For any student of Italian language and culture, it is worth exploring the ongoing debate around the revenue equalisation regime, because it mirrors the important historical tension between the wealthy north and the less affluent south.

A brief background
Under the 1948 Constitution, the equalisation regime has been used by the State to distribute federal revenue amongst the various regions on a ‘needs’ basis, with taxes pooled and distributed on the expectation that there would be an equality of services amongst the regions.
However, the regime has long been contested by the northern regions who would like to see large reductions in the subsidies paid to their poorer southern counterparts.

The 1948 Constitution did not fully articulate how legislative and administrative functions were to be allocated between the different levels of government but instead, applied a regime of concurrent legislative competence to a short list of specific functions. This produced a highly centralised outcome, where little power (either legislative or administrative) was distributed beyond the national government.

Under the concurrent competence model, sub-national governments have full power to legislate, within prescribed constitutional limits and constraints. These limits are generally framed around “fundamental principles legislation” which guarantees that the national government can interfere with the affairs of sub-national government, where an erstwhile local issue impacts on the overriding “national interest” or “fundamental individual rights”.

Phew… I take that to mean that the Constitutional Courts are kept busy adjudicating on whether a function falls inside or outside the realm of regional legislative competence.

Interestingly, there has been a growing tendency over the past decade towards the devolution of authority to sub-national government, with regions having an increased ability to legislate, fund and administer their own affairs.

The 2001 constitutional changes
In 2001, a major constitutional reform introduced a number of important changes in the relationship between central and regional governments.

Regional powers - the reforms greatly expanded the number of functions that fall within the jurisdiction of the regions:
(1.) They assigned a list of functions to exclusive national government competence
(2.) They transferred many functions that were previously the exclusive domain of the national government to a concurrent legislative competence
(3.) They assigned many functions that were previously subject to concurrent competence to exclusive regional legislative competence

This is important in the context of funding – it means that regions will progressively become responsible for providing increased funding for an increased range of services. On the flip side of this, the national government will progressively assume a reduced funding burden across a narrower range of services.

Funding – the reforms changed the nature of the equalisation criteria, which reduced the amount of cross-subsidisation (the historical demand of the affluent northern regions) and to increase regional fiscal self-reliance.
The new Constitution reduces the capacity of the national government to fund activities that fall under the umbrella of concurrent competence. Instead, it emphasises that funding should come from three sources:
(1.) Local/Regional activities (that fall within regional competence) should be funded by local revenue
(2.) The national government should provide specific purpose grants to part-fund activities of concurrent competence
(3.) National taxes should be shared on a needs basis, to fund activities of national competence

This is an important change from the 1948 Constitution, whereby shared national taxes were pooled and distributed on the basis of need.

Regional fiscal autonomy – regional fiscal autonomy is likely to increase over time, with ‘needs’ based funding of concurrent competence being funded by national grants. Over time, this funding is moving away from grants being tightly administered by a central authority towards a model of categorical (or specific purpose) grants with less administrative oversight.
This is a model similar to the Australian federal government approach that provides specific purpose grants to the States to fund healthcare (for example).

Regional legislative autonomy – single regions have the ability to submit Bills to the national parliament calling for the transfer of functions
- From national competence to concurrent competence
- From concurrent competence to regional competence

Interestingly, whilst regions have the right to submit Bills, the national parliament has no obligation to approve them.
In actual practice, this ‘devolved’ model relies on the tabling of national legislation to prescribe the legislative, financial and administrative boundaries for each area of concurrent competence.
Historically, the transfer of legislative powers to sub-national government since regions were first established in 1970 has been slow, largely because of the inherent distrust of regional government by the national legislators.

Regional power to manage local government funding – the new Constitution assigns regions the power to co-ordinate “public finances”. Unfortunately, it doesn’t spell out whose finances! The most likely candidate is local government funding.
I would expect a lot of heated discussion between regional and local governments over who owns whose funds!

In summary
Overall, the 2001 changes seem to open up greater scope for differences in service levels between regions, because of the capacity of regions to progressively control more of their own revenue.
The obvious conclusion that I can draw from these changes is that uniformity of service delivery amongst all regions (as contained in the 1948 Constitution) no longer appears to be regarded as an absolute. So I would expect that over time, the disparity in public service standards will grow between the historically affluent regions (those with a greater capacity to self-fund) and the poorer regions (those with ageing or declining populations or heavy reliance on manufacturing or agricultural industries).

My wife tells me that anecdotally, as her ageing family in Calabria progressively passes away and the younger people move further north for work, the ‘traditional’ way of life and standard of living are both in seemingly irrevocable decline…very sad but I guess that this sort of observation lines up with the outcomes of these changes to the equalisation regime.

It’s interesting though, that the transition towards these decentralised constitutional arrangements will take until 2013. I wonder what sort of resistance or acceptance there is to the devolution of authority amongst local residents?