28.11.2014 | KPMG Law Insights

Federal financial injection – healing the financial situation of universities?

Dear Readers,

Also during the summer break, we would like to provide you with current topics concerning EU state aid law. And what could be more natural than to report on the contents of the new Union framework? Our first article is about some innovations dealing with the classification of university and research institution activities as “economic” or “non-economic” activities.

As you can already see from the title of the article, however, the innovations do not necessarily lead to more clarity and thus to the long-awaited legal certainty for universities and research institutions. On the contrary, there remain numerous vague regulations and terminology that require interpretation and do not exactly simplify day-to-day dealings with EU state aid regulations.

The German government’s plans to amend the Basic Law in connection with the ban on cooperation between the federal and state governments in the field of education have been and continue to be the subject of extremely controversial debate. If the ban is overturned, the federal government is likely to contribute to university funding in the long term. A cash infusion that brings basic financial security to universities?

As usual, you’ll also find other articles on grants and procurement law.

We wish you interesting reading!

Sincerely yours

Public Sector Team of KPMG Rechtsanwaltsgesellschaft mbH

Mathias Oberndörfer Dr. Anke Empting

Increased support for universities in financial terms is needed. But where to get a cash injection when the countries’ coffers are at low tide? From the federal government? According to the coalition, education should no longer be the sole responsibility of the states. This will require a relaxation of the ban on cooperation between the federal and state governments, which was launched in the middle of this month.

In 2006, the so-called “ban on cooperation” between the federal and state governments in the field of education was inserted into the German constitution. This meant that the federal government, together with the Länder, was allowed to fund non-university research institutions in cases of supraregional importance. However, this did not apply equally to institutions of science and research at universities. This is because the Basic Law provided and still provides only for limited joint funding by the Federal Government and the Länder, both in terms of time and subject matter, and in relation to “science and research projects” in cases of supraregional significance.

To overturn or at least relax the ban on cooperation, the Basic Law needs to be amended. The federal government has now set such a change in motion. The main changes are expected to be reflected as follows:

  • Long-term funding of universities, individual institutes or institutional networks by the federal and state governments;
  • Simplified and more efficient financial support for affiliations of universities and non-university institutions due to the elimination of the previously required separation of financial flows and the associated legal and administrative problems;
  • Institutional funding for institutions of higher education through federal funds instead of the current temporary programs.

What will remain, despite the planned changes, is the reference to “national significance” that is inherent in all grants with federal funds. Accordingly, a purely national reference is probably not sufficient; what is required is that the object of the funding “has charisma beyond the individual country and is significant in the national and international context”. Responsibilities for higher education, however, remain with the states.

The amendment to the Basic Law, together with the amended BAföG Act, is scheduled for final approval in the Bundesrat on December 19, 2014.

While the previous programs (co-)financed by the federal government, such as the Higher Education Pact 2020 or the Excellence Initiative, are limited in time, in the future an additional long-term “financial injection” from federal funds will be possible. However, the amendment only achieves the framework for “legally permitting” funding by the federal government as well.

Subsidy law: Federal government’s BAföG initiative bears first fruits

It has already been announced in the BMBF’s “Federal Report on Research and Innovation 2014”: the education subsidy for students and technical students is to be increased by seven percent for the 2016/2017 winter semester.

That means more money in the coffers! In addition, the opportunities for students to earn additional income will be increased: In the future, they will be able to permanently work so-called mini-jobs up to the full amount of 450 euros per month without this being counted towards BAföG benefits. Due to the increase in rents in university towns, the housing surcharge will also be raised to 250 euros. For students who do not live with their parents, the maximum monthly rate will increase by around 9.7 percent from the current 670 to 735 euros.

Finally, in the course of the BAföG reform, the income allowances will be increased – as will the requirement rate by 7 percent. According to the BMBF, more than 110,000 pupils and students are to benefit from this.

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Mathias Oberndörfer

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