The financing of education from the public purse is currently based on the following arrangements:

• Most educational institutions are maintained by public authorities.
• They receive the greater part of their funds from public budgets.
• Certain groups undergoing training receive financial assistance from the state to provide them with the money they need to live and study.
• The public financing arrangements for the education system are the result of decision-making processes in the political and administrative system in which the various forms of public spending on education are apportioned between Federation, Länder and Kommunen (local authorities) and according to education policy and objective requirements.

Public spending on education

The political and administrative hierarchy in the Federal Republic of Germany is made up of three levels: 1) Federation; 2) Länder; and 3) local authorities (Kommunen), i.e. districts, municipalities with the status of a district and municipalities forming part of districts. Decisions on the financing of education are taken at all three levels, but around 90 per cent of public expenditure are provided by the Länder and the local authorities.

Since 2008, the Federal Statistical Office (Statistisches Bundesamt) has prepared an annual Educational Finance Report on behalf of the Federal Ministry of Education and Research (Bundesministerium für Bildung und Forschung – BMBF) and in consultation with the Standing Conference of the Ministers of Education and Cultural Affairs in the Federal Republic of Germany (Kultusministerkonferenz ). The Educational Finance Report compiles the most important information that is available on the education budget. The Educational Finance Report is part of education reporting, which continuously provides data-based information on the framework, input, progress, results and effects of educational processes. It serves as the basis for the following comments on expenditures in the individual education areas.

The expenditure (basic funds) of the Federation, Länder and local authorities in Germany are shown in the demarcation of the financing statistics of the public budgets. In 2020 according to the financing statistics, the public sector expended a total of Euro 159.6 billion on day-care centres for children, general and vocational schools, higher education institutions, financial assistance for pupils and students, other educational expenditure as well as out-of-school youth education and youth association work. This amounted to Euro 13.4 billion for the Federation, Euro 111.8 billion for the Länder and Euro 34.4 billion for the local authorities. This corresponds to 4.8 per cent of gross domestic product and 20.8 per cent of the total public budget.

Education budget

According to the International Standard Qualification of Education (ISCED), expenditure on education in Germany in 2087 totalled Euro 197.9 billion on pre-school education, schools and the associated areas, the tertiary sector, miscellaneous and other expenses. Additional German expenditure related to education amounted to Euro 21.9 billion for in-company vocational education, further education offers and the promotion of participants in continuing education. The education budget thus comprised a total Euro 219.8 billion in 2018. This corresponds to 6.5 per cent of gross domestic product. According to financing statistics, the Federation contributed a total 10.1 per cent to educational spending, the Länder 52.8 per cent, local authorities 17.5 per cent, the private sector 19.2 per cent and 0.3 per cent came from abroad. The payment transactions between the public budgets was taken into account in this calculation.

Based on the internationally applied (ISCED) breakdown for education systems, of the overall education expenditure in Germany pre-school education accounted for Euro 32.6 billion (Federation Euro 0.4 billion, Länder Euro 9.2 billion, local authorities Euro 18.2 billion, the private sector Euro 4.8 billion), schools and the associated areas accounted for Euro 101.0 billion (Federation Euro 2.8 billion, Länder Euro 68.6 billion, local authorities Euro 17.1 billion, the private sector Euro 12.5 billion), the tertiary sector for Euro 41.7 billion (Federation Euro 6.5 billion, Länder Euro 28.1 billion, local authorities Euro 0.2 billion, the private sector Euro 6.2 billion, and sources from abroad Euro 0.7 billion), and miscellaneous for Euro 3.0 billion (Federation Euro 0.2 billion, Länder Euro 2.4 billion, local authorities Euro 0.3 billion). Private household expenditure on educational goods and services outside educational establishments totalled Euro 6.5 billion. The amount spent on promoting participants in ISCED courses of education was Euro 13.2 billion (Federation Euro 7.8 billion, Länder Euro 4.0 billion, local authorities Euro 1.4 billion).

Of the additional German expenditure related to education, in-company continuing education, accounted for Euro 12.0 billion (Federation Euro 0.3 billion, Länder Euro 0.5 billion, local authorities Euro 0.3 billion, the private sector Euro 10.9 billion), expenditure on other education offers Euro 8.7 billion (Federation Euro 3.1 billion, Länder Euro 3.3 billion, local authorities Euro 1.1 billion, the private sector Euro 1.2 billion) and the promotion of participants in continuing education by the Federation Euro 1.3 billion.

In 2018 the total budget for education, research and science amounted to Euro 311.8 billion. This corresponds to 9.3 per cent of gross domestic product.

In-company training within the duales System, which is maintained by industry and by other training companies and institutions, is mainly financed by the companies. The Berufsschulen (vocational schools) which are, together with the training companies, jointly responsible for education and training within the dual system receive public financing.