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Groundhog Day

Minister Montoro recently announced that, after the local and regional elections on May 24, he will move ahead with reforming the finance system for Spain’s autonomous regions. According to current legislation, the system must be reviewed every five years. As the current system came into force in 2009, the review of the system should have happened in 2014. However, the lack of resources due to the economic crisis has been one of the reasons cited by the Spanish government to not undertake it, though they also delayed the reforms in order to avoid territorial disputes between regional PP leaders before the May elections. According to the Minister, the economic recovery now makes it possible to address the reform.

What direction should the new financing system be headed for? When you examine the proposals of experts on the topic and politicians, you can see that they aim to solve the same problems as in previous reforms. I have lived through many already and the questions to resolve are always the same.

It is true that the current model of regional financing is not the same as it was five years ago. It would be unfair to say that no progress has been made, for example in the decentralization of taxes, but in practice these steps forward have been more theoretical than real. The essence of the problem of financing for the autonomous communities persists, reform after reform.

What, then, are the problems that the experts and politicians present? The most important are: financial insufficiency, lack of tax autonomy, poor calculation of expenditure needs and fiscal capacity of the regions, poor territorial redistribution of resources and inadequate institutional coordination.

Not everyone puts the same emphasis on the different issues listed. This depends on the territorial interests that each region defends. For the autonomous regions that have received the best treatment in terms of resources per capita under the current system, the first priority is to preserve the status quo and, secondly to try to get more resources. Many of them are not looking for an increase in resources by taking on greater fiscal responsibility --that is, by achieving more regulatory capacity to establish and regulate taxes-- but rather simply by receiving more transfers from the State. So they favour distribution criteria that benefit them for transfers, mainly by introducing favorable variables in the calculation of spending needs.

On the other hand, the autonomous communities that have traditionally been treated worse, such as Catalonia, put the emphasis on the territorial resource distribution system, trying to introduce criteria of territorial equality that don’t leave room for arbitrary results, as happens now. The various governments of Catalonia have repeatedly complained that the redistribution of resources as currently applied causes regions with a higher level of income to end up with fewer resources per capita than those with lower levels. Nevertheless, the proposals made by Catalonia to achieve a better distribution of resources have always been poorly regarded, even when they included more fiscal responsibility, both regulatory and through tax management. It is legitimate for regions to defend their own interests, but in spite of conflicting interests between them, they have always managed unanimity to block substantial improvements in financing for Catalonia.

In the debate over the reform, we hear statements such as that of Minister Montoro: "There will be a regional funding system to ensure the equality of citizens in accessing public services." Sentences like this are heard at the time of each reform. The problem here is that the concept of equality that they defend is not the same as ours, as it always ends up hurting Catalonia.

Therefore, we feel as if we were stuck in a time loop with this new reform, as is the main character in Groundhog Day. In the movie Groundhog Day, Bill Murray is doomed to repeat the same day over and over again, with no end in sight.

The Catalan governments have traditionally led the regional financing reform process by submitting proposals for change and improvement. This time, however, is different. I think the position of the Catalan government is entirely correct, as their current interest should be to set up the Revenue Authority of an independent state. That doesn’t mean that they shouldn’t participate in the negotiations for the reform and try to obtain more resources for Catalonia: there is nothing wrong with trying to get back some of the taxes that Catalans pay to the State. It is all about recovering the resources that are ours, as they originated in Catalonia.

On an academic level, I have devoted a lot of time to the study of regional financing, but this time I am intellectually reluctant to participate in the debate and analysis of the new reform. In fact, I have already turned down an invitation to participate in an academic event on the matter. I think I have already disconnected intellectually from Spain.