When discussing the regional financing framework, the focus is on how funds transferred from the central government to regional authorities are determined to cover their expenses. It serves as the primary income source and supports essential services such as health, education, and care. The central government sets a general action framework, while regional administrations specify the criteria for incurring costs, so the scope and characteristics of services can differ notably across regions.
The finances of the fifteen autonomous communities under the common regime (excluding Navarra and the Basque Country, which operate under a foral regime) are today managed by the system approved by Law 22/2009 of December. The eighteenth amendment, with a seventh amendment mentioning a five-year review due in 2014 but delayed until 2017, led to a technical report by a commission of experts created at the request of the Conference of Autonomous Heads. Since then, the government announced at the end of 2021 that the so-called adjusted population, representing public service needs the system must meet, marks only the first step toward a possible new financing model. The document triggered widespread pushback from various regional governments, regardless of ideology, who presented a range of sometimes conflicting arguments about the central Executive’s proposed criteria.
The current regional financing system is approaching its fifteenth year, with no clear reform in sight. Political tensions between the two major parties—one ruling at the center and the other governing twelve of the fifteen autonomous communities in the common regime—do not create a favorable environment for broad cross-party agreement. Regardless of who governs, interregional interest disparities hinder any reform from gaining broad support among the affected administrations.
Given the obstacles to major reform, it is likely the government will negotiate a debt-reduction arrangement with the central government along the lines of the 2015 agreement between the PSOE and ERC. Investment agreements aim to provide a mechanism for autonomies that do not rely on state support to benefit from this framework during years when market borrowing is difficult. Meanwhile, the government may inject additional resources if circumstances or political expediency demand, such as the responses to pandemic-related economic effects (though not all transferred resources have been fully utilized). Autonomous communities do not currently rely on this method, but it remains possible if conditions deteriorate and reform of the 2009 system stalls.
Graph 1 illustrates differences under the existing system. It compares per capita income across communities relative to the 2022 national average and shows financing per capita in 2021, adjusted for population and corrected for power disparities that forced some autonomous governments to bear more responsibilities. The visualization reveals patterns: some regions exceed both the average per capita income and the average financing; others have below-average income but above-average resources, a pattern that can reflect interregional solidarity but may also raise questions about fairness; and some regions with low income and low resources highlight potential inequities in the system.
This dynamic helps explain the unrest since the current framework began with only minor changes. Regions perceived as less affluent, like the Valencian Community, have argued for more adequate allocation, while wealthier communities contend that solidarity can be excessive. The debate reflects a range of perspectives and is not easily reconciled.
However, the redistributive capacity of the financing model is only part of the discussion. Frequently, the larger gaps arise from varying public service costs driven by population distribution within a region. Chart 2 highlights the weight and population of each province in the broader Spanish state. Urban cores like Madrid or Barcelona stand out for high demographic concentration, while other provinces such as Badajoz, Ciudad Real, Cáceres, or Cuenca have relatively small populations. Consequently, in provinces like Soria or Teruel, population density is very low, whereas Madrid and Barcelona show dense populations, underscoring the challenge of aligning financing with real service costs across a diverse geography.
From these data, one can see the difficulty of arguing for exact per capita equality while also recognizing that public services cost more in sparsely populated areas. The question becomes whether the financing model should pursue uniform per-capita support or recognize the higher costs associated with dispersed populations to ensure equal access to services across all communities.
One plausible path is to separate the two questions: establish a basic, per-capita financing floor derived from clear indicators of public service needs, and then implement a complementary mechanism that explicitly covers extra costs related to factors like suburban expansion, demographic dispersion, or population decline. This approach would transparently indicate when extra funds are necessary, while preserving a core level of funding that is nearly uniform across regions. It would also avoid the current system’s opaque calculations that some argue fail to reflect true cost differences or to favor low-income areas adequately.
The complementary mechanism should include all autonomous communities, including those facing geographic dispersion, and should base extra resources on measurable indicators. It would quantify additional costs and demonstrate that the system provides relatively homogeneous per-capita financing while acknowledging specific costs tied to population distribution and other relevant parameters. While this may lead to a broader dispersion of funds, it would be justified by a more accurate reflection of genuine service costs across the territory.
Ultimately, the interregional solidarity question hinges on how resources are pooled and redistributed between central and regional authorities, and how tax revenues and central contributions are balanced. The basic financing would rely primarily on tax revenues transferred to autonomous communities, aligned with population service needs. The complementary mechanism would draw more on central government revenues and serve as a state instrument to address challenges such as depopulation, geographic dispersion, rural deterioration, and essential service gaps in remote areas.
All these considerations form a starting point for seeking a formula that is politically workable and economically sound. It is not an easy task, but the aim remains clear: ensure fair access to essential services for all citizens while maintaining fiscal sustainability across regions.