Act on Financial Equalisation between the Canton and Municipalities (Finanzausgleichsgesetz) - Scope

1. This law governs the financial equalization between the canton and the municipalities.

1. A financial equalization shall aim for a balanced ratio of tax burden among the municipalities.

2. Municipalities with below-average tax capacity shall receive funds from the financial equalization for a minimum provision.

3. Municipalities with an above-average number of learners shall receive funds from the financial equalization for school cost balancing.

3bis. Municipalities with above-average net expenditures for monetary benefits in economic social assistance shall receive funds from the financial equalization for social burden balancing.

4. The financial equalization is funded by the canton and municipalities with above-average tax capacity or with below-average net expenditures for monetary benefits in economic social assistance.

5. The implementation of the financial equalization shall be the responsibility of the canton.

1. The tax capacity of municipalities is determined in Swiss francs per resident.

2. The basis for calculating the tax capacity of a municipality is the sum of

a) the yield of a tax unit of ordinary taxes;

a bis) * the municipal share of the cantonal revenue from corporate and cooperative profit taxes divided by the cantonal tax rate;

b) the yield of special taxes divided by the average tax rate of natural persons across all municipalities.

3. Ordinary taxes include income and wealth taxes, including withholding taxes of natural persons, as well as profit and capital taxes of legal entities. Included are also supplementary and penal taxes.

4. The calculation of the yield of a tax unit is based on net tax revenue, which is determined from the total taxes invoiced during a year for the current year and previous years, taking into account recorded interest, reductions, and losses as well as discounts.

5. Special taxes include inheritance and gift taxes, real estate profit taxes, and property transfer taxes.

6. The relevant tax capacity of a municipality corresponds to the entire tax revenue according to paragraph 2 divided by the number of residents.

7. The average tax capacity of all municipalities corresponds to the total tax revenue according to paragraph 2 of all municipalities divided by the number of residents in all municipalities.

8. The average tax rate of several or all municipalities is weighted by the number of residents.

1. Every municipality has the right to a minimum level of tax capacity to fulfill its responsibilities. This is determined by a minimum share of the average tax capacity of all municipalities.

1. Municipalities whose tax capacity exceeds the average of all municipalities shall make financial contributions to fiscal equalization. These contributions are determined as a percentage of the tax capacity that is above the average of all municipalities.

1. Municipalities, whose proportion of learners per resident exceeds the average of all municipalities, are entitled to receive contributions from the financial equalization scheme. The entitlement to contributions is determined based on their tax capacity.

1. Municipalities whose net expenditures on monetary benefits for economic social assistance exceed the average of all municipalities receive contributions from the financial equalization. The entitlement to contributions is determined by their tax capacity.

2. Municipalities whose net expenditures on monetary benefits for economic social assistance are below the average of all municipalities make contributions to the financial equalization.

1. The basis for all calculations and assessments is the average of the three previous years.

2. The basis for determining the minimum funding and the reduction of disparities is the tax capacity per resident of the municipality.

3. The basis for determining the school cost adjustment is the total number of learners, the number of residents, and the tax capacity of the municipality.

4. The basis for the social burden equalization consists of the net expenses from cash benefits for economic social assistance, the number of residents, and the tax capacity of the municipality.

1. If the tax capacity per resident of a municipality falls below the minimum allocation specified in Art. 9, it is entitled to receive grants from the fiscal equalization.

2. The amount by which the minimum allocation according to Art. 9 is undershot, multiplied by the number of residents of the municipality and the tax rate for the minimum allocation, determines the contribution from the fiscal equalization.

3. The entitlement of the municipality is reduced by 7.5% to provide an incentive for its own efforts to enhance tax capacity.

4. The tax rate for the minimum allocation corresponds to the average of the tax rates for natural persons of all eligible municipalities, rounded down to the nearest tenth.

1. The Minimum Allocation is determined for each municipality based on their number of residents as a percentage of the average tax capacity of all municipalities.

Residents in the Municipality | Minimum Allocation

--- | ---

up to 500 | 95.00%

501 to 625 | 94.00%

626 to 750 | 93.00%

751 to 875 | 92.00%

876 to 1000 | 91.00%

1001 to 1250 | 90.00%

1251 to 1500 | 88.75%

1501 to 1750 | 87.50%

1751 to 2000 | 86.25%

over 2000 | 85.00%

1. If the financial capacity per inhabitant of a municipality exceeds the average of all municipalities, it shall contribute the amount exceeding the average according to Article 11 to the financial equalization.

2. The amount exceeding the average, multiplied by the absorption rate according to Article 11, the number of inhabitants of the municipality, and the tax rate for disparity reduction, constitutes the contribution to the financial equalization.

3. The tax rate for disparity reduction corresponds to the average of the tax rates for natural persons of all contributing municipalities, rounded down to the nearest tenth.

1. The Revenue Capacity Levy is determined for each municipality as a percentage of its share above the average revenue capacity of all municipalities.

Revenue Capacity Share Relative to Average | Rate of Levy (Progression)

--- | ---

100.01 to 105.00% | 15.00% *

105.01 to 110.00% | 16.00% *

110.01 to 115.00% | 17.00% *

115.01 to 120.00% | 18.00% *

120.01 to 125.00% | 19.00% *

125.01 to 130.00% | 20.00% *

130.01 to 135.00% | 21.00% *

135.01 to 140.00% | 22.00% *

140.01 to 150.00% | 23.00% *

over 150.00% | 25.00% *

1. Municipalities, whose number of students exceeds the average of all municipalities, are entitled to school cost compensation in accordance with Art. 13.

1. The school cost equalization is determined for each municipality based on the number of learners per inhabitant exceeding the average of all municipalities, as well as based on the tax capacity of the municipality, measured against the average of all municipalities.

2.

Proportion of learners per inhabitant, measured against the average | Basic compensation amount per learner exceeding the average

--- | ---

100.01 to 102.50% | 3,000 CHF *

102.51 to 105.00% | 3,500 CHF *

105.01 to 107.50% | 4,000 CHF *

107.51 to 110.00% | 4,500 CHF *

110.01 to 112.50% | 5,000 CHF *

112.51 to 115.00% | 5,500 CHF *

115.01 to 117.50% | 6,000 CHF *

117.51 to 120.00% | 6,500 CHF *

120.01 to 122.50% | 7,000 CHF *

over 122.50% | 7,500 CHF *

3.

Tax capacity measured against the average of all municipalities | Compensation entitlement in % of the basic amount

--- | ---

up to 85.00% | 100%

85.01 to 100.00% | 70%

100.01 to 115.00% | 40%

over 115.00% | 10%

1. If the net expenditures from monetary benefits for economic social assistance per resident of a municipality exceed the average of all municipalities, the municipality is entitled to payments from the fiscal equalization according to Article 13b. The average of all municipalities corresponds to the factor 1.00.

2. If the net expenditures from monetary benefits for economic social assistance of a municipality fall below the average of all municipalities, the municipality makes a contribution to the fiscal equalization according to Article 13b.

1. The entitlement to compensation from the social burden equalization is determined for each municipality based on their net expenditures from monetary benefits for economic social assistance above the average of all municipalities (greater factor 1.00) as well as based on the tax capacity, measured by the average of all municipalities.

1a

Factor measured by the average | Basic entitlement for net expenditures above the average

1.01 to 1.20 | 50.00%

1.21 to 1.40 | 55.00%

1.41 to 1.60 | 60.00%

1.61 to 1.80 | 65.00%

1.81 to 2.00 | 70.00%

above 2.00 | 75.00%

1b

Tax capacity measured by the average of all municipalities | Entitlement to compensation as % of the basic entitlement

up to 85.00% | 100.00%

85.01 to 100.00% | 70.00%

100.01 to 115.00% | 40.00%

above 115.00% | 10.00%

2. Those municipalities whose net expenditures for economic social assistance are below the average of all municipalities (smaller factor 1.00) contribute to the fiscal equalization. The contribution obligation of a municipality is determined by the total of entitlements pursuant to paragraph 1 in relation to their population. The contribution obligation of a municipality ends in any case when the factor reaches 1.00.

1. The government council enacts the provisions necessary for the implementation and supervises the execution of this law.

2. It informs the cantonal council annually about the effectiveness of the financial equalization as well as the status of the disentanglement of tasks between the canton and the municipalities. At the same time, it presents possible solutions for improvements.

1. The Department of Finance enforces this law.

2. It regularly reports to the Government Council on the effectiveness of financial equalization and enforcement.

1. The Government Council shall establish an advisory commission to review the effectiveness of the financial equalization and its implementation.

1. The disbursement of the services of the canton to the entitled municipalities, as well as the settlement of the municipalities' owed contributions with the tax payments of the canton, generally occur by June 30th of the current year.

1. The contributions of the canton must not exceed 30%, and those of a municipality must not exceed 45% of the revenue of a tax unit. Once these assessment limits are exceeded, the contributions to the entitled municipalities must be accordingly reduced.

1. The data for ordinary taxes, inheritance and gift taxes, as well as real estate capital gains taxes, are determined by the Cantonal Tax Administration.

2. The data for transfer taxes and the number of inhabitants are collected by the municipalities.

3. The number of inhabitants corresponds to the resident population as of December 31 and includes all individuals with legal residence in the municipality, excluding those residing temporarily with legal residence in another municipality.

4. The number of students depends on the surveys conducted by the canton for contributions to public elementary schools.

5. The net expenditures related to financial assistance for social welfare are based on the annual financial statements of the municipalities. Only the disbursed and reimbursed financial benefits are considered. Not considered are, in particular, child support advancements, expenditures for asylum and refugee services, and administrative costs. The canton, in cooperation with the municipalities, establishes guidelines for the chart of accounts in the area of social welfare.

1. Regarding the additional burden on municipalities resulting from the revision of laws and regulations due to the implementation of NFA/KFA, as well as the tax law, the National Bank Gold Act, the Health Act, the introductory law to the Federal Act on Vocational Education and Training, and the social burden equalization, the canton provides fixed contributions in the form of a hardship compensation for four years following the enactment of the NFA.

2. The following payments are made to these municipalities as hardship compensation

Municipality | 2008 | 2009 | 2010 | 2011

--- | --- | --- | --- | ---

Bühler | 88,000 | 53,000 | 19,000 | 0

Heiden | 434,000 | 299,000 | 165,000 | 30,000

Herisau | 567,000 | 109,000 | 0 | 0

Reute | 7,000 | 3,000 | 0 | 0

Schönengrund | 52,000 | 47,000 | 43,000 | 38,000

Speicher | 98,000 | 44,000 | 0 | 0

Teufen | 109,000 | 0 | 0 | 0

Trogen | 170,000 | 127,000 | 84,000 | 40,000

Urnäsch | 80,000 | 46,000 | 13,000 | 0

Waldstatt | 279,000 | 197,000 | 115,000 | 33,000

Walzenhausen | 146,000 | 90,000 | 35,000 | 0

Wolfhalden | 62,000 | 31,000 | 0 | 0

1. The Ordinance to Article 29 of the Cantonal Constitution of June 17, 1985 (Financial Equalization Ordinance) is repealed.

1. The law is subject to an optional referendum.

2. The government council determines the commencement.