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Unformatted text preview: Constitutional Court that, in
1999, essentially ruled in their favour. Since such a reform of the equalization system must be passed by the two houses
of the federal Parliament, including the Bundesrat, it must obtain broad consensus among the governments of the
Länder and the federal government. In fact, it was passed unanimously. According to the current estimates, the reform
should increase the financial resources of all the Länder.
Switzerland is also studying an extensive reform of equalization which currently does little to narrow the disparities in
financial capacity among cantons. Equalization among cantons works largely through conditional transfers with the
federal funding rate being higher for cantons with a lower financial capacity. However, the more affluent cantons
nonetheless obtain the lion’s share of these transfers because of their greater ability to pay. In addition, financial
relations among governments are, from the point of view of many observers, entangled, impeding the autonomy of the
cantons. Accordingly, pressure for reform is in the direction of greater fiscal responsibility of the cantons, streamlined
tasks and stronger equalization (of revenue instead of spending) so that it plays its role more effectively. In Switzerland,
the role of the cantons is such that a reform cannot be adopted without their support. This power of the cantons
substantially reduced the scope of the fiscal harmonization law that became effective in 2001. The reform of equalization
is being negotiated with the active participation of the canton governments. The myriad inter-canton bodies have studied
and ratified the proposal throughout the process. In any event, a canton government can hold a referendum to block or
slow the implementation of such a reform if it can convince seven other cantons to support it or if it gathers enough
signatures within the canton. It is worth noting that since November 2000, the proposal stipulates compensation for
cantons that would be worse off financially because of the reform.
In the United States, the 1996 reform of social assistance, in particular the Temporary Assistance to Needy Families
(TANF) program, has substantially changed inter-governmental funding of income support programs. This was in
response to the failures of the earlier system, a growing anti-Washington sentiment, problems with federal public
finances and the demands of state governors for more flexibility in the administration of programs. This reform moved
from a shared-cost funding model in this field to block funding in which the amounts paid depend on the amounts
granted under the programs replaced by the reform. The reform was developed in close cooperation with the National
Governors Association. The legislation on unfunded mandates was passed in 1995 in a similar context.
One of the reasons for the reform in Australia was the desire for more stable and growing funding for health and
education, in particular. The reform replaced a system of unconditional equalization transfers (Financial Assistance
Grants) with access to the genera...
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