‘Let's Talk Cash’: Cantons' Interests and the Reform of Swiss Federalism

Abstract

In 2004 the Swiss people accepted a new equalization scheme and a new distribution of competences between the federal state and the cantons. It was argued that the reform was successful because of the capacity of veto-players to overcome their interests and adopt a ‘problem-solving’ interaction mode. We propose a different interpretation and argue that distributive issues and the accommodation of actors' interests crucially mattered. We identify three mechanisms that contribute to a successful reform, i.e. package-deals, side-payments and the downsizing of the reform. Our in-depth, mainly qualitative study of both the content of the reform and related decision-making process supports the pertinence of these strategies for the explanation of the successful reform of Swiss federalism.

Keywords:

• Switzerland
• fiscal equalization
• federalism
• constitutional reform

Aknowledgements

A previous draft of this manuscript was presented at the workshop “Federalism and Territorial Politics” on the occasion of the annual congress of the Swiss Political Science Association, Luzern, 2–3 February 2012. We thank all the participants of the workshop as well as 3 anonymous reviewers for their helpful comments. Part of the empirical material used in this paper, including the interviews with the political elite, stems from a larger research project on political decision-making in Switzerland sponsored by the Swiss National Science Foundation (grant Nr 100015-113964).

Notes

¹ “Ideational factors”, such as a common frame of references, focal points and a shared understanding of the causal links underlying fiscal equalization; as well as “process factors”, such as agenda-crafting, co-optation of cantons as equal partners, and the long duration of the decision-making process.

² For a discussion of the applicability of Scharpf's theory to the Swiss case, see Fischer et al. (2010).

³ This may account for the fact that central state actors are more successful than other actors in preparing a constitutional change (Lorenz, 2011: 411).

⁴ To select the most important organizational actors we used the classic combination of positional, decisional and reputational approaches (see, e.g., Knoke, 1993: 30). Interviews took place between February and July 2008. The list of interviews can be found in the Appendix. The time elpased between the reform and the interviews calls for a triangulation with official documents and newspaper articles.

⁵ Additional analysis, not reported here, shows that the content of media coverage regarding the NFA in the two leading German-speaking newspapers (Neue Zürcher Zeitung and Tages-Anzeiger) is very similar to that in the French-speaking newspaper Le Temps, which we use in this article. This is in line with Tresch's (2008) analysis, which shows that there are no substantial differences regarding the way major political issues are discussed or framed in the French-speaking and in the German-speaking press.

⁶ In line with the principles of New Public Management, it is up to the Confederation to define the objectives, whereas the cantons are responsible for the implementation. Accordingly, the financial contributions from the Confederation to the cantons take the form of goal-targeted grants, instead of subventions proportional to the actual costs as in the previous system. In the remainder of this article we do not discuss further this specific part of the reform, which was largely undisputed.

⁷ Jeffery (2003) cites three interrelated fault-lines, but we argue that the third one (uniformity vs. diversity) is covered largely by the other two.

⁸ The old equalization system was based on the so-called ‘equalization supplements’ granted to the financially weak cantons. For more details see Dafflon (2004).

⁹ The gross gain was, in fact, higher (1.042 billion), but it was reduced by an expected loss of roughly CHF435 million associated with the new division of tasks (EFV, 2004: 4).

¹⁰ A part of these gains are invested in the new ‘cohesion fund’ (see hypothesis 2).

¹¹ For example, interviews 7, 21.

¹² This list remained almost unchanged until the enforcement of the new scheme in 2008, with only the canton of Glarus moving to the group of winners, the canton of Schwyz (SZ) moving to the group of losers and the canton of Vaud oscillating between the two groups from one evaluation to the next (EFD and KdK, 2000; EFV, 2004; 2007b). Our analysis is based on the 2004 situation, where the high potential cantons were Zug, Basel-City, Geneva, Zurich, Nidwalden and Basel-Land. In addition, we also analyse the case of Vaud, which turned into a high potential canton during the implementation phase.

¹³ For a residual group of cantons with low resources the package deal strategy was complemented in the later stage of the reform process with additional side-payments (see the test of hypothesis 2).

¹⁴ The compensation fund for excessive costs did not belong to the initial reform project. It was put forward by an expert report in 1994 (Frey et al., 1994), and was incorporated in the reform package at a later date (EFD and KdK, 1996, 1999).

¹⁵ Initially, the criteria took into account population density, road length per capita, length of watercourses per capita and forests, coppices, and bushes per capita. Subsequently, only the criterion regarding population density was kept, while the other criteria were replaced by three new criteria: the share of the cantonal area located above 1080 m, the share of the population living above 800 m and the number of inhabitants living in localities with less than 200 inhabitants. The last two criteria are especially questionable, since it is difficult to connect them with excessive costs (Dafflon, 2005). In addition, the 1080 m threshold appears as artificial (Frey, 2001: 17): “We cannot avoid thinking that this threshold was chosen on an ad hoc basis in order to benefit the alpine cantons … We do not understand the threshold of 1080 meters … What are the additional costs that glaciers and rocks generate for the cantons?” Our interview with one of the project leaders confirms that the criteria were set in light of their financial consequences for the cantons (Interview 7, see also LeTemps, 28 Apr 2001).

¹⁶ For example, interviews 11, 20, 21, 30, 31. See also LeTemps, 2 Oct 2002.

¹⁷ Such claims were indeed voiced by urban cantons early on in the implementation phase.

¹⁸ Interview 20. See also the statement of the member of the Zurich government on the importance of the inter-cantonal equalization of burdens in LeTemps, 2 Oct 2002.

¹⁹ Interviews 6, 7, 9, 10, 12.

²⁰ Interviews 3, 13, 18, 31.

²¹ LeTemps, 25 Mar 2002. The cantons concerned are Fribourg, Vaud, Neuchâtel, Jura, Obwalden, Appenzell Ausserrhoden, Aargau, and Berne.

²² See LeTemps, 12 Feb 2001.

²³ Interview 7. See also LeTemps, 31 May 2001.

²⁴ Some cantons have complained about the “disastrous” effects that the gradual reduction of the cohesion fund will have on their public finances (EFV, 2010). Reacting to this complaint, the Federal Council has recommended that the fund should not be cancelled in advance (FC, 2010: 104). This suggests that distributive conflicts regarding the cohesion fund are likely to occur in the future.

²⁵ Neue Zürcher Zeitung (NZZ), 9 Aug 2001 and LeTemps, 25 Mar 2002.

²⁶ Interview 6.

²⁷ Interviews 6, 7.

²⁸ Interview 7.

²⁹ Individual insurance services of old age and widows' insurance and of invalids' insurance, family allowance, encouragement of fundamental research, of applied research and of technology transfer, and maintenance. and operating of national roads.

³⁰ Walking trails, land-use planning, collective contributions of old age insurance to institutions of support for elderly people and care services at home, collective contributions of disability insurance to homes for the handicapped and to special schooling, fellowships for studies (until secondary level) and the promotion of the construction and the acquisition of residential property.

³¹ LeTemps, 16 Nov 2004.

³² Gymnastics and sports, maintenance of walking trails, big parts of agricultural politics.

³³ The issue of higher education was then linked to that of compulsory education and resulted in new constitutional articles. Ironically enough, in this field the outcome of the negotiation process between Confederation and cantons led to higher entanglement, not lower: the new articles on education increase the intervention of the federal state in policy areas that previously fell under the responsibility of the cantons (Fischer et al., 2010).

³⁴ An exception to this was the opposition of left-wing parties, trade unions and various associations active in the domain of social policy, who repeatedly criticized the transfer of competences to the cantons in this field (Mottu, 1997: 13). However, the Federal Council coped with it through the adoption of various transitory rules (FC, 2001: 2301, 2305) and a framework law that de facto strongly limited the (new) autonomy of the cantons. This approach proved successful, as it allowed splitting the opponents into two groups, one still opposed to the reform, and the other satisfied with the concessions obtained (see also LeTemps, 12 Nov. 2004).

³⁵ Admittedly, a fully dualist federal system can hardly be achieved in Switzerland due to its small size, and this was not the goal of the reform project anyway. However, our analysis suggests that even in domains where task disentanglement seems to be technically feasible, it may fail for political reasons.

³⁶ For a thorough discussion of the distinction between formal and substantial success, see Behnke et al. (2011).

³⁷ Le Temps, 3 Jun 2006, 17 Jun 2006, 15 Mar 2007, 12 Oct 2012.