Budget uncertainty leaves $23 billion in funding for communities hanging | Economy

The autonomous communities will receive more than 147 billion euros next year for the deliveries due to the financing systemadvances that represent the majority of their economic resources and that allow them to pay for the public services in which they have powers. The general figure, advanced at the end of July by the First Vice President and Head of the Treasury, María Jesús Montero, represents an annual growth of 9.5% and is the highest in history. From there, the information collected by this newspaper shows that all the territories will see an increase in their resources in a range between an increase of 6.8% in Cantabria and an increase of 10.1% in Catalonia and the Valencian Community. However, at a time when there is so much talk of financing, the great doubt that hangs over the regions is whether they will receive together on time this additional amount of 23 billion, or whether there will be delays that could ruin their coffers. To answer this question, we must look at the complex cogs of the financing system and the keys that drive national politics.

The coalition government is working hard to present its bill to Congress before September 30. General State Budgets (PGE) for 2025, a process mired in doubts due to tight parliamentary arithmetic and whose outcome is still unpredictable. Many ministers acknowledge in private meetings that it will be difficult for these accounts to see the light of day. If it does not prosper, the lack of new budgets for the central administration This could cause a butterfly effect in the finances of the communities through these resources of the financing system that the territories receive each year in advance and which help them to increase their number. The reason is simple: the updating of these amounts is generally linked to the PGE, so a new extension could delay the arrival of improvements and additional means. In the latest current accounts, from 2023, the advances reached 124.2 billion. The difference up to the 147.3 billion now planned is the one that would remain pending until the Treasury releases it again by decree, as it has already done this year.

The advance payments are a mechanism that allows the 15 autonomous communities of the common regime (all of them, except Navarre and the Basque Country) to receive in advance part of the funds that correspond to them through the financing system. Article 11 of Law 22/2009, which regulates this regime, establishes that the amounts are calculated from the estimated tax resources to be collected throughout the year in each region. for personal income tax (the regional rate), in addition to VAT and special taxes. In this way, the State calculates what it will have to transfer to the communities and releases these funds throughout the year, normally with a payment every 15 days.

This explains why in some territories the expected deliveries increase more than in others. As detailed by Diego Martínez López, professor of economics at the Pablo Olavide University of Seville and researcher at Fedea, the calculation is linked to the changes related to the exercise of the regulatory capacity of the autonomies in the income tax, the main tax figure of Spain. That is to say, when regional governments decide to lower the section of income tax over which they have jurisdictionThe forecasts for advance payments are adjusted accordingly. In 2025, the largest amounts will be recorded in Catalonia (28.2 billion), Andalusia (27.50 million) and Madrid (20.5 billion). The smallest amounts, excluding Ceuta and Melilla, will be recorded in La Rioja, Cantabria and the Balearic Islands (with figures that will be between approximately 1,300 and 3,000 million).

The settlements of the last financial year closed are also added to the final scheme, a process that in Spain takes two years. In this case, accounts are drawn up between the parties and if the difference between the amount settled and the amount paid on account is in favour of the communities, the State pays them a new contribution. If it is the opposite, the communities return the amount they obtained in addition. The 2023 settlement, which corresponds to the difference between the initial estimate (deliveries on account) and the actual income at the end of the financial year, will reach 11.692 million euros in 2025 thanks to the smooth running of tax collection, a figure that will be added to the 147,000 million and will leave a favourable net balance for the territories of 158,167 million. In regions such as Madrid, for example, the positive settlement will add an additional 794.6 million.

The problem right now of political uncertainty is that the amount advanced by the State is calculated based on “the forecasts existing on the date of preparation by the Government of the draft general State Finance Act for the corresponding year”, according to the law. Thus, if the public accounts are not completed in 2025 and those of 2023 have to be extended again, the autonomous communities could receive all these additional resources later than expected, which would lead to cash flow tensions. It should be remembered that advances are the fundamental pillar of territorial budgets and that they represent the bulk of the resources available to regional governments to finance the services that fall within their competence, such as health and education.

This delay, in fact, has already occurred throughout this year, which has triggered a wave of criticism from regional governments, mainly in the hands of the PP, towards the Treasury. When the Government renounced the 2024 Budget, forced to extend that of 2023, it left the updating of the advance payments – then planned at 134.5 billion – fallow for six months, until in June he unblocked the process by decree.

Despite everything, the Executive insists that “there is no precedent for a central government that has provided so much support to territorial entities.” According to the Treasury's calculations, since Pedro Sánchez has been in power, the autonomous communities have received 300 billion euros more than in the last seven years of the Popular Party government. Added to this are other measures promoted by the Treasury for the benefit of the territories, such as the decision to keep the installments unchanged during the pandemic, also assuming the negative regulations generated by the drop in tax collection during the economic crisis.

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