Introduction
According to a report by the Center for Studies of Public Finances (CEFP), 25 out of Mexico’s 32 states collectively owe $88,169.4 million to the Institute of Security and Social Services for State Workers (ISSSTE) as of August 2021. This debt represents contributions made by the states in their capacity as employers.
Debt Distribution
The debt burden is concentrated in Veracruz, Guerrero, Michoacán, Hidalgo, Oaxaca, the Federal District (Ciudad de México), and Baja California Sur, which account for 82.2% of the total debt, equivalent to $72,473.9 million.
States Without Debt
Aguascalientes, Campeche, Chihuahua, Guanajuato, Jalisco, Querétaro, and Tamaulipas do not have any outstanding debts to the ISSSTE.
Veracruz’s Debt Breakdown
Veracruz leads the list with 24.5% of the total debt, amounting to $21,572.5 million. This debt is divided into two main categories:
- Health, Disability, and Life Insurance: This covers medical care financing, disability and death pensions, work-related accident protection, and social welfare services for state workers and their families. The amount is 122.6 million pesos.
- Retirement Insurance: This represents 99.4% of Veracruz’s debt to the ISSSTE, totaling $21,449.8 million. It covers employer contributions to capitalize workers’ future pension and retirement benefits.
Veracruz’s near-total failure to ensure the future of its state employees highlights this situation.
Heaviest Burden: Retirement Insurance
Retirement, advanced age, and old-age insurance constitute the heaviest part of the states’ debt to the ISSSTE, totaling $76,987.9 million or 87.3% of the combined debt.
Pension Debt Distribution
Pension debt is concentrated in five states, accounting for 75.4% of the total. Veracruz has the largest proportion at 27.9%, followed by Guerrero at 22.5%, Michoacán at 10.3%, Hidalgo at 7.7%, and Oaxaca at 7.1%. The remaining 24.6% is held by 17 states.
Baja California, Campeche, Chihuahua, Guanajuato, Jalisco, Nuevo León, Querétaro, Tamaulipas, and Tlaxcala have no pension debt.
Financing
The CEFP explains that the Health Insurance is financed by:
- The federal government’s social contribution per working and retired person
- Employer contributions for each working person
- Active worker contributions
For pensioners, the model varies depending on their incorporation date to the system. Pre-2007 pensioners only receive social contributions from the federal government per person. Post-2007 pensioners receive additional funding from active workers and federal government contributions.
Financial Projections
The ISSSTE’s financial projections paint a challenging scenario for upcoming decades. The CEFP anticipates that the Health Insurance operating expense will grow at an average annual rate of 7.6% between 2024 and 2028, while additional federal contributions required will increase by 13.6% annually in real terms.
This pressure is exacerbated by the epidemiological transition towards chronic degenerative diseases, such as diabetes, hypertension, and cancer, which accounted for $19,859 million in expenditures in 2021, equivalent to 12% of the institute’s total health budget.
The rapid aging of the beneficiary population, with life expectancy rising from 75.67 years in 2025 to 80.13 in 2050, and the decline in the working-age to retiree ratio from 3.3 in 2010 to 2.3 in 2023, present additional challenges.
By 2050, the additional federal contributions needed for the ISSSTE will equal 99.9% of the current Infrastructure, Communications, and Transportation budget.
Key Questions and Answers
- What is the ISSSTE? The Institute of Security and Social Services for State Workers (ISSSTE) is a Mexican public institution responsible for providing social security benefits to state sector workers.
- Which states owe the most to the ISSSTE? Veracruz, Guerrero, Michoacán, Hidalgo, Oaxaca, the Federal District (Ciudad de México), and Baja California Sur have the highest debts.
- What types of insurance make up Veracruz’s debt? Veracruz’s debt consists of health, disability, and life insurance, as well as retirement insurance.
- What are the financial challenges facing the ISSSTE? The ISSSTE faces rising operating expenses, increasing pensioner numbers, and a shrinking working-age population, all of which put pressure on its finances.
