Centrão articulates maneuver to circumvent ceiling and unlock amendments in 2022

Centrão parliamentarians articulate a change in the LDO (Budgetary Guidelines Law) of 2022 to circumvent the spending ceiling and be able to expand expenses later this year, at the turn off of the lights of Jair Bolsonaro’s (PL) management.

The measure is central to unlock rapporteur amendments, an instrument used as a bargaining chip in political negotiations between Planalto and Congress. But it is also of interest to the current government, since the prospect of a new budget blockade could impose a blackout on ministries in the last month of the year.

It is not yet clear how much space the proposal could free up in this year’s Budget. If the amount is below the blocked total, the tendency is for there to be a dispute between the Executive and Congress to see who will benefit.

The government currently has around R$10.5 billion blocked, of which R$2.6 billion is allocated to ministries. The remaining amount (R$ 7.87 billion) falls on the rapporteur’s amendments —block that irritated the mayor, Arthur Lira (PP-AL), who controls a good part of the distribution of this amount.

The government’s preliminary diagnosis is that not only does there not exist any slack to release resources, but it would be necessary to impose an additional block of R$ 5.6 billion to ensure compliance with the ceiling — a fiscal rule that limits the growth of expenses to the variation of inflation . That would leave ministries with just R$3.8 billion to spend until the end of the year.

The articulation of the members of the center seeks to avoid a new blockage and create space for the release of amendments.

The maneuver introduces into the LDO a series of devices to deduct expenses from the spending ceiling or change the schedule of mandatory expenses, redistributing “leftovers” within the limit for other expenses.

Experienced technicians heard under reservation evaluate that the proposal seeks to “inaugurate creative interpretations” about the operation of the spending cap, or simply circumvent the limit.

The bill originally only changed the deadline for opening new credits in the Budget. The report with the changes is by deputy AJ Albuquerque (PP-CE), co-religionist of the mayor and the minister of the Civil House, Ciro Nogueira. The report was unable to contact the parliamentarian.

One of the excerpts from the opinion deducts from the spending ceiling adjustments related to primary expenses that are committed at the end of a year, but only have a financial impact at the beginning of the following year — as with the payroll of civil servants and Social Security.

Commitment is the first phase of spending, when the government assumes the commitment to make that payment. In the case of wages and benefits, commitment is made in December, but part of the disbursement only occurs in January, according to the payroll schedule.

Today, the spending ceiling needs to be respected in two moments: in the inclusion of expenses in the Budget and in the effective payment of actions. The project seeks to make the first requirement more flexible, allowing the forecast of expenses that will only be paid in the next fiscal year without the need to cancel expenses from other bodies. In practice, the amount that will actually be paid in 2023 would not need to be accounted for in this year’s ceiling.

In Social Security alone, this difference between the appropriation in the Budget and the actual payment in the year was R$ 5.5 billion, according to a government report released in September. The change in the LDO would free the government from having to cancel another expenditure to include that amount in its schedule to meet the ceiling.

“It was also sought to avoid the risk of interpretation that the budgetary need for expenses subject to the ceiling, in which the report provides for cash/accrual adjustments, must be met by opening credit offset by canceling expenses, resulting in a greater appropriation block of organs, today at a critical level”, says the text.

Technicians see risk of pedaling in expenses

Another device allows the Executive Branch to change the monthly execution schedule of mandatory expenses, if it identifies that there will be “surplus amounts in financial execution” after the evaluation report of income and expenses for the 5th bimester —which will be released this Tuesday (22 ). The uncommitted balance would also be released and could be reallocated to another expense.

The assessment by some of the technicians is that, in practice, this stretch generates a high risk of a pedaling in mandatory expenses, given the pressure to revise the payment schedule, throwing into the lap of the new government a liability to be regularized at the beginning of 2023.

Technicians of the current government, in turn, assess that the change does not exempt the current administration from making due commitment to the expenses that are mandatory. The change would be more focused on the financial cap. As part of it is not usually used, the space could be used to make disbursements in other areas.

The opinion also allows for accounting in the spending ceiling only the effective transfer forecast referring to the Paulo Gustavo law to encourage culture. Bolsonaro even edited an MP (provisional measure) to postpone the expenditure of BRL 3.8 billion, but the STF (Federal Supreme Court) decided that the measure is unconstitutional.

“The expense of the Paulo Gustavo Law, after opening the credit, will not be fully implemented until the end of the year. Given the financial nature of verifying the spending ceiling, it is necessary to incorporate the effective payment projection until the end of the year, so that ceiling space is not compromised with these expenses,” the report reads.

According to members of the government, the solution of using the LDO to make the payment of the resources of the law linked to culture more flexible can still be questioned from a legal point of view. Therefore, there is uncertainty whether the maneuver will be able to effectively free up space on the roof.

Congressional technicians assess, subject to reservation, that the proposal to be voted on by parliamentarians is a way to make accounting for the spending ceiling more flexible in 2022 with a bill. The view is that the project tries to give a strictly financial view to the spending ceiling, loosening rules for inclusion of expenses in the Budget.

The Bolsonaro government has been pressured by the increase in mandatory expenses, such as retirement and pensions. The reduction in the INSS (National Social Security Institute) queue increases social security expenses and has forced the government to cut spending in other areas.

This year’s budget tightening has already jeopardized service delivery. The Federal Police (PF) informed that it stopped issuing passports since the last day 19, due to lack of funds.

The folder has been asking for the recomposition of resources since September. So far, however, the Ministry of Economy has not had space to meet the demand.

Ten days before the first round of the dispute, the government needed to raise the blockade in the 2022 Budget to R$ 10.5 billion to avoid an overflow in the spending ceiling.

The measure generated dissatisfaction among congressional allies, especially with the president of the Chamber. Among the contingency resources, almost R$ 8 billion were rapporteur amendments, better known as secret budget.

These resources are fundamental for Lira to guarantee the loyalty of her base, in search of being re-elected for the command of the House next year. According to reports, he has been promising rapporteur amendments even to newly elected parliamentarians.

Before that, on September 6, Bolsonaro had edited a decree to anticipate the release of R$3.5 billion in rapporteur amendments and another R$2.1 billion for ministries, in the expectation that the bimonthly budget evaluation report point out the viability of this relief.

But the report for the 5th bimester showed unexpected growth in expenses with social security benefits, which reduced the budgetary space and forced the new blockade.