Collection falls in January and states receive less money than scheduled

80% of the income executed by the states and municipalities originate from transfers made by the federal government.

The Ministry of Finance and Public Credit (SHCP) attributes this drop to a 13.3% real decrease in January in participable federal revenue, which translated into a 4.8% annual real decrease in shares delivered to entities federations and municipalities.

In total, the shortfall for the 32 entities was 4,723 million pesos. 21 states, representing 66%, had this problem, while 11 states; 34% registered revenues above what was programmed.

However, the contributions for education, health and social infrastructure, which are also part of federal spending, grew 3.1% in real terms compared to January of the previous year, explained the Treasury in its January report on public finances and debt.

Red lights come on

The situation turns on the red lights for public finances, since a slow growth in tax collection is estimated, especially ISR, which comes mainly from the payment of taxes by companies, due to auditing acts, that is, non-recurring income , explained Mariana Campos, coordinator of the Public Expenditure and Accountability Program of México Evalúa.

The threat to the entities comes from the fact that when there are shortages such as those registered in January, they are compensated with money from the Fund for the Stabilization of the Income of the Federative Entities (FEIEF), which reported historical minimum levels at the end of 2022.

At the end of last year, the FEIEF reported a balance of 21,847 million pesos, not even a third of its highest balance in 2018, which was 76,548 million. Most of these balances were used due to the slowdown of the Mexican economy in 2019 and the economic crisis generated by the covid-19 pandemic in 2020, Treasury figures refer.

In January, the Moody’s credit rating agency warned that in 2023 this fund will suffer a 43% reduction as a result of the economy growing less than what was projected by the Treasury: 3%, in addition to “optimistic collection estimates in the economic package of the federal government”.