JUDGMENT NO. 58
YEAR 2024
Commentary on the Decision of
Angelo Maria Quaglini
Note to Constitutional Court Nos. 39 and 58/2024
for the Court of Auditors' Journal Journal
ITALIAN REPUBLIC
IN THE NAME OF THE ITALIAN PEOPLE
THE CONSTITUTIONAL COURT
composed of:
President: Augusto Antonio BARBERA;
Judges: Franco MODUGNO, Giovanni AMOROSO, Francesco VIGANÒ, Luca ANTONINI, Stefano PETITTI, Angelo BUSCEMA, Emanuela NAVARRETTA, Maria Rosaria SAN GIORGIO, Filippo PATRONI GRIFFI, Marco D'ALBERTI, Giovanni PITRUZZELLA, Antonella SCIARRONE ALIBRANDI,
has rendered the following
JUDGMENT
in the proceedings concerning the constitutional legitimacy of Molise Regional Law No. 27 of 31 December 2022 (General Report of the Molise Region for the 2021 financial year), initiated by the President of the Council of Ministers with an appeal served on 28 February 2023, filed with the Registry on 1 March 2023, registered at No. 10 of the 2023 appeals register and published in the Official Gazette of the Republic No. 13, first special series, of the year 2023.
Heard at the public hearing on 6 February 2024, the Reporting Judge Angelo Buscema;
heard the State Attorney Alfonso Peluso for the President of the Council of Ministers;
deliberated in the deliberation chamber on 6 February 2024.
Facts
1. – By appeal registered at No. 10 of the 2023 appeals register, served on 28 February 2023 and filed on 1 March 2023, the President of the Council of Ministers, represented and defended by the State Attorney General, challenged Molise Regional Law No. 27 of 31 December 2022 (General Report of the Molise Region for the 2021 financial year), with reference to Article 117, second paragraph, letter (e), of the Constitution, in the matter of harmonization of public budgets, in relation to Article 50 of Legislative Decree No. 118 of 23 June 2011 (Provisions concerning the harmonization of accounting systems and budget frameworks of Regions, local authorities and their bodies, pursuant to Articles 1 and 2 of Law No. 42 of 5 May 2009).
The State Attorney General asserts that Molise Regional Law No. 27 of 2022 is unconstitutionally illegitimate because Annex 30 (Report on the Budget Account and on economic and patrimonial management, also containing the information note on the Region's derivative financial instruments) attests to having repaid during 2021 an amount deemed insufficient to fully recover the deficit definitively foreseen under the heading "Administrative Deficit" in the budget forecast for the financial year to which the report refers, amounting to €41,717,458.35.
Furthermore, the appellant represents that the late approval of Molise Regional Law No. 7 of 29 December 2021 (Adjustment of the 2021-2023 budget forecast and amendments to regional laws) did not guarantee the coverage of the increased 2019 deficit during the 2021 financial year, while a timely approval of the 2021 adjustment, immediately after the approval by the Regional Government of the draft law on the 2021 report, which took place with decision No. 210 of the Molise Regional Government of 5 July 2021, would have allowed the necessary rebalancing measures to be taken, also in light of the results of the 2021 management, then in progress.
Molise Regional Law No. 27 of 2022 would therefore be in conflict with the provisions of Article 50 of Legislative Decree No. 118 of 2011, thus determining the violation of the exclusive State legislative power in the matter of harmonization of public budgets, pursuant to Article 117, second paragraph, letter (e), of the Constitution.
Moreover, the State Attorney General acknowledges that the Court of Auditors, Regional Control Section for Molise, in the judgment of equalization of the general report of the Molise Region for the 2021 financial year, by order of 14 March 2023, registered at No. 52 of the 2023 orders register, raised questions of constitutional legitimacy – among others – of some provisions of Molise Regional Law No. 6 of 29 December 2021 (General Report of the Molise Region for the 2020 financial year) and Molise Regional Law No. 7 of 2021.
The appellant argues that the subsequent Molise Regional Law No. 9 of 24 May 2022 (Multi-year budget forecast for the three-year period 2022-2024), providing as the portion of the deficit to be repaid in 2022 the sum of €19,644,229.24, would not have remedied the accounting irregularities of previous years because, pursuant to paragraph 9.2.26 of the applied principle of financial accounting (Annex 4/2 to Legislative Decree No. 118 of 2011), the deficit to be applied to 2022 should have amounted to €60,967,237.33, an amount higher than that recorded. Consequently, the Region should have proceeded promptly with the amendment of the budget forecasts to guarantee, during the 2022 financial year, the coverage of the deficit. Instead, during the 2022 financial year, the Region did not approve the adjustment law to the 2022-2024 budget forecast.
Therefore, the appellant concludes by arguing that the approval of the general report of the Molise Region for the 2021 financial year with the findings set out in Annex 1 (Budget account and general summary of income and expenditure) would determine the violation of the exclusive State legislative power in the matter of "harmonization of public budgets", pursuant to Article 117, second paragraph, letter (e), of the Constitution, in relation to Article 50 of Legislative Decree No. 118 of 2011, which contains the rules on the budget adjustment law.
2. – The Molise Region did not intervene in these proceedings.
Points of Law
1. – By the appeal registered at No. 10 of the 2023 appeals register, the President of the Council of Ministers challenged Molise Regional Law No. 27 of 2022, containing the general report for the 2021 financial year.
The State Attorney General asserts that the challenged regional law attests to having recovered in the 2021 financial year a portion of the deficit to a lesser extent than that foreseen in the budget forecast to which the report refers.
The insufficient recovery of the deficit would be determined by the approval, at the end of the financial year (29 December 2021), of the regional adjustment law without having provided for adequate coverage of the deficit that emerged in previous years.
The Attorney therefore argues that the approval of the regional law adjusting the budget forecast, lacking adequate coverage of the deficit during the 2021 financial year, in violation of Article 50 of Legislative Decree No. 118 of 2011, would have repercussions on the regional law approving the report itself, which is, in turn, in conflict with Article 117, second paragraph, letter (e), of the Constitution, in the matter of "harmonization of public budgets".
2. – With regard to the impact of the alleged defect on the entire law approving the report, it is observed that this Court, with reference to budget laws and the approval of the report, has specified that "the indispensable principle of continuity between financial years – which requires the genetic link between budgets according to their chronological sequence – involves the law approving the report [...] in its entirety, as the elements that make up its structure are not usefully separable" (Judgment No. 49 of 2018, and similarly, most recently, Judgment No. 268 of 2022).
In this case, the failure to apply the exact amount of the deficit recovery quota – which should have been established with the regional law adjusting the 2021 budget, to be adopted in accordance with the methods provided for in Article 50 of Legislative Decree No. 118 of 2011 – involves an underestimation of the total expenditure such as to compromise the balance of the 2021 budget and subsequent ones. The correct accounting and recovery of the deficit would have required, in fact, the adoption of appropriate forms of coverage, such as the reduction of other expenses or the identification of greater income, and a comprehensive review of the budget balances (again, Judgment No. 268 of 2022).
What has been observed is sufficient for the purposes of the argument concerning the repercussions of the alleged irregularities on the entire regional law approving the report.
3. – It must also be noted that, pending the proceedings, Molise Regional Law No. 4 of 19 September 2023, concerning "Amendment of Article 12 of Regional Law No. 17 of 30 December 2020 (General Report of the Molise Region for the 2019 financial year) and amendments to Regional Law No. 27 of 31 December 2022 (General Report of the Molise Region for the 2021 financial year)" was approved, by which, among other things, the accounting results relating to the 2021 general report were rectified.
More precisely, Article 2, paragraph 1, letter (a), of Molise Regional Law No. 4 of 2023, replaced Article 9 of Molise Regional Law No. 27 of 2022, modifying the amount of the administrative deficit as at 31 December 2021, which from the sum originally recorded of €493,863,931.66 was indicated as €573,484,996.41.
This value was also reproduced in Molise Regional Law No. 6 of 15 December 2023 (Budget forecast of the Molise Region 2023-2025), as the first expenditure item of the 2023 financial year, thus adapting the budget cycle to correct accounting data, according to what this Court stated in Judgments No. 39 of 2024 and No. 268 of 2022, as well as in the decisions of the Court of Auditors on the equalization of the Regions' reports.
The effects of the ius superveniens must therefore be assessed since – according to the constant jurisprudence of this Court – the subsequent legislation, satisfying the claims put forward by the appellant, may determine the cessation of the subject-matter of the dispute where the challenged provision has not received medio tempore application (ex plurimis, Judgment No. 223 of 2023).
3.1. – Considering that the 2021 report was approved on 31 December 2022, the underestimation of the 2021 deficit to be repaid in the 2022 financial year determined an illegitimate expansion of the entity's spending capacity in the latter financial year, projecting the effects of the 2021 report balances onto the following year. In fact, as shown in Molise Regional Law No. 9 of 2022, the multi-year budget forecast for the three-year period 2022-2024 shows a severely underestimated deficit to be repaid.
These elements lead to the exclusion of the possibility of a judgment of cessation of the subject-matter of the dispute: the challenged regional law remained in force for a time sufficient to produce effects on the entire budget cycle.
4. – That being so, the question of the constitutional legitimacy of Molise Regional Law No. 27 of 2022, raised with reference to Article 117, second paragraph, letter (e), of the Constitution, in the matter of harmonization of public budgets, is well-founded.
The regional law approving the report for the 2021 financial year presents a management result lower than the actual one, due to the failure to adopt, during the budget adjustment, adequate measures to correctly represent the deficit to be repaid.
This Court has already noted that the financial management of the Molise Region, for the entire 2021 financial year, was conditioned by the serious underestimation of the management result of the 2020 financial year, the alteration of which led to the undue increase in expenditure (Judgment No. 39 of 2024).
Moreover, pursuant to Article 50, paragraph 1, of Legislative Decree No. 118 of 2011, the region must approve the budget adjustment by law by 31 July, on the basis of the balances ascertained during the report of the financial year ended on the previous 31 December; or, pending the conclusion of the judgment on the equalization of the report of the previous financial year, on the basis of the draft law on the report approved by the Regional Government (Article 50, paragraph 3-bis). Furthermore, the regional law adjusting the budget must acknowledge the persistence of the general budget balances and, in the event of a negative finding, the entity must take the necessary rebalancing measures (Article 50, paragraph 2).
The Molise Region did not, however, correctly adjust the budget forecast for the 2021 financial year, either with regard to the exact quantification of the overall deficit or with regard to the annual quota to be repaid.
These irregularities – already ascertained by this Court in Judgment No. 39 of 2024, which declared the unconstitutionality of various provisions of Molise Regional Law No. 7 of 2021 – are reflected in the regional law approving the report, which is therefore in conflict with Article 117, second paragraph, letter (e), of the Constitution, in the matter of harmonization of public budgets.
As already pointed out, the precepts laid down by the State legislature in the matter of "harmonization of public budgets" in the exercise of the exclusive legislative power pursuant to Article 117, second paragraph, letter (e), of the Constitution, are located "simultaneously in an autonomous and instrumental position with respect to the principle of budget balance ex Article 81 of the Constitution" (Judgment No. 6 of 2017).
The harmonization of public budgets, in fact, is "aimed at achieving the homogeneity of accounting systems to make the budgets of the administrations aggregable and comparable, so as to satisfy the information needs connected to various objectives such as economic and financial programming, coordination of public finance, management of fiscal federalism, verification of compliance with Community rules, prevention of serious irregularities capable of jeopardizing the balances of budgets" (Judgment No. 184 of 2016).
Therefore, the regional accounting system is also subject to the aforementioned principles, which are configured as necessary limitations capable of "allowing the simultaneous satisfaction of a plurality of constitutionally relevant interests" (Judgment No. 279 of 2006). In particular, the autonomy of the region in this normative area is limited by the provisions laid down by the State for the safeguard of financial interests attributable, from a teleological point of view, to multiple constitutional parameters, such as the coordination of public finance, the rules on budget balances pursuant to Article 81 of the Constitution, the principles of good financial management and programming pursuant to Article 97, paragraphs one and two, of the Constitution.
The regional law approving the general report of the Molise Region for the 2021 financial year must, therefore, be declared unconstitutionally illegitimate for violation of the exclusive State legislative power in the matter of "harmonization of public budgets" pursuant to Article 117, second paragraph, letter (e), of the Constitution.
For These Reasons
THE CONSTITUTIONAL COURT
declares the unconstitutionality of Molise Regional Law No. 27 of 31 December 2022 (General Report of the Molise Region for the 2021 financial year).
So decided in Rome, at the seat of the Constitutional Court, Palazzo della Consulta, on 6 February 2024.
Signed:
Augusto Antonio BARBERA, President
Angelo BUSCEMA, Reporting Judge
Valeria EMMA, Registrar
Filed with the Registry on 18 April 2024