Expenditure Cut, Giancane Wrote a Letter to Citizens

The economic and international crisis caused troubles to several EU countries and to Italy, too.

This situation affected Regions differently due to historical reasons which emphasized the most vulnerable from the economic point of view, such as Regione Campania.

This is why, recently, problems related to public expenditure, to the continuous attention of the Press, have affected these Regions, that are studied and examined, emphasizing public money waste while Italians experience so many troubles.

Without disregarding the need to enhance administrative activity, that is lacking in many features, those who criticize these activities do not realize many aspects of the action of public administrators or politicians who have to find solutions, even difficult answers, in the attempt to soothe social hardship.

Particularly, it would be necessary to assess the inherited economic and management situation and the activity carried out to enhance it, as well as the time necessary to complete the undertaken road.

Often, instead of dwelling on concrete data, people question current Administration about mistakes that clearly date back to the past.

As Regional Minister for Budget of Campania, it seems to me that I have to give you some elements to avoid general statements and to have a little clarity on the issue.

I would like to focus on several issues I had the opportunity to observe during these almost two years as a regional Minister, but I deem it useful to just consider some of the most remarkable topics, such as multiannual debt, state transfers, current payable for exceeding commitments compared with their relevant payments, healthcare and problems related to active and passive residuals corresponding to claims and debts of Regione.

Concerning debts, the Campania Court of Auditors writes in its report about the 2009 regional statement that leveraged exposure is 8,601 million € compared with 728 million € as for 31 December 1999.

Contributions on loans for Municipalities as for the same date, namely 31 December 2009, should be added for approximately 2,200 million € with a total debt of 10,800 million €.

The increase of the debt by approximately 10,000 million € in ten years is caused by: 2,200 for Municipalities and approximately 2,100 for healthcare debt securitization in 2007 while the remaining amount of about 5,700 million was necessary to cover regional expenses with an average increase of the annual debt by 570 million; this average increased to 670 million per year during the period from 2004 to 2009, as pointed out by the Court of Auditors in the above mentioned report.

Besides the non-contracting of loans from 2010 on, with the following missed average income of 670 million per year, from which the previous administration, on the contrary, benefited annually in the 5 years before 2010, state cut policy arrived with the decree –law no. 78 issued in May 2010 by which Regione missed transfers of 381 million in 2011 and 420 million in 2012 and for the following years.

It is hence clear that from 2000 to 2009 we had to cover expenses by raising loans every year, while for 2010, 2011 and 2012 not only debts were not raised (nowadays prohibited by the law) that with the progression method would have led to the regional accounts approximately 2,000 million, but 801 million of state transfers were missing too.

We cannot disregard that in the next 20 or 30 years, in accordance with the duration of the loans, we will have to pay the instalments of the huge debt taken out; it means that we did not have any income raising loans from 2010 to date and simultaneously we had to pay instalments related to those debts, both direct and indirect, until 31 December 2009, of 808 million per year and until their settlement for 30 years after their contract.

Concerning the current payable, we have to point out that the commitments undertaken, apart from those dealing with the healthcare sector, were far higher than the payments made, although the liquidity resulting from loans, with a difference for 2007 of 802 million and for 2008 of 968 million.

In 2010 only from an average of commitments of approximately 4,300 million per year we were able to keep them under about 3,400 million, and in 2011 under 2,657 million, excluding the healthcare sector again.

The result achieved in 2011 is even more remarkable, since payments for 2,531 million against 2,657 million of commitments taken on.

One of the most remarkable activity of the Regione is the free current expenditure reduction, meaning that it is not bound to specific purposes, such as healthcare, that from 1,518 million € in 2009 decreased to 1,469 in 2010, to 1,122 in 2011 and for 2012 outlook will be kept at the last year sum with a saving or a current expenditure cut in the last two years by more than 600 million, the best performance in Italy.

Above all, these cuts of current expenditure allow us to avoid further debts to face that incredible increase of current payable occurred previously and caused also by the income use of the administration surplus from 2006 to 2010 included (budget plan 2010 approved in 2009) for a total amount of approximately 950 million €.

In 2011 and in 2012 this surplus had not been used to cover expenses, being aware that further debts would have been created and would have also been difficult to pay unless deferred.

Last, Regione currently takes on expenditure commitments for the amount that it can really pay for and it is facing difficulties, that will take time to overcome, for payments of historical expenses. This is a virtuous behaviour needed to guarantee future generations, welfare as well as the production world.

Concerning healthcare in details, it is necessary to point out that budget balancing is not a fantasy anymore if you consider that the imbalance of 2009 equal to 774 million was reduced in 2010 to 496 and in 2011 to 251 million, with the forecast to cancel it by 2012.

The effort of Regione focused on enhancing the management of active residuals, namely claims and passive residuals or debts, too; above all, it gave momentum to the collection of these credits raising the payment levels or if preferable, decreasing the passive residuals or current debts to creditors, in spite of this difficult period for liquidity.

Nowadays, Regione, characterised by this good administration, cannot consider its problems solved since the tough job done to date has to continue for many years more.

We hope the road started for the full recovery of the budget will carry on. It would become more difficult to climb back to the top if this administration or the upcoming administration fell into temptation of benefiting from the initial outcomes of the recovery.