One of the critical points of the agreement between the Partit dels Socialistes de Catalunya and Esquerra Republicana de Catalunya for the investiture of Salvador Illa rests on the demand for ordinality in the financing of the Autonomous Communities (CC. AA.). What is understood by ordinality and how to land it in a context like Spain constitutes the subject of this article.
First of all, while it may seem like a nominal issue, it is worth softening the tone of the concept. There is no principle of ordinality in the current legislation. In Article 2 of the Organic Law on the Financing of the Autonomous Communities, where the principles that should inspire their financial regime are laid out, there appear sufficiency, co-responsibility, solidarity, among others, but nothing referring to ordinality. Could it be a principle? Yes, of course, as are some others, but today it is not, and elevating it to that category would require a substantial legal reform due to its significance.
There is, however, a more explicit reference to ordinality in the Statute of Catalonia of 2006, whose Article 206.5 states that “the State will guarantee that the application of leveling mechanisms will in no case alter Catalonia’s position in the per capita income ranking among the Autonomous Communities before leveling.” But in order to invert that ranking in terms of per capita income, a North Korea–level intensity of leveling would be required, which makes the cited article a fantasy.
In my view, therefore, ordinality is more of a political criterion or condition, legitimate but partisan, and subject to a malleability and temporality different from the category of a guiding principle.
“To my mind, therefore, ordinality is more of a political criterion or condition, legitimate but partisan, and subject to a malleability and temporality different from the category of a guiding principle”
Its precise definition leads, in my view, to two versions of the same. The strong one, in which financing per inhabitant adjusted for the cost of living reproduces the ranking by which the CC. AA. stand in terms of tax revenue per rightful inhabitant; that ranking in financing can be sharpened or softened depending on the desired intensity of ordinality (a kind of gradient of ordinality). And the weak one, by which the classification of the CC. AA. in financing per inhabitant adjusted does not invert their relative position with respect to the average in terms of tax revenue, also per rightful inhabitant.
These two definitions yield two interesting corollaries. One, obvious, is that a situation in which all the CC. AA. received the same funding per adjusted inhabitant would respect the weak version of ordinality. Another, more complex, concerns the use of the term “tax receipts” instead of the overused “fiscal capacity.” I consider the former appropriate in this context, insofar as it can incorporate a differential fiscal effort that yields more receipts, beyond the mere potential of the “fiscal capacity.” Therefore, displays of fiscal capacity that do not materialize into tax receipts aligned with the first would not be useful.
Llegados a este punto estoy en condiciones de defender una nivelación completa, esto es, compatible con una ordinalidad débil. Y hacerlo sobre la base de la equidad y sin efectos perjudiciales sobre la eficiencia.
“In relation to equity, my main argument is that it facilitates that all individuals in a country, regardless of their place of residence, can access the same level of consumption of preferred social goods such as education, health care, or assistance to those dependent”
En relación con la equidad, mi principal argumento es que facilita el que todos los individuos de un país, con independencia de su lugar de residencia, puedan acceder al mismo nivel de consumo de bienes sociales preferentes como la educación, la sanidad o la ayuda a la dependencia. If we were talking about the consumption of private goods or services (say Lamborghinis or rock concerts), my position would, of course, be different. Redistributing for the first, and with sufficient intensity, yes. For the second, which could also be extended to an expansive concept of income, no.
This distinction, precisely, obliges us to qualify the intuitive and understandable complaint of “if I contribute more than others, why do I receive the same?” First, because that should be the prevailing equity criterion according to constitutional mandate, above regions. And second, because complete leveling does not lead to an “excessive” redistribution in all vectors of equality/inequality. Equalizing the consumption of the aforementioned preferred social goods would not erase the remaining post-redistribution income differences, maintaining a necessary—therefore—gradient of ordinality.
¿Sin perjuicio de la eficiencia? This is, would the recipient autonomous governments of net flows in that leveling not come to accept the “handout” of autonomous financing? No. With a design even like the current one, improved in the calculation of the so-called normative revenues, those CC. AA. that reduced their taxes below a certain level would not be entitled to the solidarity of the others. At FEDEA we have several proposals on how to calculate those normative revenues, linked to the relative tax effort and the tax bases of each Community.
“With a design even like the current one, improved in the calculation of the so-called normative revenues, those CC. AA. that reduced their taxes below a certain level would not be entitled to the solidarity of the others”
If, moreover, the issue is framed in dynamic terms, advances in this area would grow. For example, complete leveling could be guaranteed in the initial year and let the ordinality be given by the evolution of the tax bases of each region. It would be a clear way to foster fiscal responsibility in the autonomous governments. The current model already establishes a mechanism similar in the design of the Fund for the Guarantee of Fundamental Public Services, which only mutualizes 75 percent of normative revenues. But the poor calculation of these and, above all, the functioning of the rest of the funds to guarantee the status quo and other battles of political economy, turn the distribution pattern into a mess of difficult-to-justify reasons.
In short, a weak ordinality would be compatible with complete leveling. Without harming efficiency and without opening spigots of inequality across the territory. A strong and pronounced ordinality, on the other hand, would not only challenge the solidarity principle (this one, indeed) but could also lead to inefficient movements of people and companies in the medium to long term.
