Spain's "autonomous community financing" and the catchcry of Espanya ens roba - "Spain robs us": a system and a slogan that have been at the heart of Catalan complaints about the Spanish state's economic abuse of Catalonia. That is why successive governments of Catalonia have demanded a new financing system, together with several other autonomous communities, such as the Valencian Country and Galicia. Finally, it seems that the negotiation to unblock a new system for deciding the funding of regional governments is beginning to be a reality. However, as with the previous one, Catalonia will continue to be one of the communities worst affected by the sharing out process - in fact, it is third from the tail end, according to the Madrid-based think tank FEDEA (Foundation for Applied Economics Studies).
In a report published this Thursday and signed by the director of the foundation, Ángel de la Fuente, economist and expert in autonomous financing, FEDEA estimates that the changes proposed by the Spanish finance ministry in its calculation of adjusted population coefficients would be detrimental, as always, to certain communities and would benefit others. Moreover, the think tank points out that the new system continues the existing error of ad hoc adjustments and tailor-made measures to boost certain regions.
Worse off and better off
So who are the winners and losers and how is the calculation made? To put it simply, the ministry starts from the premise that the coefficient of 100 is the average resources needed by each Spanish resident, but not all of the state's 17 autonomous communities and two autonomous cities have the same needs, and varying the coefficient means, in practice, that they lose or gain many millions of euros in relation to this state average.
According to FEDEA, the treasury proposal would increase "very appreciably" the spending requirements which are attributed to Extremadura (+ 8.6%) and Aragon (+ 7%) and reduce those of the Canary Islands (-3%) and Galicia (-2.7%). In addition to these two communities, the other territories that would see their spending needs reduced with the new formula would be the Valencian Country (-1.7%), Catalonia (-1.58%), Madrid (-1.05 %) and Andalusia (-0.54%). In fact, together with Extremadura and Aragon, the new calculation proposed by the treasury would enlarge the slice of the pie received by La Rioja (+ 5.41%), Cantabria (+ 4.51%), Murcia (+ 3.28%), Castilla-La Mancha (+ 3.14%), Asturias (+ 2.72%), Castilla y León (+ 2.54%) and the Balearic Islands (+ 2%).
In the report, FEDEA explains that the adjusted population variable is an indicator of the expenditure needs of the different Spanish communities according to an estimate of the per capita costs produced in generating the standard list of services provided by the autonomous communities. If the cost formula is correct, a distribution of system resources in proportion to the adjusted population would ensure that all communities can offer similar benefits to their citizens, even if they have higher costs in some territories than in others.
But FEDEA points out that the method still fails to talk about the real, effective allocation of resources achieved by the financing system. Rather, this "ideal distribution" has very significant effects on the actual distribution of funding through the redistributive mechanisms of the financing system, because some of the most important funds are distributed taking into account the adjusted population.
This is how the current distribution of funding (blue) would change for each community under the new system (yellow), according to FEDEA:
Conclusions
FEDEA reaches the conclusion that the Spanish ministry headed by Maria Jesus Montero has assumed "the bulk" of the proposals of the committee of experts for the reform of the system, but it has also included a "more debatable" part. This has to do with "the introduction of two ad hoc adjustments that involve falling back into one of the most persistent vices of our funding system: the tendency to try to insert tailor-made garments" - that is, drawn up for certain parts of the state which appear to need them - "instead of looking for sensible general rules of distribution".
These adjustments, it says, consist of "the peculiar 'distribution by blocks' of the proposed fixed costs on the basis of a confusing and unnecessary analysis exercise" and "the forced introduction of a new depopulation indicator specifically designed to make certain regions prevail".
"These adjustments generate significant changes in the expenditure needs of some regions that are difficult to justify based on the (scarce) existing evidence on the impact of geographical factors on the cost of autonomous community services, which suggests that these factors are already more than sufficiently reflected in the current model," says the foundation.
Main image: Spanish treasury minister Maria Jesus Montero / Europa Press