ABSTRACT
This chapter explores whether and, if so, to what extent, West German federal and state governments have increasingly provided federal and state transfers to local government in order to cope with rising demands for centralised public activities. The most powerful factors which explain the immobility of the grant system are surely the peculiar patterns of federal responsibilities and of federal-state decision-making in the Federal Republic. The federal division of responsibilities and the patterns of federal-state decision-making have also restricted the states’ interest and ability to increase state transfers to local governments. There were enormous disparities of fiscal resources between heavily industrialised and non-industrial communities, and these disparities increased more and more throughout the 1960s. Since 1963 the only spectacular change in intergovernmental transfers for local governments has occurred within the scope of specific grants, where grants for local investment have continuously expanded at the expense of grants for current spending.
