Understanding State Debt, Social Security, and Regional Finance

State Debt

State debt is comprised of capital borrowed by the state, representing the financial liabilities they have with the private sector. It serves as an alternative to taxes for funding public spending. State debt can be purchased in the primary market (banks or boxes) or the secondary market (stock exchange). Key features include:

• It is not collected coercively and does not constitute consideration for goods and services provided.
• It is obtained through emissions allowed by law.
• The issuance of public debt takes the form of securities.
• The operation does not establish a permanent link between the Administration and lenders.

Social Security Financing

Resources for funding social security include:

• Contributions from the General State Budget.
• Contributions from employers and workers.
• Amounts collected through surcharges or penalties.
• Income from assets.

The universal non-contributory protective action is financed by contributions from the State budget, excluding healthcare, which is transferred to the Autonomous Communities (CCAA). Contributory cash benefits of the Social Security system, not included above, and those arising from work accidents and occupational diseases are also considered.

The non-contributory benefits are:

• Healthcare benefits of the Social Security system and Social Services.
• Non-contributory pensions for disability and retirement.
• Supplements to minimum pensions of the Social Security system.
• Family benefits as defined by law.

Financing of Autonomous Communities

Overall Funding of Autonomous Regions

The financing of Autonomous Communities is fundamentally based on the Constitution, the Organic Law on Financing of the Autonomous Communities (LOFCA), the Law on Inter-territorial Compensation Fund, and the legal basis of the Statute of Autonomy.

The Constitution establishes general principles for the financing of Autonomous Communities and Local Corporations. These basic principles are:

• Principle of solidarity: The State shall ensure the establishment of an adequate economic balance and fair balance between the various parts of Spanish territory.
• Principle of legality: The regions and local corporations may establish and levy taxes in accordance with the Constitution and laws, as the primary power to tax rests exclusively with the State.
• Principle of free movement of goods: No authority may adopt measures to restrict the free movement of goods throughout the Spanish territory; internal tariffs are prohibited.

Furthermore, and exclusively for financing the Autonomous Communities, there are other basic principles:

• Principle of equity: The public authorities shall promote conditions for a better balance of regional income. The State may plan general economic activity to balance and harmonize regional development.
• Principle of free movement of goods: The regions may not introduce taxation measures on goods located in its territory or hinder the free movement of goods.
• Principle of financial autonomy: The Autonomous Communities shall enjoy financial autonomy for the development and execution of its powers.
• Coordination: Autonomous Communities coordinate with the State Treasury, which is the sole entity responsible for this.