Treasury suggests stricter limit for Judiciary and Legislative in new spending ceiling

The National Treasury’s proposal for a new design of the spending ceiling suggests the application of a stricter limit for the growth of expenses of other branches, such as the Judiciary and Legislative, and also for expenditures on personnel in the Executive.

In this way, other expenses (such as Social Security, Auxílio Brasil, health, education and investments, among others) would have priority in the additional space generated from the flexibilization of the fiscal rule – which would allow for the correction of expenses above inflation.

The discussion has been put forward by the Ministry of Economy body as a suggestion. Therefore, it is not yet officially part of the proposal that has been presented to interlocutors outside the government, although it is considered relevant to assist in the sustainability of public accounts.

as anticipated the Sheet, the National Treasury is working on a reformulation of the spending ceiling that authorizes real expenditure growth according to the level and trajectory of the public debt, at a rate to be defined every two years. The rule also grants an annual bonus for increased spending in the event of an improvement in the surplus in public accounts.

The proposal is in the final stages of preparation and should be released in November. “Regardless of who wins the election, we want to contribute to the debate. This is the role that the Treasury has,” said the secretary of the agency, Paulo Valle, at a press conference on September 29.

Today, the spending limit is only corrected for inflation. By the preliminary design, the new ceiling could have a real growth of 0% to 1%, if the indebtedness is increasing. But the gain could be greater, from 0.5% to 2%, if the debt trajectory is downward.

The exact percentage to be applied would depend on the level of indebtedness. In addition, the government could have a bonus of 0.5 percentage point if the primary result (difference between income and expenditure) is positive and also shows improvement over the years.

The suggestion of including differentiated limits for the other Powers seeks to prevent these bodies from incorporating for themselves gains that should be directed to public policies, whose realization is concentrated in the hands of the Executive Branch.

In the current format of the ceiling, there are no differences between the Powers and the same variation is applied to the individual limits of the Executive, Judiciary, Legislative, Public Ministry and Public Defender’s Office.

Therefore, when the Jair Bolsonaro (PL) government articulated, at the end of 2021, a change in the correction of the spending ceiling to be able to spend more in an election year, the other Powers also benefited. Together, they accumulate a surplus of R$ 2.7 billion in 2022 and are already planning to use the space to grant salary readjustments to their servers next year.

Meanwhile, the Executive had to block R$ 10.5 billion of its expenses this year and sees its volume of investments fall year after year. Among the explanations are the lack of review in other expenditures and the faster growth of items such as Social Security, affected by other factors — such as the aging of the population.

The technicians’ premise is that the most appropriate thing would be to make the ceiling more flexible to allow expansion of investments, a more noble type of expenditure with high social returns, and to provide better accommodation of social benefits.

In this scenario, these expenses would have the limit corrected by the proposed rule, with a real increase in case of debt under control and with additional bonus in case of public accounts in the black and on a recovery trajectory.

On the other hand, expenses with salaries in the Executive and expenses of the other branches could follow a stricter rule — that is, a smaller correction than the one applied to the budget of public policies.

Within the government, it is believed that this format would give more comfort to the expansion of expenditures in the Executive, in addition to promoting greater alignment between the personnel policies practiced within the public administration.

In addition to boasting higher salaries, the Judiciary, Legislature and Public Ministry sometimes end up getting more benevolent increases in their remuneration.

This year, the Federal Supreme Court (STF) sent a proposal for an increase of 9% for 2023, followed by another 9% in 2024. The claim ended up becoming a parameter for the entire Judiciary and also for the MP.

The Executive set aside R$ 11.6 billion in the 2023 Budget proposal to increase the salaries of its servers, which is enough for a linear adjustment of 4.85%.

In recent years, the spending ceiling has been successively amended to accommodate extra spending on social benefits. The most recent initiative took place on the eve of the electoral campaign, to establish a “state of emergency” and pave the way for the boosted Auxílio Brasil of R$600 and benefits for truck drivers and taxi drivers, groups that are part of Bolsonaro’s support base.

Without the same subterfuge, the 2023 Budget was sent to the National Congress without resources to ensure the continuity of the Auxílio Brasil of R$ 600 and with a wide cut in social areas. To avoid a blackout, economists who advise the main candidates for the Presidency of the Republic have advocated changes to the ceiling.

The Treasury’s proposal has been developed by technicians as a way of contributing to this discussion.

As the Treasury is a State body, there is care behind the scenes to prevent the proposal from being contaminated by electoral differences. But the posture is one of collaboration in the face of any demonstration of interest by interlocutors of the future president-elect.

If Bolsonaro is the winner at the polls, assistants to Minister Paulo Guedes (Economy) believe that the proposal should be used organically, although the minister himself has his views on how the new ceiling should be formatted. One of Guedes’ central objectives is to have in the framework of fiscal rules some kind of incentive to reduce the State through the sale of assets and privatizations.

Within the campaign of former president Luiz Inácio Lula da Silva (PT), there is still no consensus on the fiscal rule to be adopted. as showed the Sheetone wing defends the resumption of the primary result indicator as the main reference, but with bands that allow absorbing eventual collection frustrations.

Another group prefers to keep some spending rule, but more flexible than the current ceiling. Some participants in these debates even defend a specific limit for the Executive’s payroll.

The PT campaign, however, has avoided giving details of what the new proposed framework will be if Lula wins the elections. The speech of the former president and his aides is that this will need to be negotiated with the new Congress.