Overview and Background
In the first half of 2025, state and local governments received fewer resources from the federal government due to a cut in programmable spending for subnational entities. According to data from Mexico’s Secretariat of Finance and Public Credit (SHCP), federalized resources, which are funds transferred by the federal government to state and local administrations, totaled 1.4 trillion pesos in the first half of the year.
This amount represents a 0.6% annual decrease, adjusted for inflation, following three consecutive years of increases from the start of 2022 to mid-2024.
Importance of Federalized Resources
Federalized resources account for approximately 85% of the total income of federated entities (states) before the pandemic, excluding financing resources and the City of Mexico’s 56% share. These funds are crucial for state and local governments’ operations.
Gasto Federalizado Components
The 0.6% decrease in federalized resources is primarily due to a single component’s growth: federal participations, the most significant part of federalized spending. This portion is non-programmable, giving local administrations discretionary funds dependent on federal participable revenue, economic activity, and population.
In the first half of 2025, federal participations increased by 3.5%. Most states experienced growth in this area due to improved economic dynamics, resulting in higher revenue collection.
Programmable Federal Contributions
The second most important transfer component from the federal government to states and municipalities is programmable federal contributions, which address issues in education, health, social infrastructure, security, and financial strengthening.
These resources decreased by 2.9% annually in real terms, with allocation depending on the federal government’s budget construction.
The most significant declines were observed in the Decentralization Conventions (-15.5%) and Social Protection in Health (-13.6%) sectors, while the Reassignment Conventions sector did not report any resources during the reference period.
States with Reductions
Out of Mexico’s 32 federated entities, 18 states experienced annual decreases in federalized spending, adjusted for inflation, during the first half of 2025.
States with the most significant reductions were located in various regions of Mexico. Hidalgo led this list with an 8.3% contraction, followed by Oaxaca (-7.6%), Sonora (-5.6%), Michoacán (-5.5%), Guerrero (-5.2%), and Sinaloa (-5.0%).
Other notable states with reductions include Colima, Tabasco, Chiapas, the City of Mexico, Puebla, Baja California Sur, Tamaulipas, Chihuahua, Guanajuato, San Luis Potosí, and Yucatán. A common factor among these entities is their economic weakness.
On the other hand, Coahuila, Veracruz, Quintana Roo, Campeche, Durango, Aguascalientes, Baja California, Tlaxcala, and Jalisco registered the most significant increases in federalized spending during the first half of 2025.
Among subnational governments, the Estado de México, the nation’s capital, Veracruz, Jalisco, Chiapas, Puebla, Nuevo León, Guanajuato, and Oaxaca received over 50,000 million pesos each in federalized resources.
Among this group, increases were observed in the Estado de México, Veracruz, Jalisco, and Nuevo León, with only the City of Mexico experiencing a decrease in federalized spending among economies contributing significantly to the national Gross Domestic Product (GDP).
Key Questions and Answers
- What led to the decrease in federal resources? The primary reason for the 0.6% decrease in federalized resources is a cut in programmable spending for subnational entities, mainly due to reduced federal participations.
- Which components of federalized resources experienced growth? Federal participations, the most significant part of federalized spending, grew by 3.5% in the first half of 2025.
- Which states had the most significant reductions in federalized resources? Hidalgo led with an 8.3% contraction, followed by Oaxaca (-7.6%), Sonora (-5.6%), Michoacán (-5.5%), Guerrero (-5.2%), and Sinaloa (-5.0%).
- Which states experienced growth in federalized resources? Coahuila, Veracruz, Quintana Roo, Campeche, Durango, Aguascalientes, Baja California, Tlaxcala, and Jalisco registered the most significant increases in federalized spending during the first half of 2025.
- Which subnational governments received the most federalized resources? The Estado de México, the nation’s capital, Veracruz, Jalisco, Chiapas, Puebla, Nuevo León, Guanajuato, and Oaxaca received over 50,000 million pesos each in federalized resources.
