With the impact of the Covid-19 pandemic and the current economic situation, it is not the time for subnational entities to have greater collection powers; however, it is feasible to generate a national debt policy focused on states and municipalities, assured the head of the Superior Audit Office of the Federation (ASF), David Rogelio Colmenares Páramo.
Derived from a conversation with the College of Economists of Oaxaca, where the liquidity problem faced by the states and the indebtedness they have had over the years was raised, the auditor ruled out that it is time to give more collection powers to local governments because most do not take advantage of – or do not know how to implement – local taxes.
“I don’t see it as viable if they don’t collect what they already have. Who raises well? (…) At some point Campeche collected 18%, but states like ours (Oaxaca) do not collect more than 5% and I am already being generous (…) It makes no sense to give them more tax powers if we know that the average does not to use,” he said.
In addition, he indicated that granting them more powers would also generate a control problem, since if they are local resources, it would be at the discretion of each entity to spend them; As an example, the expenditure made by the states on basic education stands out.
However, the official pointed out that for entities to have greater liquidity and more in economic times like those of this 2022, it is time to generate a national policy focused on debt, which is sustainable but transparent.
“Make a debt policy, but transparent, not open amounts, but see how it is going to be contracted (…) We should have a debt policy at the state level, each state has its own peculiarities, but certain principles can be agreed upon in the National Fiscal Coordination System”, explained Rogelio Colmenares.
He added that generating this type of policy would also help debt resources to have a productive purpose, in addition to reinforcing the Financial Discipline Law and the current gaps it has.
Currently, he said, it is not on the radar that there are entities and municipalities that have other types of debt that affect local finances (such as those of suppliers) and focus on short-term financing.
As an example, he highlighted the case of Tlaxcala, which although it is located as one of the entities that do not have indebtedness and that is even a reference in the Alert System of the Financial Discipline Law, it has had debt problems with suppliers.
“According to its Constitution, you cannot have a debt greater than one year. So, you don’t really have debt recorded; however, in the governments, I don’t know how it has been now in this government, which has just entered, but they left them a supplier debt (…) In Oaxaca there were people who told me that they owed the government, “he said.
Meanwhile, generating a policy or instrument would also help states and municipalities to know how to access debt, make it productive, and how to liquidate it. “Today, there are still many states where they have access to credit, many states are still not clear about what the debt is for.”
Behavior
Colmenares Páramo explained that although it is an indicator that in recent years, and in particular in this federal administration, it has generated a reduction in the indebtedness of subnational governments, it must be reviewed that not all states can access indebtedness.
As a sample, of the 32 states, five concentrate more than 50% of the debt.
The head of the ASF stressed that currently what happened with local governments has to be analyzed, since with the pandemic they did not get more indebted, contrary to what happened in 2008.
“In 2006 the total debt of states and municipalities was 160,000 million pesos and it evolved to 434,000 million in 2012, to 601,000 million in 2018 and by 2021 it is at 660,000 million. But I want to tell you that the big jump was from 2006,” he added.