• The regional financing system reduces available resources per capita by 25% in Madrid and by around 10% in the Balearic Islands and Catalonia

Madrid, the Balearic Islands and Catalonia are the three autonomous communities hit hardest by the current regional financing system, according to data in the second edition of the Autonomous Community Financing Map that the Barcelona Institute of Economics (IEB) has just published. The map monitors the evolution between 2009 and 2015 of the financial resources available per capita in each territory as the model’s equalisation mechanisms and adjustment funds are applied. It shows that in 2015 the Community of Madrid disposed of €3,190 per capita (adjusted) before equalisation, a figure that was reduced to €2,369 at the end of the process, representing a reduction in funding of 25.7%.

The other two communities most severely affected by the current financing model are the Balearic Islands and Catalonia. The first generated an average of €2,696 per capita, but the application of the equalisation mechanisms and the adjustment funds reduced its finances by 11.8%, leaving it with €2,379 per capita. In the Catalan case, the region had tax revenues of €2,632 per inhabitant before applying the financing model, a figure that subsequently fell by 9.7%, leaving it with €2,379.

They are the only three communities that began with more tax resources per capita than the state average (€2,387.41), but which following the application of the system found themselves with less revenue than average. An anomaly that was repeated between the years 2013 and 2015 in all three autonomies.

According to IEB researcher, Maite Vilalta, “The distortions generated by the current financing model cannot be attributed to the application of the equalisation mechanisms, including the guarantee fund for essential public services, since these aim to shorten the gap between the richest and the poorest communities. What is responsible for the fact that some of the communities with the most resources end up with less funding than average is the application of the sufficiency, competitiveness and cooperation adjustment funds, which distort the redistribution and result in unjustifiable final figures, such as those highlighted by the IEB’s Autonomous Community Financing Map”. She believes that a future reform of the model should “increase the global volume of the system’s resources and the financial autonomy of the governments, and establish an equalisation mechanism that respects the principle of ordinality”. She also stresses “the need for the Autonomous Communities of the régimen foral to contribute to the system”.

The model increases the resources of Extremadura by 73.5%

At the other end of the scale, we find communities such as Extremadura, whose available resources have increased thanks to the application of the equalisation mechanisms and the adjustment funds. The taxes ceded before equalisation in 2015 were €1,538 per capita, but the application of the current financing model meant the region ended up with €2,685, an increase in its resources of 73.5%.

However, Extremadura was not the community with the most resources in 2015. La Rioja and Cantabria were ranked higher, with €2,855 and €3,087 per capita once all the financing model’s mechanisms had been applied, with increases of 29.7% and 28.1%, respectively.

The three communities were also the regions with the most resources in the period 2012-2015.

Update evaluation and analysis of the model

The new edition of the IEB’s Autonomous Community Financing Map represents the consolidation of a tool that offers a system for the continuing evaluation and analysis of the current regional financing model, in operation since 2009. Via the different sections of the website, the user can consult the amount of tax revenues ceded by the central government to each autonomous community, the resources resulting from their participation in the equalisation mechanism (i.e. the guarantee fund for essential public services) and the proceeds from the model’s adjustment funds (i.e. the sufficiency, competitiveness and cooperation funds).

“With this second edition, the Autonomous Community Financing Map firmly establishes itself as an essential tool for understanding the current financing model in Spain and for analysing the evolution in the resources available to each region, thus facilitating debate on the reform of the model”, explains IEB director, José María Durán Cabré, who recalls “the long-standing role played by the institution in the study of fiscal federalism”.