The pensions of civil servants raise the red numbers of the entire public system by 14,000 million

In the image several people after the weekly concentration of the Platform for the Worthy Pensions of Seville. / PACO PUENTES (ELPAIS).PACO PUENTES

The Ministry of Inclusion, Social Security and Migration expects the pension system to close this year with a deficit of 0.5% of GDP (about 7,200 million euros). However, this forecast falls short if we want to show a complete picture of all public pensions, for two reasons: the first is that this budget projection does not include the negative balance (equivalent to 1% of GDP, around 14,000 million euros) of passive class pensions, which are those received by career civil servants from the State and Justice (civilian and military), as well as civil servants transferred to the autonomous communities.

And, secondly, that half point of deficit that the Government foresees would be closer to 0.9% (some 12,600 million) if the almost 3,000 million in collection income from the new Intergenerational Equity Mechanism (MEI) is not accounted for. ) that cannot be spent on pension payments until 2032, since they must be deposited in the Reserve Fund. However, in the Ministry they justify the incorporation of the proceeds from this additional contribution in their budgetary income for this year “because it is an operation that is fully permitted by the General State Intervention”.

The negative balance of the pensions of the so-called passive classes, which will amount to around 14,000 million euros in 2023, is explained by the fact that this system is “to be extinguished”, they insist from the Social Security, and stopped admitting affiliates in 2010. From the On January 1, 2011, all new civil servants and public employees join the General Social Security Regime. This has meant that the income from contributions of civil servants who continue to be attached to passive classes is less with each passing year, since the system has fewer and fewer contributors (currently just over 600,000).

Thus, according to the calculation made with official data by the professor of Applied Economics at the Juan Carlos I University, Miguel Ángel García, the income of the passive classes has gone from 0.8% of GDP in 2010 to 0.5% at present. . While spending on pensions for these civil servants —included in the chapter on remuneration of public employees— has increased from 0.9% of GDP in 2010 to 1.5% in 2023. This means that, of the more than 21,000 million that these retiree benefits cost, the system only collects about 7,000 million for the fees paid by officials and the so-called imputed contributions of the company (in this case the State is the employer).

Having said this, sources from the department of José Luis Escrivá stress that the negative balance of the passive classes is not part of the Social Security deficit in any case and they point out that the financing of Social Security is established in the first recommendation of the Pact of Toledo. However, there would also be reasons to include the pension accounts of the passive classes in the evaluation of the financial health of the public pension system. In the first place, to give a complete picture of the payment of all types of retirement benefits, which is also how Brussels evaluates it.

Another reason to give this broader and more general picture of the pension system is that Social Security has received the contributions of all the new civil servants since 2010 —they have contributed around 5,000 million euros in contributions since 2019—, although the payments of the pensions of this group are imputed as personnel expenses and are paid with taxes and, therefore, it is the State that finances the deficit of the passive classes, as they remember in the Ministry of Inclusion. Moreover, given that it is a regime to be extinguished, the imbalance of the passive class system will increase in the coming years and its affiliates will be retiring until 2060. In addition, in 2020, in the midst of a pandemic, the Ministry of José Luis Escrivá assumed the management of the payment of almost 700,000 passive class pensions.

For all this, García defends that “given that passive class pensions also have to be paid, using only Social Security to assess the public pension system does not fully reflect its reality.” In the opinion of this expert, who was also in charge of Social Security as management director, “the analysis of the public pension system must be carried out as a sum of the Social Security system and the Passive Class Regime, because ultimately it is the balance of the two that affects the composition and balance of the Spanish public accounts”.

To complete the photographic enlargement of the public system as a whole at the end of the year, the deficit forecast by Escrivá’s team, of 0.5%, will end up being somewhat higher if the accounting is done excluding almost 3,000 million from the income chapter that Social Security will collect from the new MEI contribution (which feeds the new pension piggy bank), since this will cut the growth rate of contribution collection (through worker contributions and those charged to the company) up to around 8.2%. Although this is strong revenue growth, it is somewhat less than the significant increase in spending, of around 11%, driven by the 8.5% revaluation of pensions, according to the CPI; the increase in the number of benefits by 1% and the greater amount of the latter (which means an increase of 0.7% more).

European assessment

With this accounting, which is used by the European Commission in the evaluations included in its Aging Report, the budget hole for all public pensions as a whole would rise by the end of the year to around 1.5% (-0.5% of Social Security and -1% of the passive classes), which will be equivalent to just over 21,000 million euros. And this after having injected into the system, via tax transfers, more than 20,000 million of the so-called improper Social Security expenses. If, in addition, MEI collection is not taken into account, the imbalance would be 1.9% of GDP (26,000 million). What’s more, the negative balance would increase to 3.3% of GDP, García warns, “if the new state transfer for improper expenses had not been applied, which has changed the location of the negative balance in public accounts”, transferring it from Social Security to the State. Although Escrivá’s team insists on defending the deficit forecast of 0.5% because it is the one that shows the accounting methodology accepted by the General Comptroller.

Another way of estimating the budgetary imbalance of the system, and which yields figures similar to those of adding the Social Security deficit and that of the passive classes, is the one used by the professor of Applied Economics at the University of Zaragoza and editor of the Cuadernos de Información Económica de Funcas, Eduardo Bandrés Moliné, who in his analysis of the Social Security Budget differentiates the “real” from the “nominal” contributory deficit. Specifically, this economist takes the almost 7,200 million deficit forecast by the Ministry of Escrivá (nominal) for 2023, adds the 15,478 million that are part of the current transfers of the State for “benefits and contributory functions” and subtracts the 2,793 million expected collection of the MEI. The result gives a “real” deficit of the contributory part of the system of 25,470 million, much higher than the nominal deficit. Although on this point, sources from the Ministry of Inclusion also bet on the nominal deficit, because transferring improper expenses of the system, including part of the contributory benefits, to the State is something endorsed by the vast majority of the parliamentary arch in the Pact of Toledo .

The pension reform in two phases (2021 and 2023) carried out by the Ministry of Inclusion, Social Security and Migrations in the legislature that has just ended, sought, among other things, to restore balance to the accounts of the public pension system. pensions. To this end, measures were approved aimed primarily at increasing income, not only without making adjustments in spending but also maintaining the purchasing power of pensioners. It was about laying the foundations for a healthier future system to receive a strong increase in retirees born in the baby boom, and who will begin to retire en masse from the middle of this decade.

However, social and economic reality has prevented Minister Escrivá from ending the legislature with positive pension system accounts. First there was the pandemic, which brought the system deficit to 2.6% in 2020; and, later, the inflationary crisis aggravated by the war in Ukraine, which has prevented a greater consolidation of these public accounts.

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