State Budgets: Understanding the Legislative Framework

Posted on Jan 16, 2025 in Law

Concept of General State Budgets

The General State Budgets (PGE) are a legislative act authorizing the maximum expenditure to be carried out during the financial year and the anticipated revenues needed to finance it. Annual budgets are approved by a law voted in the courts, establishing a maximum of obligations to be recognized by the state and its autonomous bodies, the full costs of the various entities that make up the state public sector, and all other income that each entity is expected to obtain in the corresponding year.

Characteristics of the PGE

  • A representative of the state’s financial revenue and expenditure of the public sector.
  • An act of authorization and control of the legislature over the executive, currently embodied in the obligations or expenditures of the state and its autonomous bodies.

Aspects

  • Legal: A set of rules governing relations between the various legislative and executive powers in relation to the budget cycle.
  • Juridico-financial: Studying the effects of the Budget Act with respect to state revenue and spending.

For the regulation of these aspects, the budget law has two mechanisms: legislative authorizations, through which the public sector provides the necessary financial resources to accomplish its purposes.

Contents of the Laws Regulating the PGE

There are two laws regulating the PGE: the Budget Law and the Law of Budgetary Stability.

  • The Budgetary Stability Law prohibits the expenditure of the state from being greater than income, and if it is not, the state must compensate for it in the next three years.
  • The Budget Law contains general budgetary rules necessary to develop the draft budget each year. The PGE are approved for each year by law.

Basic Content of the Titles of the Law of PGE

The PGE includes:

  • The state budget
  • The budgets of autonomous bodies of the state administration
  • The Social Security budget
  • The budgets of public bodies (Nuclear Safety Council, Instituto Cervantes, etc.)
  • Rating of public broadcasting (Spanish Radio and Television Corporation and other state corporations and TV broadcasting services)
  • The budgets of state corporations
  • Foundations
  • State budgets
  • The budgets of remaining public bodies

The PGE are developed in the following titles:

  1. Approval of budgets and their modifications, including all income and expenses. Also regulates the financing of healthcare.
  2. Budgetary management.
  3. The costs of active personnel, salaries of personnel in active service.
  4. Public transactions.
  5. Financial transactions.
  6. Tax rules.
  7. Social contributions.
  8. Local and regional.

Accompanying Law

The PGE Law is accompanied by a law containing fiscal, administrative, and social measures. The accompanying law stipulates certain reforms in the field of taxation, partly amending the legal regime of Social Security, and introduces some legislative changes on regulations governing the staff serving the administration.

The Budget Cycle

The budget cycle consists of different phases: preparation, approval, execution, and control.

  • Preparation: This is the responsibility of the executive power. The government has the ultimate authority for cabinet approval of the bill prepared by the Ministry of Finance and its referral to the courts, following the guidelines of the Constitution in Article 134.1 (corresponding to the government the production of PGE and the Cortes Generales to examine, approve, and amend them).
  • Institutional: According to Article 134.2 of the Constitution, the PGE will annually include the full costs and income of the state public sector and record the amount of tax benefits affecting state taxes.

Preparation, Discussion, and Approval

Preparation: This corresponds principally to the Government. The General Budget Law sets the procedure for the preparation of the PGE, shown every year by a Finance Ministry order that dictates the rules to be followed by ministerial departments. The Government must present the bill of PGE in the courts before October 1st of each year.

Discussion: This starts with the presentation of the Budget Act in accordance with the steps indicated in the Constitution and regulations of the Congress and Senate.

Approval: The passage of the bill begins with the budgets of all discussions that take place in the plenary chamber, and once approved, it is sent to the Budget Committee for their opinion and their publication in the newsletter of the Cortes Generales.