Introduction
The allocation of state and federal resources in Mexico has undergone significant changes from 2019 to 2023, revealing distinct priorities and weakening crucial subnational financial capabilities in healthcare, education, security, and public investment. This article explores the implications of these shifts in spending priorities, focusing on state and federal budgets for essential sectors.
State vs. Federal Spending
States receive resources through three primary channels: Participations (Ramo-28), contributions (R-33), and development agreements (part of R-23). State governments have discretion over Participations, while Contributions are legally earmarked for specific purposes. Development agreements are negotiated individually.
Contributions primarily fund state expenditures in healthcare, education, and public security. States rely on Participations and other transfers to finance local public investments, which are vital for human capital development and economic activity.
Key Sectors and Their Funding
The National Institute of Statistics and Geography (INEGI) provides data on the Expenditure Finance and Public Investment Program (EFIPEM) from 2011 to 2023. This data allows for the analysis of total spending and spending directed towards key sectors.
- During the first five years of the previous administration, state spending decreased while federal spending increased.
- State expenditures in crucial sectors experienced a significant decline.
- The drops in education and healthcare spending from 2019 to 2023 are particularly concerning, given the pandemic’s demands.
- State spending on public investment and security exacerbated the downward trend: state public investment in 2023 was at 53% of its 2011 level, and security spending was only 15%.
From 2019 to 2023, state spending on key areas declined as federal spending rose. Notably, the Secretariat of Well-being, housing social programs, increased its spending by an average of 34.5% annually during these years.
The decline in state spending on key areas resulted from a substantial reduction in development agreements with states, whose amounts are heavily dependent on federal will. Participations and contributions did not decrease.
Implications for Subnational Finances
Resources for healthcare, education, public security, and public investment have contracted, prolonging previous reductions. There are indications of insufficient subnational public finances overall.
Decentralization in healthcare, education, and security has faced challenges, with evident public infrastructure deficiencies. Since the global crisis 15 years ago, economic growth has declined, and subnational incomes have not been strengthened.
The allocation of public resources at the state level has put physical and human capital, as well as public security, on a precarious path. It is essential to reverse this trend and reorder and define the shared responsibility between the federal government and subnational entities, reviewing the rules governing coordination of responsibilities and resources for each level of government.
Key Questions and Answers
- What are the primary channels through which states receive resources? States receive resources through Participations (Ramo-28), contributions (R-33), and development agreements (part of R-23).
- How have state and federal spending priorities changed from 2019 to 2023? State spending on crucial sectors like healthcare, education, public security, and public investment has decreased, while federal spending has increased, particularly in social programs housed under the Secretariat of Well-being.
- What are the implications of these shifts in spending priorities? The decline in state spending on key areas has weakened subnational financial capabilities, and there are indications of insufficient public finances at the subnational level. The allocation of resources has put human and physical capital, as well as public security, on a precarious path.
