President says new law curbs political patronage while redirecting municipal budgets toward public works and investment.

President Daniel Noboa has stepped up his defense of a newly approved law regulating spending by local governments, arguing that years of unchecked hiring turned many municipal payrolls into political holding pens rather than engines of public service. Speaking in a radio interview on February 27th, Noboa said the legislation is designed to restore discipline to municipal and provincial budgets while limiting what he described as entrenched patronage networks.

The measure, formally known as the Law of Sustainability and Efficiency of Spending of the Decentralized Autonomous Governments, was approved by the National Assembly as one of two urgent economic bills submitted by the executive in early 2026. The second, a mining law, cleared the Assembly with 77 votes on February 26th. Together, the two laws form part of the government’s broader effort to tighten fiscal controls while boosting investment and security spending.

A shift in how local budgets are used

At the heart of the GAD law is a spending formula that requires municipalities and prefectures to dedicate at least 70% of their budgets to investment, infrastructure, and public works, while limiting current spending — such as salaries and administrative costs — to 30%. Noboa insisted that the rule does not rewrite existing legal frameworks but instead enforces principles already outlined in the country’s decentralized governance code.

According to the president, the imbalance between investment and payroll spending became especially pronounced after 2016, when local governments expanded their staff rolls without corresponding improvements in services. “People who previously worked for the Correa administration, directly in the central government, began to be hired by the local governments,” Noboa said, claiming many of those hires were political activists rather than essential public employees.

Claims of inflated payrolls and activism

Noboa alleged that, in several municipalities, payroll costs grew far beyond legal limits as local leaders brought in party loyalists. He cited the municipality of El Triunfo, in Guayas province, where current spending on salaries reportedly reached 90% of the total budget — triple the level allowed under the new law.

In his remarks, the president argued that this pattern was not accidental. He said aspiring candidates from the Citizen Revolution movement often felt compelled to absorb militants from earlier administrations, creating a cycle in which municipal budgets were consumed by wages rather than projects. “That’s how current spending gets inflated, but it gets inflated with militants and cronies,” Noboa said.

The president rejected accusations that the law targets cultural workers or social programs. “It’s a fallacy that we’re against cultural managers,” he said during the interview, adding that he would rather see resources directed toward essential services such as education. His blunt phrasing sparked debate but underscored his broader point about prioritizing public value over political loyalty.

Legal challenges already underway

Since its publication in the Official Register, the GAD law has faced at least three lawsuits challenging its constitutionality. Noboa said his administration is prepared to defend the legislation before the Constitutional Court, maintaining that it respects decentralization while safeguarding national fiscal stability.

Under the new framework, municipalities and prefectures that fail to meet the 70% investment threshold will see reductions in transfers from the central government. These funds are distributed through the Territorial Equity Model, which channels national resources to local governments based on population and development criteria.

Where the money goes

Official figures illustrate why the government is focused on the largest recipients. In 2025, five local governments received roughly $979 million from the State Budget, accounting for about 30% of all transfers to municipalities, prefectures, and parish councils nationwide. These included the major cities of Quito, Guayaquil, and Cuenca, as well as the provincial governments of Pichincha and Guayas.

For Noboa, the concentration of resources heightens the stakes. He argues that redirecting spending toward roads, schools, and public works in these jurisdictions could have an outsized impact on employment and economic activity, while unchecked payroll growth risks draining funds with little visible return.

As the legal challenges move forward, the law’s practical effects will soon become clear. Municipal leaders must now choose whether to restructure budgets and staffing or accept reduced transfers, a decision that could reshape local governance — and political alliances — across the country.