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The Cabildo of Tenerife, governed by CC and PP and with the nationalist Rosa Dávila as president since July 2019, already knows for certain or has official confirmation that in its budget execution of 2024 it violated the so-called spending rule (on the consolidated budget: Cabildo of Tenerife, autonomous bodies, and dependent and attached public entities that consolidate in terms of National Accounting), which is as much as deviating from the legal objective or not attending to the considerations established in Organic Law 2/2012, of Budgetary Stability and Financial Sustainability. This is a state regulation of high rank and community connection that, after the suspension of its application due to the covid pandemic, resumed its validity from January 1, 2024.
In the first full year of budgetary management of the new island government (in the 2019-23 mandate), this is undoubtedly one of its negative balances: the computable expenditure for 2024 in the mentioned Corporation has reached the figure of 917.9 million euros, according to the report (identified on its cover as “independent report”) of the General Intervention of that same public administration (to which this digital newspaper has had access), although it should only have been, at most, 800.5 million, in application of the spending rule regulated by the mentioned organic law. The deviation, which has consequences, means exceeding the existing legal limit by almost 15% (14.7%), the already provided 800.5 million.
It should be known that the spending rule is a fiscal mechanism established within the framework of that organic law in order to guarantee the sustainability of public finances by limiting the growth of non-financial expenditure of public administrations. Thus, article 12 of the law requires local entities, among them the island cabildos, that the variation of computable spending does not exceed the reference rate of medium-term GDP growth of the Spanish economy. This rate rises to 2.6% for 2024, which is applied to the computable spending of the 2023 budget liquidation. That rate will be 2.7% for 2025 and 2.8% for 2026.
That financial gap in the Cabildo of Tenerife, always in accordance with what is regulated in the aforementioned organic law, requires the presentation and approval by the Cabildo of a Financial Economic Plan (PEF), commonly known as an adjustment plan, with the aim of rebalancing the accounts during this year, 2025, and the next, 2026.
As identified in the aforementioned document from the General Intervention, which consists of 41 pages, the non-compliance with the spending rule or the confirmed gap of 117.4 million euros for 2024 has its roots, among other elements, in the following:
-Deferred payments and investment agreements, mainly due to adjustments linked to hydraulic works with Acuaes, to operations such as the Taoro hotel and the Mencey hotel canon, which amount to 24.7 million euros.
-Expenses not applied to the Budget: more than 7.4 million euros were executed without being reflected in accounting, which mainly affects transparency and spending control.
-Payments to private operators in social and health centers: 1.9 million euros linked to infrastructure financed in previous years are computed.
-Investments through third parties: more than 5.6 million euros executed by other entities but computed as expenses of the Cabildo itself.
-And then the elimination of certain fees (hunting, roads, waste…). This has reduced structural income by more than 500,000 euros, which in turn lowers the legal spending limit.
Considering what Organic Law 2/2012 states about the implications of not complying with the spending rule, the Cabildo of Tenerife is now obligated to present a Financial Economic Plan (PEF) to correct the existing gap between this year and the next.
Along with the need to prepare, approve, and execute the adjustment plan, the Cabildo will be subject to the control of the financial oversight body, of the Government of the Canary Islands, which could impose conditions, evaluations, and additional requirements to ensure compliance with the program decided to restore economic-financial normality.
But it will not only be that. In addition, there can be credit retention, only in case of non-compliance, which would involve withholding part of the transfers or subsidies from the autonomous community or the State. This may be combined with the implementation of reinforced financial control, in which the Corporation would be subject to prior authorizations or special audits of its expenses by external financial control bodies.
And to all these indications also adds the reputational impact on the confidence towards the Corporation. Indeed, this non-compliance with the spending rule can negatively affect the levels of institutional credibility before the citizens, other public administrations, and public or private investors, which may affect the rating (credit rating) of the Cabildo of Tenerife.
