The powers that Madrid City Hall releases from payment to the Ayuso government amount to 860 million euros

More than eight hundred million euros. This is the annual debt that the Community of Madrid accumulates with the capital’s City Hall. Since José Luis Martínez-Almeida became mayor and Isabel Díaz Ayuso was inaugurated as regional president in 2019, transfers linked to the management of inappropriate powers in the region have multiplied, causing a notable deterioration in the supply of health services in the city.

Although the Local Government Rationalization and Sustainability Act of 2013 attempted to reduce and limit the exercise of abusive powers by municipalities, in practice many of these continue to be assumed by City Hall from Madrid without receiving the corresponding funding in return. These skills cover areas essential to civic life such as emergency services, housing, education, social assistance, health, employment or culture, which also generate significant expenditure in the municipal budget. .

Madrid City Council is obliged to allocate a considerable part of its budget to these non-obligatory expenses, which reduces its capacity to invest in its own and obligatory areas. A report prepared by the Municipal Socialist Group of the capital, to which Somos Madrid had exclusive access, exposes this problem in detail, highlighting the urgent need for a structural solution that involves the approval of a Municipal Charter for the city of Madrid, the revision of financing by the Community and the reform of the law on the capital on which the municipal government is working.

The PSOE considers that these three proposals are necessary so that Madrid City Council has sufficient resources to adequately finance the public services that fall under its jurisdiction. “A first step would be to update the framework of collaboration and co-responsibility with the Community of Madrid and the central government,” they explain.

According to the municipal opposition, the mayor only proposed to open the debate on the reform of the Capital Law to “a simple partisan strategy which seeks a permanent confrontation with the central government”, alleging that the latter does not give not enough resources at City Hall. However, data from the Socialist Party refutes this version. According to the Town Hall’s draft budget for 2025, current transfers from the State amount to 2,241.5 million euros, or 58 million more than the previous year. Only the Supplementary Financing Fund increases its allocation by 5.9%. However, the Community of Madrid will contribute 128.5 million, only 3.2% more than in 2024, or around five million more.

Even if the State has increased transfers to the Town Hall, the Community contributes less than the other regions. An example is Barcelona, ​​which has a capital law and receives more than double per capita despite having half the population of Madrid.

Barcelona receives more than double the funding per capita despite having half the population of Madrid.

The problem of inappropriate management of powers is old, even if it has worsened significantly in recent years. Since 2008, Madrid City Hall has documented the impact of non-obligatory spending on its finances. That year, Mayor Alberto Ruiz-Gallardón estimated this type of transfer at more than 1.3 billion euros, which represented 25% of the municipal budget. A subsequent study by the Barcelona Institute of Economics carried out in 2010 confirmed the scale of the problem, highlighting that non-obligatory spending amounted to around 362 euros per capita and was concentrated on security, social services and culture.

More recently, a doctoral thesis from the Complutense University of Madrid in 2021 updated this data, identifying an increase in non-obligatory spending and noting that, in some cases, it exceeded 35% of the City Hall’s annual budget allocations. This represents an increase of 10% compared to 2008, which translates into €58 million more allocated to abusive powers than 16 years ago.

Social assistance and education, among the most affected areas

The financial imbalance does not only affect municipal accounts, it also has a direct impact on the lives of citizens. The lack of resources limits the City Hall’s ability to improve urban infrastructure, expand the supply of affordable housing or modernize public transport, services that Madrid residents maintain thanks to their taxes and from which they would cease to benefit if the budget allocated to their maintenance was reduced. redistributes to other problems. The report identifies in detail the main areas where non-compulsory spending has a significant impact. If we put aside the consolidated EMVS housing expenses and the administrative expenses of security personnel, social assistance and education top the list.

Municipal programs aimed at social assistance are essential to guarantee the well-being of citizens, especially the most vulnerable. However, the Community of Madrid does not cover the full costs of these initiatives, forcing the City Council to use its own resources. This is the case with the home help service. This program, which allows elderly and dependent people to stay at home, incurred an expenditure of 198.3 million euros in 2023, of which the Community only financed 58.9 million. Something similar happens with day centers. These facilities, vital for the care of the elderly, cost the Town Hall 60.9 million last year, with a regional contribution of only 11 million.

The same goes for assistance to the homeless, a service for which the Community has only transferred 250,000 euros in 2023. Only the nominal grant that the Town Hall has granted to the Federation of Entities and Centers Integration and Assistance to the Marginalized (Faciam), amounted to 2,385,000 euros. The budgetary program that manages this public policy spent 42.4 million euros last year, of which the Community only contributed 0.6%.

Education follows the same line, particularly in the fight against school absenteeism and the offering of additional services to students. Education aid spending amounted to five million euros in 2023, while the Community only transferred 400,000 euros, leaving a significant gap. Also affected are nursery schools and specialized education centers managed by the Town Hall, which do not receive adequate funding even though they constitute key skills for the social and economic development of the city.

Concerning the promotion of employment, the Town Hall manages several budgetary programs intended for this work through the Employment Agency. In 2023, expenditure in this area was 57.2 million euros and the transfer from the Community to the aforementioned Agency was 26.4 million euros for the annuities of 2023 and 2024, or 13.2 million euros. euros for each year, the regional government therefore only covered 23.1% of this non-obligatory expenditure.

One of the most serious cases is that of consumer defense. It is not that expenses have been reduced, but rather that they lack funding from the Community of Madrid. This competence was no longer considered to belong to the municipalities after the reform of the law regulating the bases of local government by the law on the rationalization and sustainability of local administration of 2013. However, the municipality provides this public service without change. none, with an expenditure of 9.1 million euros in 2023 without the Community contributing a cent to its financing.

The same goes for cultural promotion, management of historical and artistic heritage, trade, business and entrepreneurship development or the promotion of innovation. All these powers and services do not benefit from any funding from the Community of Madrid.

A renewed financial model

In the report, the Municipal Socialist Group not only describes the expenses incurred by the city in managing abusive powers, but it also proposes a solution to the financial imbalance. According to what they emphasize, the transfers from the General Administration of the State to Madrid City Hall would more than cover the non-obligatory expenses that this administration must face. On the contrary, they assure that the transfers from the Community of Madrid are totally insufficient and that a range between 700 and 885 million euros per year can be established for the amount of debt that the Community has with its capital.

Although the Local Government Streamlining and Sustainability Act 2013 attempted to reduce or limit the exercise of inappropriate powers by municipalities, in practice many of these powers continue to be assumed by the Madrid City Hall without receiving the corresponding funding. Madrid City Council is obliged to allocate a considerable part of its budget to these non-obligatory expenses, which reduces its capacity to invest in its own and obligatory skills.

A possible solution to this situation would be that the scope of a political commitment for the development and approval of an autonomous capital law or a municipal charter for the Municipality of Madrid, which should include sufficient funding for support the above-mentioned expenses, either through participation in taxes collected by the Community or through a canon or non-finalist capital fund.

In this sense, the Socialist Party also considers a review of regional transfers essential. To this end, it proposes a financing mechanism based on participation in regional taxes, similar to the Catalan model, which would ensure that the Community covers at least 70% of the costs linked to abusive powers. Strengthening inter-administrative relations would also help resolve the problem, an issue for which they suggest the creation of specific consortia to coordinate projects between the Town Hall and the Community. He also calls for greater transparency in the allocation of resources and the implementation of joint audits.

The PSOE insists that Madrid faces a structural challenge that affects the quality of public services and their financial viability. Establishing an adequate regulatory and financial framework would help resolve the imbalance, which is why they urge the regional government to take responsibility and ensure that the capital has the necessary resources to serve citizens.