Chihuahua— The state of Chihuahua estimated income last year of 92 billion pesos, but actually collected almost 105 billion pesos, which places the entity in tenth place nationally in the systematic underestimation of resource collection, according to with the study “How do states spend?”, by the Mexican Institute for Competitiveness (IMCO).
The IMCO report considers that there are systematic, widespread and significant variations between the amounts approved by local Congresses in state expenditure budgets and those spent by local Finance Secretariats.
According to the organization, in Mexico one in every three pesos of public resources is used by state governments in areas that directly affect the country’s competitiveness and the well-being of the population, such as health, education and public safety.
In 2023, the governments of the country’s 32 federal entities spent 2.85 trillion pesos, which is equivalent to an average of 21,759 pesos per inhabitant.
The IMCO, with the purpose of promoting better planning of income and public spending, as well as promoting greater accountability in the states, evaluates the financial conditions of the states in the State Expenditure Exercise Report (IEEG).
Based on official sources, “this report examines whether state governments have collected as estimated in their revenue laws and whether their expenditures have adhered to what was approved in their expenditure budgets over the last decade (2015- 2023).
The study reveals the existence of systematic, widespread and, at times, significant variations between estimated and collected income, as well as between approved and incurred spending for multiple income items and state spending items, which distort the objectives and goals reflected in the Income Laws and Expenditure Budgets approved by local Congresses.
“Estimating less income than is actually collected is a widespread and recurring phenomenon. Each year over the past nine fiscal years, state governments as a whole have reported revenues between 6.6 and 17.9 percent higher than estimates.
This implies reallocations in spending that, if not adequately justified and monitored, can lead to discretionary use of public resources,” he warns.
In 2023, 31 of the 32 federal entities had revenues greater than programmed, so the state governments, together, collected 13.0 percent more than estimated (2.97 trillion pesos compared to the 2.63 trillion approved). In 15 entities, surplus income exceeded by more than 15 percent. In the case of Chihuahua, the difference between what was estimated and what was actually collected was 13 percent.
Spending, not always on budget
“State governments do not necessarily spend as budgeted. In practice, there are spending items or concepts where the amount finally spent is considerably greater or less than the approved amount, without local Congresses necessarily actively intervening in the authorization of such changes,” the IMCO study states.
In 2023, the 32 federal entities planned to spend 2.62 billion pesos, but they spent 2.85 billion pesos, which represented an excess of spending of 235.2 billion pesos, equivalent, for example, to 2.2 times the budget spent by the Government’s Health Secretariat. federal that year, in the order of 105.4 billion pesos.
“Although in 2023 the states obtained more income than estimated, different spending items presented underexercises. Among these items, the following stand out: Communications (-15.6%); Science, technology and innovation (-10.7%); Mining, manufacturing and construction (-5.4%); Housing and community services (-3.2%); and Fuels and energy (-3.0%)”, cites the study.
In addition, it states that public investment registered an underexercise in 2023. Although 119.9 billion pesos were authorized for this expenditure item, 106.5 billion pesos were spent, a figure 11.1% lower than that established in the state expenditure budgets.
“The type of budget adjustments – both cuts and increases – that are documented, reveal areas of opportunity in the planning, execution and monitoring of public resources, and highlight the importance of limiting the discretion that the state Finance Secretariats have in the management of local resources,” he criticizes. “In particular, they demonstrate the need for the state Legislative Branches, including local oversight bodies, to comply with the powers conferred on them by the Constitution and act as counterweights in the management of state public spending.”
The 10 states that underestimated the most income
In the area of income, the states that most underestimated their collection did so by between four and almost 40 percent.
The State of Mexico was the one that, in absolute terms, detached its income projection the most from its real income. That is, it projected to raise 310 billion pesos by 2023, but in reality it raised 323 billion pesos, which represents an underestimation of 4.4 percent.
Mexico City projected revenues of 233.8 billion pesos, but managed to collect 271 billion pesos, a difference of 16 percent; while Nuevo León, which in absolute terms is the third place nationally, collected 186 billion pesos, when it estimated income of just 140 billion pesos, a differential of 24.7 percent.
Veracruz, the fourth national place, estimated income of 148 billion pesos and actually collected 172 billion pesos, while Jalisco, the fifth place in the table, projected 158 billion and received 163 billion pesos into its coffers.
Chiapas, Puebla, Guanajuato and Sonora also showed a high discrepancy between the income they projected and those they actually collected. In fact, Sonora achieved a 39.5 percent difference between its projection and its actual income.
In tenth place, Chihuahua estimated just over 92 billion pesos and received 104.9 billion pesos into its coffers, according to the IMCO report.
Given this, the organization proposed greater control of state public spending, through the establishment of controls and monitoring mechanisms for the budget adjustments of the state Executive Branches; Likewise, it proposed modifying the Financial Discipline Law of Federal Entities and Municipalities (LDF) and local laws to regulate variations between the amounts approved and exercised by state governments.
Specifically, the IMCO proposed that if the budget adjustments exceed 15 percent of the approved budget, the state Secretary of Finance (or its equivalent) must justify and submit the proposed budget expansion or reduction to the authorization of the local Congress.
In addition, he requested greater participation of local Congresses in the approval and supervision of the expenditure exercise.
“Local Congresses, together with local oversight bodies, must fulfill their counterbalancing function by duly monitoring and supervising the variations observed between the amounts approved in the expenditure budgets and the amounts spent that are reported in the quarterly reports and public accounts. that the local executives send them,” he considered.
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