Almost a quarter of a century after the current local financing scheme was launched, the Ministry of Finance's announcement to undertake its reform has brought back to the forefront a debate that city councils consider pending. Municipalities describe the system as "unsustainable" for supporting the responsibilities and services they currently assume, while the discussion remains open as to whether the real problem is the scarcity of resources or the way they are distributed.
The Spanish Federation of Municipalities and Provinces (FEMP) has been demanding the update of a model designed in 2002 for years. Its Secretary General, Luis Martínez-Sicluna, emphasizes that city councils have been forced to respond to a social and economic reality very different from that of then, assuming new demands from citizens without financing keeping pace.
"City councils operate with resources derived from a local financing system from 25 years ago. It is a truly unsustainable situation," Martínez-Sicluna stated in declarations to Europa Press.
As he points out, city councils are the administration "closest to the citizen" and the first door knocked on when problems arise related to housing, social services, mobility, dependency, or waste management. Furthermore, he recalls that the cost of these services has increased significantly over time.
Growing Responsibilities and Limited Funding
One of the central axes of the discussion is the catalog of responsibilities that city councils currently exercise. The FEMP denounces that both state and regional regulations have been adding responsibilities to municipalities without guaranteeing the necessary funding to assume them competently.
For this reason, the federation calls for a review of the Law on the Bases of Local Government to more precisely define which tasks correspond to each level of administration and to ensure that the functions performed by city councils are accompanied by adequate resources.
The executive director of the Foundation for Applied Economic Research (Fedea), Ángel de la Fuente, partially agrees with this analysis, considering that there are areas where the separation between regional and local responsibilities remains blurred.
"There are competitions in which the border between regional and local is not very clear," De la Fuente stated in declarations to Europa Press, who sees it as "logical" to address the reform of both systems in a coordinated manner to better define both responsibilities and the financing that should support them.
Increase funds or redistribute them better?
Although there is broad agreement on the need to review the model, positions diverge when identifying the main source of the problem.
The FEMP insists that municipalities need more income to sustain the services they offer and warns in particular about the situation of small municipalities. It recalls that 87 percent of Spanish town councils have fewer than 5,000 inhabitants, which makes the provision of services more expensive due to geographical dispersion and demographic aging.
However, De la Fuente does not see it as essential to increase the total volume of resources. "In general, I don't think municipalities lack money because in some places they have too much and in others they lack it. What needs to be done is to distribute it better, that should be the priority of the reform," he summarized.
In his opinion, the reform should serve to correct imbalances between municipalities with similar characteristics and move towards a more equitable distribution of available funds. Along these lines, he suggests introducing equalization mechanisms similar to those that already exist in regional financing, in order to reduce differences between territories.
Despite these discrepancies, both FEMP and Fedea agree that local and regional financing are closely interrelated.
Therefore, the municipalist federation rejects the idea, put forward by the Ministry of Finance, of reforming the regional system first and leaving the local one for later. Martínez-Sicluna argues that the entirety of public resources must be analyzed globally to prevent municipalities from being relegated to a secondary position in the distribution.
"Municipalities cannot resign themselves to receiving what is left over once the regional financing model is finalized," he warns.
Uncertainty about the reform in this legislature
Although the debate has been reactivated, doubts persist about the real possibility of the reform being approved in this legislature.
Martínez-Sicluna recalls that the current political cycle is entering its final phase and that the absence of solid parliamentary majorities has slowed down the processing of significant reforms in recent years, which, in his opinion, "does not guarantee" the approval of a change of this scope.
A perception shared by De la Fuente, who also expresses his "doubts" about the chances of the process coming to fruition. "I don't know if we're going to see them in these years," he laments.
Meanwhile, the update of local financing remains pending, despite municipalities having demanded it for years and despite the fact that, almost 25 years after the approval of the current model, it continues without a clear date on the political calendar.