Should congressional elections be publicly funded

Parties in Germany

Heinrich Pehle

To person

Prof. Dr. Heinrich Pehle is a professor emeritus at the Institute for Political Science at the Friedrich-Alexander-Universität Erlangen-Nürnberg. His main research interests include the political system of the Federal Republic of Germany and the Europeanization of institutions, decision-making processes and political fields.

Functionality, freedom of the state, equal opportunities and transparency: party financing in Germany should meet these requirements. The current regulations were praised as "almost perfectionist" by a commission of experts. But until then it was a long road that was rarely conflict-free and straightforward. There are still controversial debates about party funding.

In the CDU party headquarters, party donations can be paid directly into a machine, the "Spendomat". For every euro donated, the parties receive a state subsidy of 45 cents. (& copy picture-alliance / dpa)

In Article 21 of the Basic Law, political parties are accorded the rank of constitutional organs. In representative democracy, they are considered indispensable mediators between the population and the state. It must therefore be ensured that the parties have the financial means they need to carry out their tasks. If they had to rely exclusively on social sources of finance such as membership fees and donations, there would be the risk of preferring parties that tend to represent business or entrepreneur-friendly positions. Their competitors, who are more committed to the interests of underprivileged sections of the population, would, on the other hand, suffer from considerable competitive disadvantages. If the parties should not lose their character as social organizations rooted in the people and should not mutate into state organs, exclusive financing from public funds is also out of the question.

The financial safeguarding of the functionality of political parties must therefore consist of a balance between the use of public and social resources in order to guarantee the parties' independence from the state. With the keywords functionality and freedom of the state, two constitutional principles have already been named, which must be observed when structuring the financing of parties. They are supplemented by the principles of equal opportunities and transparency. The former means that a certain type of party - for example parties with a traditionally high membership - is not preferred over others - who have fewer membership fees and are therefore more dependent on donations. The principle of equal opportunities is supported by the transparency requirement, which is also anchored in Article 21 of the Basic Law. The parties must give a public account of the origin and use of their funds and their assets. The annual statement of accounts should provide the public with a clear understanding of who supports the individual parties.

Parties as "legislators in their own right"

The specific design of the system of party financing has always been controversial. This is mainly due to the fact that the amount of the state's share in the total party funding is subject to political discretion and that this discretion falls to the legislature: that is, the parties represented in parliament themselves. In the form of their parliamentary groups, parties act as "legislators on their own behalf ".

But the parties are not free to decide on their own funding. The Federal Constitutional Court has also been repeatedly called upon to review the legal regulations on party financing and, through its judgments, has played an active role in the structuring of party financing, declaring individual regulations unconstitutional or giving the Bundestag specific directions to one of the judges in its judgments as a constitutional form of party funding. Both the legislature and the constitutional court have turned around several times over the years.

The role of the Federal Constitutional Court

The political parties draw their financial resources essentially from five sources: From 1) membership fees, 2) donations from natural and legal persons, 3) levies that the elected representatives are obliged to pay by their parties, 4) other income (mainly from business activities, investment income, etc. .) and from 5) government funds. The mentioned U-turns by Parliament and the Constitutional Court mainly concerned the tax privilege ("deductibility") of donations, the absolute and relative amount ("upper limit") of the state's share and the question of whether only certain aspects of the party activities were carried out by the state may be funded ("reimbursement of election costs") or whether general party funding should be provided. The rulings of the Federal Constitutional Court of 1958, 1966 and 1992, as well as the legislative reactions to these rulings, mark the main turning points in the structure of party financing.

In the first few years after the Basic Law came into force in 1949, donations to political parties could be deducted from the tax-assessed income of natural and legal persons. In 1958 the Federal Constitutional Court put an end to this practice. The reason for this was that the citizens' influence on the formation of political will would be treated differently because higher incomes would be favored due to the tax progression. In their reasoning, the judges pointed out that the state is not obliged to ensure that the political parties 'money needs are met, but that they are free to provide tax funds directly for the parties' tasks (BVerfGE 8: 51). The legislature took up this advice and made funds available in the federal budget to subsidize the general activities of political parties. These funds, which initially totaled DM 5 million per year, were distributed among the parties according to their parliamentary group size in the German Bundestag. The budget has been gradually increased over the years.

The first U-turn: the flat-rate election campaign fee

Although this satisfied the principle of equal opportunities at least for the parties represented in parliament - but only for them - the general party funding from the state budget affected the principle of state freedom. With this justification, the Hessian state government initiated a judicial review procedure before the Federal Constitutional Court - and thus initiated the first turnaround: In their judgment of July 19, 1966, the Karlsruhe judges declared that the "principle of free and open opinion and will formation from Volk to the state organs is "not compatible with" granting the parties subsidies from the federal budget for their entire activities "and" making permanent financial care for the parties a state task "(BVerfGE 20: 56). The judgment went on to say that it could be constitutionally justified if "the political parties would be reimbursed for the necessary costs of an appropriate election campaign" (ibid: 113).

In response to this judgment, the German Bundestag in 1967 - eighteen years late - complied with its legislative mandate from Article 21 of the Basic Law ("The details regulate federal laws") and passed the first law on political parties. The financing part of this law provided for a total of DM 2.50 per eligible voter for reimbursement of election campaign costs. Parties that had achieved at least 2.5 percent of the valid second votes in federal and state elections should receive a lump sum for election campaigns relative to their second vote share. The Federal Constitutional Court was also appealed against this regulation. The judges left the reimbursement of election campaign costs as such untouched in their verdict. However, they determined the lowering of the threshold value for participation in the reimbursement of election campaign costs to 0.5 percent of the second votes, since otherwise the principle of equal opportunities would be violated (BVerfGE 24: 342).

The second turnaround: partial state funding

The introduction of the election campaign fee ultimately created more problems than it solved - even if it was increased in two steps over the years to five DM for each eligible voter. Because the parties could not cover their running costs from membership fees, donations and other own income, but were only allowed to use the funds made available by the state to cover their election campaign costs. From the point of view of the treasurers of the parties, this made attempts at deception inevitable. The two-step increase in the tax deductibility of donations at the beginning of the 1980s did nothing to change this precarious situation, nor did the introduction of a so-called equalization scheme that was decided in December 1983. As a result, parties with a relatively low volume of donations and membership fees received state compensation payments.

The Federal Constitutional Court brought an action by the Greens against these measures into play again. The judgment of April 9, 1992 (BVerfGE 85: 264ff.) Marked the second fundamental change in direction by the Karlsruhe court. It rejected the assumption that the parties' expenses for their election campaigns could be clearly distinguished from those for their other activities. Instead, partial state funding of the parties, which relates to their entire activities, is ultimately compatible with the Basic Law. The Constitutional Court was basically back to the interpretation it had already formulated in 1958, which it had rejected in 1966 as fundamentally contrary to the constitution.

Double cap on state subsidies

In the 1992 ruling, the constitutional judges again gave clear indications as to how the state funding of political parties should be structured in accordance with the constitution. With the amendment of the Political Parties Act in 1994, these requirements were largely implemented. After the uncovering of various party donation scandals in the following years, the then Federal President Johannes Rau set up a commission of experts in 2000 to deal with ongoing problems of party financing. Some of the recommendations submitted by the "Party Financing Commission" in the following year were incorporated into the amendment to the Political Parties Act passed by the Bundestag in 2002. The members of parliament decided on stricter regulations for accepting cash donations, certain notification requirements and the introduction of penal provisions.

Since then, government grants have been capped in two ways. In addition to a "relative upper limit", according to which the state grants to a party may not exceed its self-generated income, there is an "absolute upper limit" for the funds made available by the state for all parties. It was initially based on the total amount distributed to the parties before 1994. However, an adjustment of the absolute upper limit to the price development was planned from the start, which is based on a price index for the expenses typical for a political party. For this reason, the total amount of party financing provided by the state rose gradually from the original equivalent of around 133 million euros to 161.8 million euros in 2017.

How are the parties financed today?

The benchmark for the granting of state funds is the fact that the parties are rooted in society. It is measured by the electoral success of the parties in the Bundestag, Landtag and European elections as well as the amount of membership fees and donations by natural persons. This is reflected in the fact that the respective state subsidy is linked on the one hand to the number of voters. All parties who have won at least 0.5 percent of the votes in the last elections to the Bundestag and the European Parliament or 1 percent in the state elections are eligible. In 2017 there were a total of 20 parties. Until the next election, you will receive EUR 0.83 per year for each valid vote cast for you. For the first 4 million votes, this amount increases to EUR 1.00, which is intended to compensate for competitive disadvantages for those parties that are not represented in parliaments. In addition to the award of election successes, there is a contribution and donation subsidy: For every euro of membership fees and per euro donated, the parties receive a state subsidy of 0.45 euros, whereby this only applies to donations by natural persons up to an annual donation of 3,300 euros per person. It is precisely this amount that marks the tax benefit limit for membership fees and private donations of 3,300 euros per person per year. Corporate donations (from companies, associations, etc.) can no longer be tax deductible, donations from public companies are prohibited.

The provisions mentioned so far serve to safeguard the functionality of the political parties, their independence from the state and their equal opportunities. The new version of the Political Parties Act should also take account of the principle of transparency. People and companies must be publicly named if they donate more than 10,000 euros. A denomination of donations and cash donations over 1,000 euros is prohibited. In addition to these disclosure obligations, there are various possible sanctions. In the case of illegal donation practices, prison sentences of up to three years are possible for those responsible at all party levels. If a party submits an annual report that does not comply with the provisions of the Political Parties Act, it loses the right to partial state funding for the year in question. And: If donations are obtained illegally or not properly listed in the statement of accounts, the affected party loses the right to government funds in double the amount of these donations. In addition, she must pay an amount equal to the illegally obtained donations to the President of the Bundestag. Corresponding returns are passed on to non-profit organizations.

It has long been a problem that the National Democratic Party of Germany (NPD) and z. In part, other parties that oppose the free democratic basic order also benefited from state funds. The constitutional provisions, however, resulted in the fact that a party could not be denied the right to it as long as it was not forbidden by the Federal Constitutional Court. On January 17, 2017, the BVerfG passed its judgment, according to which the NPD was anti-constitutional and related to National Socialism. It represents a political concept aimed at eliminating the existing free democratic basic order: "It wants to replace the existing constitutional order with an authoritarian nation-state based on the ethnically defined 'national community'." In addition, they disregard human dignity and their goals are incompatible with the principle of democracy. Nevertheless, the party could not be banned because it did not have the potential to achieve its goals because of its membership, which has fallen to around 6,000. Since it does not pose any real threat to the free democratic basic order, a ban would be disproportionate.

The judgment of the BVerfG still contained a "wink with the fence post". The constitution-amending legislature is free to determine "sanctions below the ban on political parties" - for example by excluding them from state party funding. This was followed by the Bundestag and Bundesrat with an amendment to Article 21 of the Basic Law. The following passage was added: "Parties which, according to their goals or the behavior of their supporters, are geared towards impairing or eliminating the free democratic basic order or endangering the continued existence of the Federal Republic of Germany are excluded from state funding. On the question the unconstitutionality [...] and the exclusion from state funding [...] will be decided by the Federal Constitutional Court. " In February 2018, the Federal Council decided unanimously to submit a corresponding application to the Constitutional Court.

Article 21 of the Basic Law assigns the political parties the function of participating in the formation of the political will of the people. The decision as to whether and to what extent they carry out this task is up to them, however. In practice, political education work is carried out by foundations, which are usually referred to as "party-affiliated". Based on the name alone - with the exception of the Alternative für Deutschland (AfD), which plans to complete corresponding planning in 2018 - such a foundation can be assigned to each of the parties represented in the German Bundestag. The state supports the activities of these foundations, which, in addition to political education work, extends to political advice, the promotion of talented children and international cooperation, through funds from the federal budget.The Federal Constitutional Court has expressly legitimized this practice in a - albeit controversial - judgment because, in its opinion, the foundations fulfill their tasks with sufficient "organizational and personal independence from the parties closely related to them" and this does not result in covert party financing (BVerfGE 73: 31 ). The state payments to the currently six foundations totaled in 2017 the unprecedented amount of 581.4 million euros. This means that the expenditures from the federal budget for the party-affiliated foundations are 3.6 times higher than those for party funding. They are distributed to the foundations in proportion to the number of votes cast by the parties closely related to them in the last four federal elections.

Close to perfection?

The Expert Commission on Party Financing presented its final report in 2004. In it, the Commission attested the Federal Republic of Germany a "good by international comparison, almost perfectionist law of party financing" (Bundestag printed paper 15/3140: 30). Nonetheless, controversies still exist with regard to the question of whether donations by legal entities should not be prohibited in principle or at least "capped" by an upper limit. The Party Financing Commission had rejected the introduction of such an upper limit with 3: 2 votes, which the legislature at least in its majority favored. Another recommendation by the experts concerned the introduction of a comprehensive "Policy Financing Report". The Bundestag did not want to follow her, however. Such a general overview, which should have been presented by the federal government every five years, would have included all sub-organizations and subsidiary organizations of the political parties such as youth or business associations and above all the party-affiliated foundations.

The "Group of States of the Council of Europe against Corruption" (GRECO) has been emphasizing for several years that, despite the perfectionism attested to by the applicable law, alternatives are still conceivable that could serve to improve implementation of the transparency requirement. In its "Evaluation Report on the Transparency of Party Financing in Germany" published in December 2009, GRECO called, among other things, to lower the limit for the immediate notification and publication of large donations to political parties from the current EUR 50,000. She also recommended that anonymous donations should be forbidden in principle (up to now they are allowed up to 500 euros). The parties should also be required to provide accountability reports on the funding of their election campaigns. The same should apply to direct donations to MPs and constituency candidates.

After the German legislature had not reacted to these recommendations even after more than eight years, GRECO went public in February 2018 with an "urgent appeal" to the German authorities to "deal primarily with the outstanding recommendations" (cf. Süddeutsche Zeitung of February 27, 2018, p. 6). As is easy to see, the discussion about the design of the system of state partial financing of the political parties has lost none of its topicality.

literature

  • Report of the commission of independent experts on the question of party financing (= German Bundestag, printed matter 15/3140 of May 11, 2004)
  • Kropp, Sabine: Party financing in the "party state". Problems, misunderstandings and reform considerations, in: Gegenwartskunde H. 4/2000, pp. 435-446.
  • Krumbholz, Arne: Financing and accounting of political parties and their environment, Baden-Baden 2010.
  • Stricker, Gregor: The Party Financing State, Baden-Baden 1998.