The Fiscal Council Ignores the Region's Requests to Address Funding and the ExtraFLA

The Fiscal and Financial Policy Council (CPFF) has overlooked the requests of the Valencian Community regarding a new regional funding system, as the current one disadvantages the region, and the implementation of the extraFLA (Autonomous Liquidity Fund) to address needs following the October 2024 storm. Instead, the meeting of regional councillors focused on presenting the budgetary stability objectives, known as the 'spending cap', which is essentially the prelude to the General State Budgets.

During her intervention in this debate body, the Regional Finance Minister, Ruth Merino, once again demanded that the Finance Minister, María Jesús Montero, take responsibility and present a reform proposal for a model that has been outdated for 11 years. Meanwhile, she has again proposed the implementation of a transitional equalisation fund to reduce current differences in funding per adjusted inhabitant, an indicator in which the Valencian Community ranks last among all regions.

She also demanded that the central government clarify what will happen with the extraordinary Autonomous Liquidity Fund (extraFLA) that has so far allowed the financing of the excess deficit of the autonomous communities. She did so after denouncing the "institutional disloyalty" of the Spanish Government for "not offering a single explanation or alternative" regarding the continuity of this mechanism, which is essential until the funding system is reformed.

The Consell does not claim the extraFLA as a structural solution, "but in the current situation, it cannot be eliminated without ensuring sufficient funding through other means. Otherwise, it would leave the five million inhabitants of the Valencian Community stranded," she denounced.

The Valencian Community will be one of the few regions to comply with the spending rule in 2025. However, it will again incur a deficit due to insufficient income, not because of spending more than the average of the autonomous communities: "We are in a position to meet the spending cap, but even so, we are condemned to incur a deficit that is already structural due to an unfair funding system with the Valencian Community for two decades. It is a fiscal nonsense," she criticised.

"It is incomprehensible to maintain an approach that penalises those who comply, while, on the contrary, regions that will exceed the spending rule will end the year with a surplus by receiving more income," she clarified.

The Finance Minister has emphasised that the structural deficit of the Valencian Community is not due to excessive spending, but rather a chronic income problem stemming from an outdated funding model. "We do not spend beyond our means; it is the State that transfers funds below our needs," she remarked.

According to the data from the last settled financial year, the Valencian Community received 3,148 euros per adjusted inhabitant in 2022, compared to the national average of 3,367 euros and Cantabria's 4,163 euros, the best-funded region. This gap forces the region to assume a structural deficit and an ever-increasing debt each year to provide basic services such as healthcare, education, or social services. Currently, the Valencian Community bears the highest debt percentage of GDP among the common regime regions, exceeding 40%.