights to inspect files (§ 147 StPO in conjunction with § 46 OWiG), to legal counsel (§ 137 StPO), and, if there is a risk of significant sanctions or existential consequences, to the appointment of a court-appointed defense counsel (§ 140 StPO). Furthermore, the person concerned has the right to submit their own motions for evidence or to challenge evidence (§ 244 StPO). The principle of official investigation applies; however, authorities and courts must carefully examine all relevant circumstances and provide documented reasons if motions for evidence are rejected.
What is the burden of proof in the deficit procedure and how is it allocated?
The burden of proof in the deficit procedure generally lies with the authority or court asserting the claim or alleging the presumed deficit. The principle of “in dubio pro reo” (when in doubt, for the accused) applies, which means a deficit must be clearly established and proven. Only if there are objective indications or clues (such as accounting discrepancies, evidence of manipulation, inventory discrepancies) can a secondary burden of explanation shift to the affected party. In that case, the individual is required to provide a substantiated explanation or to present counter-evidence. However, the final assessment of evidence always belongs to the independent court or the competent administrative fine authority.
What possible legal consequences and sanctions can result from an established deficit?
If a deficit is validly established, a wide range of legal consequences may follow. In administrative offense law, fines, warnings, or official requirements may result. In tax law, in addition to back taxes, a tax criminal investigation may be initiated (§ 370 Fiscal Code). In administrative law, civil law claims for damages and repayment may arise, for example, against employees in the public service. In serious cases—such as deliberate manipulation—criminal sanctions such as fines and imprisonment for embezzlement (§ 266 Criminal Code), fraud (§ 263 Criminal Code), or misappropriation of public funds may apply. The legal consequences depend on the individual case, the amount of damage, and the degree of fault; statutory limitation periods must always be observed.
What options for objection or appeal exist against a deficit procedure?
There are various legal remedies against measures within the framework of a deficit procedure, depending on the stage of proceedings and the area of law. In administrative offense proceedings, an objection can be lodged against a fine notice within two weeks (§ 67 OWiG). In administrative or tax law, opposition or appeal proceedings are available (§ 347 Fiscal Code for tax assessments). If the legal remedy is rejected, recourse to the courts is then possible—usually before an administrative court or tax court. In criminal deficit proceedings, appeals or revisions against a judgment are possible. Deadlines, formal requirements, and jurisdiction for each court instance must be strictly observed; otherwise, a legal remedy may be rejected as inadmissible.
How is the deficit procedure compatible with data protection regulations?
When conducting a deficit procedure, all data protection provisions must be observed, in particular the General Data Protection Regulation (GDPR) and the Federal Data Protection Act (BDSG). The collection, processing, and use of personal data may only take place for a specific purpose (for clarification of facts and case management) and in compliance with the principles of data minimization and data security. Under Art. 15 GDPR, data subjects have the right to access stored data and may request rectification (Art. 16), erasure (Art. 17), or restriction of processing (Art. 18). Disclosure of case data to third parties is only permissible if provided by law or with consent. Authorities and institutions are subject to comprehensive documentation and proof obligations.
What is the significance of limitation periods in the deficit procedure?
The statute of limitations plays a central role in the deficit procedure, as it determines the period within which claims or sanctions can be asserted. The limitation periods vary depending on the legal classification of the deficit: in administrative offense law, the prosecution period is generally up to three years (§ 31 para. 2 OWiG), for tax evasion under § 376 Fiscal Code up to ten years. Civil law claims are subject to the standard limitation period of three years (§ 195 Civil Code). Commencement, suspension, and interruption of the period are precisely regulated by law; deviations are only permitted in justified exceptional cases. Once the limitation period has expired, no further measures may be taken against the affected party.
