Vertical Imbalances and Revenue Assignments in Decentralized Spain

This chapter provides an overview of the key issues in public economics arising from the process of territorial decentralisation that has taken place in Spain since the restoration of democracy and the Constitution of 1978, and which resulted in the emergence of the “Autonomic State”. The first section focuses on the assignment of competencies between central and regional levels of government and explains in some detail the methodology used to quantify the “effective cost” of the services devolved to the Autonomous Communities (hereinafter ACs). We have paid special attention to health services, which is the most significant item for regional budgets in quantitative terms. The second section deals with revenue assignment, transfers and borrowing, and describes the two systems established to finance regional expenditure. These are the “common system” (régimen común) applied in the majority of the ACs and the “charter system” (régimen foral), which is based on the historical rights accorded to the Basque Country and Navarre. The last section appraises the decentralisation process and notes some emerging issues of debate.