Of the Interior Ministry, with which forwards the initiative of decree Law Financial Discipline of the States and Municipalities is issued, and the Laws of Fiscal Coordination, General Public Debt are amended, and General Accounting governmental
Mexico City, August 17, 2015.
Board members of the Permanent Commission of the Congress of the Union
instructions from the President of the Republic and in exercise of the
power conferred by Article 71, Section I of the Constitution of the
United Mexican States, based on the provisions of Article 27, Section
II, of the Organic Law the
Federal Government, I would refer the initiative to decree the Law of
Financial Discipline of the States and Municipalities is issued, and
laws are reformed Fiscal Coordination, General Public Debt and General
Government Accounting, in order that for your kind conduit, is sent to the Chamber of Deputies of the Mexican Congress.
based on the provisions of Article 18 of the Federal Budget and Fiscal
Responsibility, I accompany the present copies of trades numbers
312.-A-002 859 and 353.A.-0430, the Ministry of Finance and Credit public, by which sends the opinion of budgetary impact.Without further ado, I take this opportunity to reiterate the assurances of my highest consideration.
Mr. Felipe Solis Acero (heading)UndersecretaryChairman of the Board of the Chamber of Deputies of the Mexican CongressPresent
on the Article 71, Section I of the Constitution of the United Mexican
States, I would submit its worth through, before this honorable
assembly, the initiative to decree the Law of Financial Discipline is
issued of the States and Municipalities, and the Law of Fiscal Coordination,
General Public Debt and General Government Accounting are reformed.
This initiative is submitted for consideration of that sovereignty to
regulate the recent constitutional reform in financial discipline of the
states and municipalities, which was published in the Official Gazette
on 26 May this year.
to the aforementioned constitutional reform, in terms of Article 73,
Sections VIII, and XXIX-W, the Congress has the power to establish laws,
the general rules for states, the Federal District and municipalities
to incurring indebtedness; the
limits and conditions under which such orders may affect government
shares allocated to them to cover the loans and payment obligations that
obligation to register them and publish all of their loans and payment
obligations in a timely and transparent manner, in a single public
record; an alert system to rate the level of indebtedness of such authorities; the possibility of granting the federal guarantee on the debt of states and municipalities; as well as the sanctions applicable to public servants who do not comply.Therefore,
one of the main objectives of this initiative is to establish a
regulation on fiscal responsibility to allow the states and
municipalities conducted under criteria and rules to ensure a
responsible and balanced management of public finances, creating
favorable conditions for economic growth and stability of the financial system. Specifically, determines provisions for sustainable management of
local governments for the recruitment and registration of public debt
and other obligations, as well as transparency and accountability,
applicable to the states and municipalities.Notably,
although not present a systemic risk and the rate of growth of debt in
the last two years have been contained, it has been observed that some
states and municipalities have a high level of debt. In response, the Permanent Constituent considered urgent address the problem with a comprehensive approach; that is, not only taking into account the situation of these entities,
but making a substantive reform definitively promote the sustainability
of state and municipal finances.
it is not only necessary to establish new rules for contracting of
public debt, but a new legal framework to standardize the management of
public finances as a whole and the responsible use of debt as a tool to
finance development. Therefore,
the basis for this initiative is rooted in the principles of the
Federal Budget and Fiscal Responsibility, recognizing the positive
effects generated, but assuming that it may not be applicable to the
states and municipalities, given the differences in competition and structure of public finances. This
is consistent with the provisions of the XXIX-W infringement of Article
73 of the Constitution, which empowers the Congress to issue different
laws on fiscal responsibility for all three levels of government. Therefore, the Federal Budget and Fiscal Responsibility in this area
continue to govern for the Federation, while for states and
municipalities govern the Law of Financial Discipline of the States and
Municipalities which is subject to consideration of that sovereignty.
Briefly, this initiative seeks to achieve its objective through 5 main components:1. Rules on financial discipline, to promote the healthy development of public finances by early landowner liability;
2. Alert System, linked to nivelas debt, debt service and liquidity
conditions, allowing for early detection of risk in the debt of public
3. Recruitment of funding and obligations under the principles of
transparency and efficiency, so that their procurement is conducted to
lower financial costs and allocating the proceeds to public investment;
State guaranteed debt, through which the federation, according to the
constitutional authorization, granted its endorsement with the intention
of supporting the states and municipalities to reduce the interest rate
of its credits. This, in return for agreements generate financial discipline; Y,
5. Unique Public Registry to register and make transparent all the obligations of local governments.In
addition, as envisaged in the recent constitutional reform, there is a
need to undertake a reform that not only focuses on the use and
allocation of bonds and loans as a mechanism to finance development as
the ultimate goal; but in the establishment of principles, criteria and standards leading
to a responsible, balanced and efficient use of public resources
collected by the states and municipalities exercise.
the constitutional reform on financial discipline of the states and
municipalities, and this bill are fundamental elements for building a
stronger institutional framework for compliance with their
responsibilities to the states and municipalities of Mexico. Also, arrange and align budgetary and financial instruments available
to these levels of government, they are necessary conditions to ensure
proper use and thereby achieving the objectives of the local development
planning.Additionally, this initiative provides for adjusting existing provisions of the legal framework in this area. In
particular, it aims to amend Article 9 of the Law of Fiscal
Coordination, and the name and various provisions of the General Law on
Public Debt, to harmonize the various provisions that are linked to the
constitutional reform approved on financial discipline the states and municipalities.Based on the general objectives outlined above, the content of this initiative is detailed.
Act I. Financial Discipline of the States and Municipalities
aim of this new law to ensure sustainable management of public finances
of the states, the Federal District and the municipalities of the
this regard, proposed general principles in budgetary matters, debt,
transparency, monitoring and accountability of the use of revenues and
the exercise of public spending by states and municipalities,
recognizing the difference in managing their public finances and the level of institutional development of these levels of government.The provisions include the proposed new law are as follows:
Title One: Scope and Definitions of the Law
Chapter One: General Provisions
• The law, being regulatory fractions VIII, paragraph 3o. and
XXIX-W Article 73 of the Constitution in regard to the states,
municipalities and public entities, is to establish the general criteria
of financial discipline and fiscal responsibility for sustainable
management of public finances (Article 1) .On the other hand, it specifies that public bodies of the states and
municipalities must comply with the rules of financial discipline, in
line with the accounting standards that apply to them.• definitions applicable under the new law are incorporated. Within the definitions, it highlights the concept of Public Investment Productive. This, considering the legal debate that has occurred in this area and today, under this law (Article 2) specific.
April 21, 1981, was published in the Official Gazette an amendment to
the Constitution through which the Permanent Constitution first
introduced the term "Productive Public Investment" to refer to the
purpose for which They should be earmarked bonds or loans contracted by states and municipalities.
Elucidating the concept of Public Investment Productive proved challenging in terms of legal interpretation. Although various criteria have been issued on the matter, it is
considered necessary to limit this term in the legislation with a view
not only to establish greater order in the public finances, but also for
the public good.
limit the scope of this concept, it is made clear that the aim is that
the obligations and loans contracted by public bodies are aimed at
collective interest generated, directly or indirectly, benefits for
society that can boost economic growth of the respective public bodies and, where appropriate, allow the
generation of revenue with which to repay the loans taken within the
on the above, and by virtue of a teleological interpretation of the
constitutional amendment referred and thesis issued by the plenum of the
Supreme Court of Justice of the Nation, Productive Public Investment is
defined as all expenditure for which are generated directly
or indirectly, a social benefit, and intended: (i) the construction,
improvement, rehabilitation and / or replacement of public property; (Ii) the acquisition of assets associated with the equipment of such
public property, or (iii) the acquisition of assets for the provision of
a specific public service.
An important element of this definition is that it expressly provides
that the Public Investment Productive also includes the acquisition of
capital goods that will be used to provide a public service, such as
patrols, garbage trucks, ambulances, among others.
• the supplementary application of the Federal Law of Budget and
Fiscal Responsibility Law of Fiscal Coordination and General Government
Accounting Act, empowering for her performance in the administrative
sphere to the Secretariat of Finance and Public Credit (Article 3) is
the power of interpretation for administrative, by the Secretariat of
Finance and Public Credit effects, it is considered necessary that the
dependence of the Federal Government may issue interpretive criteria for
proper implementation of the Act, taking into consideration the purpose of it, in terms of fractions VIII and XXIX-W Article 73 of the
Constitution, is to establish a regulation to be implemented
consistently across the states and municipalities in terms of fiscal
responsibility and management of public debt.
This is even more relevant in the case of the provisions on extra law (Article 3); the regulation of federal transfers (Articles 2, section XXXVI, 5, 13, section VIII, 17 and 18); General Criteria for Economic Policy (Articles 5 and 18); procurement
regulation of public-private partnerships or nullifies federal
resources (articles 3, 11, 22, 27, 48 and 51) charge; the hiring of funding from the Federal District (Article 33); granting the federal government guarantee the debt obligations of the states and municipalities (Articles 34-42); System Alerts on the levels of indebtedness of states and municipalities (Articles 43-47); the Single Public Registry of Bonds and Financing (Articles 48-56); the
obligations of information and transparency in the framework of the
General Law on Government Accounting and in the case of federal
transfers in terms of other federal laws (Articles 4, 57 and 58) and on
sanctions when referring to federal resources ( Articles 59 to 63).
On the other hand, is expected to ensure consistency between the
proposed law and its obligations under the General Government Accounting
Act with regard to the generation of financial information required in
the three levels of government, the National Council for Harmonization Accounting shall issue the necessary accounting standards (Article 4).
Title II: Financial Discipline Rules
Chapter I: Sustainable Balance Budget and Fiscal Responsibility states
• It is established as a basic principle of financial discipline, the
revenue laws initiatives and projects expenditure budgets of the states
are in line with development plans and observe the following (Article
a) which are prepared based on objectives, strategies, goals and performance indicators;
b) To take into account the General Criteria for Economic Policy defined by the Federation; keep consistency with national public finances and transfers and
federal contributions that states will receive during the year in
c) projections covering a period of five years, in addition to the tax
year in question, based on the forms issued by the National Council of
Accounting Harmonization take place;
d) identify significant risks for public finances, accompanied by proposals for action to address them, and
e) To include the results of the public finances in the past 5 years and the fiscal year in question.This
will strengthen the planning and programming of the budget of the
states and their agencies and serve in the decision-making process, both
the local Executive to prepare the draft budget (income-expenditure),
Legislative during analysis, discussion and approval of the amendment.
It will also provide transparency and encourage accountability of the
government budget of the states, and that such information should be
Recognizing that responsible lending is a tool that supports the
development of institutions, the term "sustainable budget balance", both
total and resources freely set. To this end, states may not contract financing from paying income
source freely available beyond the ceiling of financing that results
according to measurement Warning System (Articles 6 and 7).
However, it is recognized that departures may register to that
balance, that is, record negative budgetary balances of resources
available when the following cases occur:
A decrease in federal contributions regarding what was approved in the
Budget of Expenditures of the Federation for the fall in Gross Domestic
Product in real terms, and that fails to offset the resources of the
Stabilization Fund Income Federal States;
b) Cost of reconstruction in order to cope with expenditure pressures resulting from natural disasters;
Costs associated with administrative improvements that generate local
growth, or that contribute to reducing future spending income. In that case, you need to quantify the amount of imbalance, expose the
sources of financing, actions to eliminate it, and the number of years
in which the imbalance is reversed.
that the states and municipalities, as members of the National System
of Fiscal Coordination, receive transfers from the Federation. Such
transfers shall constitute revenue for the states, which in the case of
shares, may be used freely or, in the case of contributions should be
earmarked for specific purposes, such as education, health,
infrastructure and other services public order. The
proper use of these resources, ie the use thereof according to the
assigned destination, it is a central part of financial discipline. In this sense, the states and municipalities must exercise freely,
only the resources in respect of shares and, according to the
predetermined order, the resource that has a specific destination.
addition to the aggregated balance sheet included in the public
accounts of entities and municipalities, including the concept of budget
balance available resources, contributes to a better understanding of
spending pressures faced by local governments. This
balance is made up of disposable incomes, which can be used by the
federal entity to own decision and financing, less the expenses whose
financing source are such income, except Similarly, the payment of
capital. The separation of the financial balance of resources is essential to
specify and understand the specific spending pressures that records a
local public body.
terms of this initiative, this balance can not be negative, except for
the existence of the aforementioned exceptional cases. Importantly, considering the resource earmarked by law it should only
be exercised in certain areas, your balance at all times must be
• In line with Article 126 of the Constitution, the law incorporates
the principles of unity and universality of the budget, provided that
only expenditures under the same or later approved by law (Article 8)
may be made.
follows from that, the increase or new spending that is approved, both
in the budget discussion, and during the fiscal year, must be previously
funded; ie is expressly required before approving a revenue or expenditure cuts which will cover the new expenditure.
In our country faces recurrent contingent events generated by nature or
accidental causes of damage to people and property as well as public
it is contemplated that the states included in its Budget of
Expenditures, reserves for such damage and to take actions to prevent
and mitigate its impact on state finances. Budgeted resources should be provided to a public trust, which will provide total transparency to their management (Article 9).
This does not imply, in any way, changes to the procedures established in the General Law of Civil Protection. Financial mechanisms for risk management will continue to operate
according to their respective rules, serving as appropriate for the
financing of such obligations not covered by local governments
resources provided must be designed, first, to finance the
reconstruction works and actions of state infrastructure approved under
the General Rules of the Fund for Natural Disasters, as a counterpart to
the federal entity to the agreed programs of reconstruction with the Federation.To
avoid excessive accumulation of resources in the trust, is expected if
the balance accumulates an amount that exceeds the average cost of
rebuilding the state's infrastructure over the past five years, the
federal entity can use the remnant that appropriate for prevention and mitigation.
• Within local government finances, the payroll is one of the chapters of spending more pressure and more growth. That is why, as a prudent budgetary approach, it is proposed to
implement a growth ceiling compute fully to this chapter of expenditure
it is considered appropriate to generate a policy of greater
transparency in this chapter of expenditure, through the inclusion of a
specific section of the draft budget that details the concepts of
spending, wage provisions to cover salary increases and the creation of
places, among others elements.
schemes of public-private partnerships are another option for Public
Investment Productive and provide public services by public bodies. The
financial structures of these schemes contemplated as the primary
source of repayment of the public entity contracting budget. That
is why the Financial Discipline Act regulates that public entities that
hire or structures are to hire public-private partnerships are required
to consider in their budget forecasts expenditures necessary to meet
such commitments. This measure gives legal certainty to the investor supplier and
therefore, helps to create better conditions to the public body (Article
Debts limit for the preceding fiscal year (Adefas), which may be up to
two percent of total revenues of the public entity, since it involves
the use of Adefas financing through suppliers of the entity is
established federal or municipality (Article 12).
• principles of financial discipline to be observed by the states and
public bodies in the exercise of public expenditure (Article 13) are
a) One may commit resources against the approved budget, having
previously budgetary sufficiency, by reserving resources in the specific
budget programs and identifying the source of income;
b) They may make additional to those adopted in the Expenditure
Budget, only under surplus revenues, provided they have the
authorization of the Ministry of Finance or equivalent expenditure;
As a way of standardizing the means of evaluating projects at the local
level, when they exceed more than 10 million investment units (UDI)
amount, must have a cost-benefit analysis and generate a net social
benefit, under reasonable assumptions. This shall not apply where such projects are intended for priority and immediate response to natural disasters.
It also foresees that each state should have an area responsible for assessing this analysis; and to integrate and manage the registration of productive public investment projects of the corresponding state. The creation of a specialized area, encourage the timely generation of
state banks projects that meet a minimum standard requirements,
generating a virtuous circle in the fulfillment and execution of the
in the case of productive public investment projects that aim to employ
under a scheme of public-private partnership, public authorities must
prove, at least, an analysis of convenience to carry out the project
through this scheme compared to traditional public works mechanism and an analysis of risk transfer to the private sector. Above, to ensure that the scheme used is the most efficient.
Remarkably, as do several of the transparency measures implemented
through this Act, assessments should be made public through the websites
of the ministries of finance or equivalent;d) Only proceed to make payments for accrued concepts effectively,
provided the rates have been registered and recorded in the Expenditure
The personal service overall allocation originally approved in the
Expenditure Budget may not be increased during the fiscal year. Additionally, the Ministry of Finance shall keep a record and control
of expenditures made under this chapter of expenditure, in order to
integrate a complete list by the Executive that allows you to better
plan this category;
f) They shall take steps to rationalize current spending. Savings
and savings generated by these measures, as well as those resulting
from the concept of a financial cost of public debt under budget, will
target first, correct the negative budget balance of available resources
and subsequently to the priority programs;
g) In terms of subsidies, should identify the target population, purpose or main destination and timing of grant. The
mechanics of distribution should ensure that resources are delivered to
this population, and that administrative costs are reduced. Such information should be made public, via the Internet, and
Once the validity of the Expenditure Budget, only proceed to make
payments based on the budget for the items actually accrued in the
corresponding year and that has been registered in the report of
accounts payable or integrating current liabilities at year-end.
• Another reasonable measure included in this law, is the fate of surplus disposable incomes. It
establishes that the states should be allocated at least fifty percent
to the amortization of the public debt, payment of debts from previous
fiscal years, current liabilities and obligations, in which case the
balance represents a decrease registered in your Public Account at the end of the immediately preceding fiscal year, as well as fund management of natural disasters and pensions.
remainder would be earmarked for public investment projects through a
fund to be set up for this purpose, so that the appropriate resources
are exercised later than the immediately following year or the creation
of a fund to supplement a possible declining revenue in the future (Article 14).This principle seeks to improve the sustainability of public finances
and at the same time, avoid new spending with revenue not generated
• If during the fiscal year decrease expected income for the fiscal
year, the adjustment shall perform the states (Article 15) are set.
this regard, an order of priority is determined to make adjustments to
expenditures, beginning with media spending and operating expenses,
before affecting the priority programs of the government. In the latter case, there will always be taken not affect social programs.
• the obligation for the local Executive, making the estimated
budgetary impact of proposed laws or decrees submitted to the local
legislature, as well as provisions involving administrative costs for
implementation (Article 16) is expected.
This, in order that the cost of implementing a regulation submitted to
the local legislature, is identified and undoubtedly a factor for
decision-making in the approval process.
Similarly, it is proposed that any bill or decree to be put to the
vote in plenary of the local legislature, in its opinion should include
an estimate of corresponding budgetary impact of the project.
• Finally, this chapter regulation on federal resources with specific
destination, the end of the fiscal year have not been disbursed by the
states and municipalities (Article 17) is expected.
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