More than eight hundred million euros. That is the annual debt that the Community of Madrid accumulates with the capital’s City Council. Since José Luis Martínez-Almeida became mayor and Isabel Díaz Ayuso was inaugurated as regional president in 2019, transfers linked to the management of improper powers in the region have been increasing, causing a notable deterioration in the provision of health services. the city.
Although the Law on Rationalization and Sustainability of Local Administration of 2013 attempted to reduce and limit the exercise of improper powers by municipalities, in practice many of them continue to be assumed by the Madrid City Council without, in return, receive the corresponding financing. These competencies cover essential areas for citizen life such as emergency services, housing, education, social assistance, health, employment or culture, which also generate significant expenditure in the municipal budget.
The Madrid City Council is forced to allocate a considerable part of its budget to these non-mandatory expenses, which reduces its ability to invest in its own and mandatory areas. A report prepared by the Municipal Socialist Group of the capital to which Somos Madrid has had exclusive access exposes this problem in detail, underlining the urgent need for a structural solution that involves the approval of a Municipal Charter for the city of Madrid, the review of financing by the Community and the reform of the Capital Law on which the municipal government is working.
The PSOE considers that these three proposals are necessary so that the Madrid City Council has sufficient resources to adequately finance the public services that fall under its jurisdiction. “A first step would be to update the collaboration and co-responsibility framework with the Community of Madrid and the central government,” they explain.
According to the municipal opposition, the mayor has only proposed opening the debate on the reform of the Capital Law for “a mere partisan strategy that seeks permanent confrontation with the central government”, alleging that it does not provide sufficient resources to the City Council. However, data from the Socialist Party refute this story. According to the City Council’s Budget project for 2025, current transfers from the State total 2,241.5 million euros, 58 million more than in the previous year. Only the Complementary Financing Fund increases its allocation by 5.9%. However, the Community of Madrid will contribute 128.5 million, only 3.2% more than in 2024, or in other words, around five million more.
Although the State has increased transfers to the City Council, the Community contributes less compared to other regions. An example of this is Barcelona, which does have a Capital Law and receives more than twice as much per inhabitant despite having half the population of Madrid.
Barcelona receives more than double the funding per inhabitant despite having half the population of Madrid
The problem with the management of inappropriate powers goes back a long way, although in recent years it has suffered a significant rise. Since 2008, Madrid City Council has documented the impact of non-mandatory expenses on its finances. In that year, Mayor Alberto Ruiz-Gallardón estimated this type of transfers at more than 1.3 billion euros, which represented 25% of the municipal budget. A subsequent study by the Barcelona Institute of Economics carried out in 2010 confirmed the magnitude of the problem, highlighting that non-obligatory spending was around 362 euros per inhabitant and was concentrated on security, social services and culture.
More recently, a doctoral thesis from the Complutense University of Madrid in 2021 updated this data, identifying an increase in non-mandatory expenses and noting that, in some cases, they exceeded 35% of the City Council’s annual budget allocations. This represents an increase of 10% compared to 2008, which translates into 58 million euros more allocated to improper powers than 16 years ago.
Social assistance and education, among the most affected areas
The financial imbalance not only affects municipal accounts, it also has a direct impact on the lives of citizens. The lack of resources limits the City Council’s ability to improve urban infrastructure, expand the supply of affordable housing or modernize public transportation, services that Madrid residents maintain with their taxes and from which they would stop benefiting if the budget allocated to their maintenance were reduced. redistributes to other issues. The report identifies in detail the main areas where non-mandatory spending has a significant impact. Leaving aside the consolidated expenditure on Housing of the EMVS and the administrative expenditure of security personnel, social assistance and education top the list.
Municipal programs aimed at social assistance are essential to guarantee the well-being of citizens, especially the most vulnerable. However, the Community of Madrid does not cover the total costs of these initiatives, which forces the City Council to use its own resources. This is the case of the home help service. This program, which allows elderly and dependent people to remain in their homes, had an expenditure of 198.3 million euros in 2023, of which the Community only financed 58.9 million. Something similar happens with day centers. These facilities, vital for the care of the elderly, cost the City Council 60.9 million last year, with a regional contribution of only 11 million.
The same also occurs in terms of care for homeless people, a service for which the Community transferred only 250,000 euros in 2023. Only the nominative subsidy that the City Council granted to the Federation of Entities and Centers for the Integration and Help of the Marginalized ( Faciam), was 2,385,000 euros. The budget program that manages this public policy spent 42.4 million euros last year, of which the Community only contributed 0.6%.
Education follows the same line, especially in the fight against school absenteeism and the provision of complementary services for students. Expenditure on educational support amounted to five million euros in 2023, while the Community transferred only 400,000 euros, leaving a significant gap. Nursery schools and special education centers managed by the City Council have also been affected, which do not receive adequate funding despite being key competencies for the social and economic development of the city.
Regarding the promotion of employment, the City Council manages several budget programs aimed at this work through the Employment Agency. In 2023, the expenditure on this matter was 57.2 million euros and the transfer from the Community to the aforementioned Agency of 26.4 million euros for the annuities of 2023 and 2024, that is, 13.2 million euros for each year, so the regional government only covered 23.1% of this non-obligatory expense.
One of the most serious cases is that of consumer defense. It is not that spending has been reduced, it is that it lacks any financing from the Community of Madrid. This competence was no longer contemplated as belonging to the municipalities after the reform of the Law Regulating the Bases of Local Regime by the Law of Rationalization and Sustainability of Local Administration of 2013. However, the City Council has been providing this public service without change. none, with an expenditure of 9.1 million euros in 2023 without the Community contributing a cent to its financing.
The same occurs with cultural promotion, management of historical-artistic heritage, commerce, business development and entrepreneurship or the promotion of innovation. All these powers and services do not have any funding from the Community of Madrid.
A renewed financial model
In the report, the Socialist Municipal Group not only describes the expenses incurred by the city for the management of improper powers, it also proposes a solution to the financial imbalance. According to what they point out, the transfers from the General State Administration to the Madrid City Council would more than cover the non-obligatory expense that this administration must face. On the contrary, they assure that the transfers from the Community of Madrid are completely insufficient, and a range of between 700 to 885 million euros per year can be established for the amount of debt that the Community has with its capital.
Although the Law on Rationalization and Sustainability of Local Administration of 2013 attempted to reduce or limit the exercise of inappropriate powers by municipalities, in practice many of these powers continue to be assumed by the Madrid City Council without, instead, receive the corresponding financing. Madrid City Council is forced to allocate a considerable part of its budget to these non-mandatory expenses, which reduces its ability to invest in its own and mandatory powers.
A possible solution to this situation would be that the scope of a political commitment for the preparation and approval of an Autonomous Capital Law or Municipal Charter for the municipality of Madrid, which should include sufficient financing to support the aforementioned expense, either through the participation in taxes collected by the Community or through a canon or non-finalist capital fund.
In this sense, the Socialist Party also considers a review of regional transfers essential. To this end, it proposes a financing mechanism based on participation in regional taxes, similar to the Catalan model, which would guarantee that the Community covers at least 70% of the costs associated with improper powers. Strengthening inter-administrative relations would also make it possible to tackle the problem, an issue for which they suggest the creation of specific consortia to coordinate projects between the City Council and the Community. It also advocates for greater transparency in resource allocation and the implementation of joint audits.
The PSOE insists that Madrid faces a structural challenge that affects the quality of public services and their financial sustainability. The implementation of an adequate regulatory and financial framework would help resolve the imbalance, which is why they urge the regional government to assume its responsibility and guarantee that the capital has the necessary resources to serve citizens.
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