Budget stability, financing and social responsibility in Spanish municipalities

Abstract

In this paper, we analyze the most relevant relationships between budgetary stability, the Municipal Financing System (SFM) and social expenditure policies, as fundamental pieces to define the level of Corporate Social Responsibility (CSR) that can be assigned to Spanish municipalities. We have started from the budgets of the 9,500 municipalities and other local Spanish entities, presented to the Court of Auditors in 2014, and available on the website of the Ministry of Finance. Based on this information, we developed a database (more than 1,500,000 records, big data, treated by data mining techniques) to per­form an analysis of the most significant factors explaining the relationship between budgetary stability, financial sufficiency and sustainability of welfare policies. Based on the above and the level of budgetary expenditures in the Basic Public Services programs (AG1) and the Social Promotion Protection Actions program (AG2), we propose two indicators to measure the level of CSR attributable to each municipality. The main findings of our research are summarized in three conclusions: that municipalities with budget deficits prioritize the reduction of their debt with financial institutions while diluting payment to suppliers; That the relations between the income and expenditure policies of each municipality have a direct impact on their level of CSR; And that, using a logit probability model, the hypothesis according to which the RSC of the municipalities can be explained by the size of their population and the way in which they are financed is confirmed.