Financial aid and flexibility for local governments during the COVID crisis

Automatic summary, not yet reviewed

1. Local governments will be able to use their 2019 budget surplus in 2020 to finance financially sustainable investments, and if a project cannot be completed in 2020 they may finish executing it in 2021.
2. Investments paid with the 2018 surplus that started in 2019 may be completed in 2021, because the state of alarm halted many works and contracts.
3. City councils, provincial councils and island councils may voluntarily lend their 2019 treasury remainder to the State as a loan, to be repaid within a maximum of fifteen years starting in 2022.
4. The State creates an extraordinary credit of up to €5,000 million for local governments: at least 35% of what each one contributes, earmarked for urban agenda and sustainable mobility, local care services and culture. 40% is paid in 2020 and the remaining 60% in 2021.
5. Another extraordinary credit is authorized, €275 million expandable to €400 million, to compensate local governments for the loss of revenue in their public transportation services during the state of alarm and until the end of 2020.
6. Local governments with a 2019 surplus may spend in 2020 the unused part of the surplus, or the treasury remainder if larger, as long as they close 2020 with a balanced budget. In addition, in 2020 they will not be required to comply with the spending rule.
7. Provincial councils must financially support municipalities in their territory with liquidity problems or in financial risk, especially those with fewer than 20,000 inhabitants, through loans or transfers charged to their 2019 surplus.
8. Municipalities in financial risk may cancel debts with the Tax Agency and Social Security by replacing them with loans from the Local Government Financing Fund, and convert short-term debt into long-term debt.

Who it affects

• City councils and other local governments: They can use their surplus and treasury remainders more freely, receive State transfers and take out loans on better terms.
• Provincial councils and equivalent bodies: They are required to financially support struggling municipalities in their territory.
• Municipalities in financial risk or with liquidity problems: They can cancel debts with the Tax Agency and Social Security, consolidate short-term debt into long-term debt and receive support from provincial councils.
• Local public transportation users: Part of the deficit of locally owned transportation services caused by the pandemic is compensated.
• Foral councils of the Basque Country and island councils of the Canary Islands: They may apply their 2019 surplus to offset the drop in revenue from agreed State taxes.

Words worth knowing

Superávit (budget surplus)

When a year's revenue exceeds spending, that is, money left over when the accounts close.

Remanente de tesorería para gastos generales (treasury remainder for general expenses)

The liquid money a local government has left after paying its debts and obligations for the year.

Regla de gasto (spending rule)

A legal limit on how much a public administration's spending can grow each year.

Inversiones financieramente sostenibles (financially sustainable investments)

Investment spending that can be paid without harming the entity's future financial health.

Entrega a cuenta (advance payment)

An advance payment the State makes to local governments of their share of State taxes.

It summarizes the law as published in the BOE. It is written by artificial intelligence and may contain mistakes: the official text is what counts. Read the official text · How we make summaries