This paper provides a critical assessment of the current legislation on budget stability for the case of the Spanish regions. Particularly, the paper focuses on its very limited effectiveness for the compliance of the deficit and expenditure rules objectives. Moreover, the application of this legislation has experienced significant failures in dealing with the transitory period, the application of the corrective mechanisms, the lack of higher automatism and the interpretation of some provisions related to budget surplus and non-expected fiscal revenues. The possible reform of such legislation should take into consideration a number of issues, namely, the reform of the European economic governance, the changes in the Spanish territorial financing system and the complete revision (if not elimination) of the extraordinary financial funds.