Marco Pérez Valtier: The dynamics of NL’s federal holdings

Marco Pérez ValtierMarco Pérez Valtier Source: Félix Vásquez

As I mentioned in my previous article, Federal Participations (Branch 28 Budgetary) that regulates the Fiscal Coordination Law, are being strongly criticized by the Governors of the Federalist Alliance, arguing that the distribution formula contains “redistributive” elements and that it should only be “compensation”Depending on what each State contributes.

However, these critics fail in their arguments, since the analysis should focus, exclusively, in the distribution of the General Participation Fund, (20 percent of the Participable Federal Revenue) since the questioned formula ONLY applies to that Fund, and not to the other Funds of Branch 28, and much less, to the total of federal resources distributed by the Federal Government (Federalized Expenditure).

In the case of Nuevo León, he pointed out that from 2007 to 2019, analyzing the results of the change in the formula that began to be applied in 2008, when the direct allocation of 45.17 percent of the General Participation Fund was eliminated based exclusively on the “population”, And the variable of state GDP growth was introduced, the greater resources obtained by our State have been marginal, and not as great as the initial expectations, and they went from 4.6626 percent, to only 4.6980 percent, an increase of only 3.5 hundredths of a percentage point.

However, at that time, the growth dynamics of the other funds that make up budget Branch 28 had a much greater increase than that of the General Participation Fund, since while the resources distributed by this Fund increased 127.4 percent, the resources distributed through the other funds grew by 350.2 percent.

In fact, in 2007 there were only 7 additional funds in Branch 28, the most important being that of Tenure, which is eliminated with the Calderón reform, to repeal said Federal Law, and leave the States free to legislate a local Law or not, while currently there are TWELVE additional funds to the General Fund, whose distribution rules have nothing to do with the questioned redistributive formula.

As I have already pointed out, the resources transferred to the States using these additional funds have grown by 350.2 percent between 2007 and 2019, going from $ 55,732.8 million pesos to $ 250,887.5 million, and if we eliminate Tenure in this calculation, the increase of federal resources transferred to the States would be 605.5 percent, that is, they have multiplied by SEVEN in just 12 years.

Unfortunately for our State, participation in these funds, in addition to the General Participation Fund, has been REDUCED between 2007 and 2019, going from 5.8328 percent to 5.0410 percent respectively, and this is NOT a product of the redistributive formula that is applied to the General Participation Fund.

If we review some of the amounts that are distributed in the Additional Funds, particularly the ISR of the local bureaucrats stands out, (the federation “returns” to the local governments the ISR caused by its bureaucrats) since it is the one that contributes the most resources within of the additional funds, (32.9 percent of the total) and the Federation transferred to the States $ 82,607.6 million pesos in 2019, but Nuevo León only received 4.7425 percent of that total, a percentage much lower than the 7.6 percent of the GDP generated in our State, which both It is presumed.

Another result that strongly draws attention is the one referring to the participation that our State receives from the IEPS State Quota to gasoline and diesel, of which nine elevenths are distributed among the Federal Entities where the sale of said fuels is generated, and Nuevo León only received 4.2368 percent of the total distributed in 2019, a percentage even lower than that received at ISR fund to the bureaucrats, which I repeat, compares very unfavorably with the contribution of our State to the national GDP.

A different situation is the one reported in the distribution of the tax that causes the sale of new cars (ISAN) since in this area, our state received, in 2019, 8.2451 percent of the total tax collected at the national level, a figure that It does look aligned with the economic importance of our State at the national level.

Another important fund, particularly for municipalities, is the Municipal Development Fund, and from receiving only 1.2274 percent of the total distributed in 2007, the resources transferred to NL went to 3.2336 percent, increasing from $ 159.5 million pesos to $ 1,013.2 million, which although in percentage terms NL receives a low percentage, in absolute terms , the growth has been very high, higher than 6 times.

Considering the grand total, as already noted, Nuevo León has seen its capture of federal resources reduced in these “other funds” of the budget Branch 28, and it is a subject that corresponds to the State TreasuryReview the causes that are producing these poor results, which are NOT the product of the redistributive “formula” that is applied to the General Fund.

In other words, it is one thing to argue the “inequity”Of the formula with which the General Participation Fund is distributed, and to seek a truly“ compensatory ”reform, and a very different one, to question the low percentage of federalized resources that our State receives, considering its contribution to the national GDP.

Finally, it is unquestionable that for political reasons, the collection of the Vehicle Ownership and Use tax was eliminated in our State, and that a good part of the current financial pressures could have been resolved with these revenues, although it is also unquestionable that a good part from this decline, they are now recovering under a huge collection of vehicle rights, which makes us occupy the first place, at the national level, in this area.

Additionally, there are collection powers that are not fully exploited, but the point under discussion is the low resources transferred by the Federation to the States, and not the possible alternatives to approach more local resources, of course, at the expense of the citizen.

This is an opinion column. The expressions used here are the sole responsibility of the person signing them and do not necessarily reflect the editorial position of El Financiero.