International Research Seminar

“AUTONOMY STATUTES AND REGIONALIZATION: SOLIDARITY AND EQUALIZATION BETWEEN REGIONS”

(Geneva, (Geneva, July 2013)

below the average. The final resources of each AC proceed from its own fiscal ability (column 1) and the different grants of the equalisation system (column 2). ACs are ranked from higher to smaller fiscal ability (column 1). If the equalisation system were partial, the situation would reflect that ACs whose fiscal capacity is higher than the average, in our table from Madrid to Asturias, would also benefit from higher resources per capita and that the ranking of the ACs would remain unchanged. Consequently, Madrid should be the AC with the highest resources per capita, followed by Baleares and the rest of the ACs. Nonetheless, this circumstance does not occur. If the equalisation system were to be total, all ACs would have the same resources and the value obtained in column 3 would be 100 for all ACs. However, this circumstance does not occur either. Hence, there is not clear logic that explains the result of the system.

Rich regions, such as Cantabria and La Rioja, whose fiscal ability is above average, are greatly benefited from the equalisation system. However, other rich regions such as Madrid, Baleares and Catalonia lose resources from the application of the equalisation system. On the other hand, poor regions, whose fiscal ability is below the average, such as Extremadura or Castille and León are greatly benefited by the equalisation system and, obtain final resources that are above the average. We can also encounter poor regions such as Valencia, Murcia or Andalusia, that although they benefit from the equalisation system, their final per capita resources are below the average. This result is a consequence of different factors, but the maintenance of the status quo is by far the most important and influent factor.

- Table 3. Average financing index per adjusted capita. 2010

ACs	Homogeneous fiscal ability (1)	Funds (2)	Total resources (3)
Madrid	120.3	-19.6	100.7
Balearic Islands	104.5	-2.1	102.4
Catalonia	99.5	-0.2	99.3
Cantabria	91.1	26.8	117.9
Aragón	89.1	15.8	104.9
La Rioja	84.8	31.1	115.9
Asturias	84.0	23.4	107.4
Average (all ACs)	83.9	16.1	100.0
Castille and León	79.7	29.7	109.4
Valencia	77.4	15.5	92.9
Murcia	72.4	22.9	95.3
Galicia	70.9	34.6	105.5
Andalucía	69.0	26.9	95.9
Castille-La Mancha	68.7	30.0	98.7
Extremadura	60.4	52.6	113.0
Canary Canary	43.51	51.8	95.3

Source: De la Fuente (2012) 1 The financing of the Canary Islands has certain peculiarities that do not allow a comparison between its fiscal ability and the ones of the other ACs.

# 4 What Can Be Learned from the Spanish Experience in order to Regulate a Financing System for the Autonomous Sahara Region?

## The Coexistence of Two Systems with Disparate Results

Two different systems of financing regions exist in Spain: the common one, applied in fifteen ACs, and the foral one, that affects only two regions. Each one, as explained in the previous section, has very different features, particularly the foral system, which marks an unprecedented system within the international framework. No federal country has a regional financing system similar to the foral one. On the other hand, a key difference between the two systems is precisely the equalisation mechanism between regions. The territorial equalisation aims to assure that those territories with lesser resources can provide, with equal fiscal effort, a similar level of public services to their citizens. I do not deal now with the extent to which this objective is achieved; I only want to point out that an equalisation mechanism exists and, in general, richer communities contribute and fund it, while poorer ones benefit from it. Nonetheless, this situation is not encountered in the foral system, because the payments made by these two communities do not contemplate the existence of the equalisation mechanism. These circumstances are not a result of norms dictated by the