Term and General Definition of Expenditure Increases
Expenditure increases refer, in legal terms and in particular in public finance, to all measures and developments that lead to an increase in expenditures on the part of state or municipal budgets. The term includes both planned increases (legislative or executive decisions) as well as extraordinary increases that can arise during budget management. Expenditure increases typically involve outflows of funds arising in the fulfillment of public tasks, for example in the context of social benefits, investments, administrative expenses, or debt service.
Expenditure Increases in Public Budget Law
Legal Basis
In German constitutional fiscal law, expenditure increases are determined primarily by the provisions of the Basic Law and the budget laws of the federal, state, and municipal governments. According to Article 110 of the Basic Law (Budget Law), every expenditure requires a legal basis and must be planned in the respective budgets. Expenditure increases therefore often require an adjustment of the budget law or the budget plans (supplementary budget).
Types of Expenditure Increases
Ordinary and Extraordinary Expenditure Increases
- Ordinary expenditure increases: Those that arise in the course of normal budget execution, such as through collectively bargained pay increases, legal adjustments to social benefits, or planned investments.
- Extraordinary expenditure increases: These result from unforeseen events such as natural disasters, economic crises (stimulus programs), or court decisions requiring additional payments.
Approved vs. Unapproved Expenditure Increases
- Approved expenditure increases: Expansions of the existing expenditure framework legitimized by parliamentary resolution.
- Unapproved expenditure increases: Payments made without parliamentary authorization, which typically constitute a violation of budget law.
Procedures for Implementing Expenditure Increases
Supplementary Budget
According to § 37 of the Budgetary Principles Act (HGrG) and the respective state budget regulations, a supplementary budget must be prepared if, subsequently, expenditure increases become necessary that exceed or were not foreseen in the original budget plan.
Budget Overruns
For unavoidable additional expenditures, expenditure increases may occur in accordance with § 34 BHO (Federal Budget Code) and § 37 LHO through so-called budget overruns, provided that funds are available as coverage or can be obtained through savings elsewhere.
Commitment Authorizations and Budget Notes
Many budget laws provide for commitment authorizations securing future expenditure increases. By means of notes (such as blocking notes or expenditure carry-overs), expenditure increases may be limited or enabled.
Legal Restrictions and Consequences of Expenditure Increases
Constitutional Debt Brake
With the debt brake as set out in Articles 109 and 115 of the Basic Law, the ability to increase expenditures is structurally restricted. The federal government and the states are generally not permitted to take on new debt, which means expenditure increases are only permissible within the scope of existing revenues, unless there is an extraordinary emergency (e.g., public emergency or natural disasters).
Parliamentary Reservation and Budget Sovereignty
The increase of public expenditures is subject to parliamentary reservation: the legislature decides on the budget plan and thus on each expenditure increase. Without parliamentary authorization, expenditure increases are regularly unlawful.
Control Mechanisms
- Budget control by audit courts: Proper management and any increases in expenditures are subject to ongoing oversight by the audit courts.
- Obligation to Efficiency and Economy: According to § 7 BHO, expenditures must be made in a manner that ensures efficiency and economy.
Expenditure Increases in Civil Law and in Public Enterprises
Expenditure increases may also become legally relevant in private law contexts or in the area of public enterprises. For example, in the context of contract adjustments (e.g., construction contracts under § 650 BGB), claims for expenditure increases may arise due to unforeseen price increases, supplements, or changes in performance, whereby the contracting parties often provide for adjustment clauses or arbitration proceedings.
Tax and Levy Law Implications of Expenditure Increases
Increased government expenditures can indirectly lead to changes in taxes, levies, and contributions, if the financing of the expenditure increases requires an adjustment of the revenue side. Any expansion of types of taxes or increase in contribution rates must be legitimized by law and are subject to strict formal requirements.
Consequences of Incorrect or Unlawful Expenditure Increases
Unlawful expenditure increases, such as those without parliamentary authorization or contrary to budgetary regulations, may lead to disciplinary or, if applicable, even criminal consequences. Responsible office holders may be liable for the damage caused and may be held accountable (§ 34 BHO in conjunction with § 839 BGB, state liability).
Literature and Further Sources
- Kube, Volker/Seeger, Bettina, Federal and State Budget Law, 4th ed., Munich 2022.
- Langner, Ernst/Schöberlein, Gerhard, Public Budget Law, Heidelberg 2021.
- Rainer Pitschas, Budgetary Principles and Constitutional Principles, Braunschweig 2020.
- Bundeshaushaltsordnung (BHO)
- Haushaltsgrundsätzegesetz (HGrG)
- Grundgesetz (GG), insbesondere Art. 109, 110, 115
Note: This article provides a comprehensive overview of expenditure increases under German law, significantly influenced by budgetary sovereignty, constitutional fiscal requirements, and control mechanisms. Actual arrangements may vary across individual states and municipalities and are subject to ongoing development through legislation and case law.
Frequently Asked Questions
What legal requirements must be observed when implementing expenditure increases?
Expenditure increases always involve a conscious increase of the payment amounts estimated by state or public-law institutions. Legally, it must be noted that expenditure increases usually require a formal decision, mostly in the form of a supplementary budget, a reallocation, or a corresponding budget approval. According to § 37 BHO (Federal Budget Code) and the relevant state budgetary regulations, expenditures may only be increased when there is either a statutory or a budget act/budget plan authorization. In municipalities, this is regulated by municipal law, such as the GO NRW or GemO BW, which also contain rules on budget overruns and their approval. Special attention must be paid to ensuring each increase is consistent with the principles of efficiency and economy (cf. § 7 BHO).
What are the participation and consent requirements for expenditure increases?
The participation and consent requirements are essentially determined by the respective organizational form and level of the affected institution. At the federal level, expenditure increases must, in principle, be resolved by the Bundestag (Art. 110 GG), often through supplementary budgets or extraordinary approvals. In federal states and municipalities, the relevant representative bodies, such as state parliaments or municipal councils, are responsible. In specific cases, the approval of the Ministry of Finance or the relevant budget authority may also be required. Furthermore, participation rights of the competent specialist committees and, if applicable, higher supervisory authorities must be observed. Autonomous overruns by the administration are not permissible under budget law and can result in disciplinary consequences.
What legal remedies are available against unlawful expenditure increases?
Legal remedies against unlawful expenditure increases are generally available to affected third parties, competitors, or oversight bodies via recourse to the administrative courts. In particular, depending on the circumstances, an action for performance or annulment can be brought citing violations of budgetary regulations or insufficient involvement of democratic bodies. Internal expenditure increases carried out without the legally required permissions can also be objected to by audit authorities. Violations of budget law may be considered as breach of budgetary trust or official misconduct, which can have disciplinary and even criminal consequences.
To what extent must earmarking be observed with expenditure increases?
Earmarking is subject to strict budgetary regulations. An expenditure increase may only be approved if the additional funds are used for purposes and reasons covered by the budget plan or expressly approved by subsequent changes in purpose. An improper or inadmissible repurposing of funds can render the increase unlawful. Proper use of funds is regularly monitored by the relevant budgetary and audit authorities and, in the event of an objection, may give rise to claims for repayment or other consequences.
How are the relationships between expenditure increases and existing coverage pools regulated?
Expenditure increases within so-called coverage pools require special attention. Coverage pools allow mutual coverage between budget items that are substantively related. In principle, overruns are only permissible if sufficient coverage funds are available within the coverage pool and the superior earmarking is not violated. For expenditure increases that affect several coverage pools or exceed coverage capacities, special, usually budgetary authorization from the competent authorities is required.
What are the documentation and proof requirements for expenditure increases?
Every expenditure increase must be carefully documented. This includes specifying the reason, the legal basis for authorization, the amount, and the financial settlement. Both the original budget allocation and the increase amounts must be recorded separately and comprehensibly. The proof must be maintained through seamless record keeping and presented in the budget account. § 70 BHO and comparable state law provisions require that all transactions relating to the budget are properly evidenced and provided upon request. A violation of these obligations may be objected to by the audit authorities and may result in sanctions.
