Economy should stop RJ’s fiscal recovery, and dispute may go to the STF

The Ministry of Economy must block the fiscal recovery plan presented by Rio de Janeiro, after the state failed to comply with the requirements of the federal relief program and proposed measures to increase expenses.

Government sources informed the leaf that the National Treasury and PGFN (National Treasury Attorney General’s Office) took a stand against the approval of the plan, which even included readjustments to the state civil service.

The Supervisory Board of the RRF (Tax Recovery Regime), made up of a representative from the Treasury, one from the TCU (Union Court of Auditors) and one from the state, voted for approval with reservations.

With two opposing opinions, however, the Economy will not be able to accept Rio de Janeiro’s entry into the program.

The decree that regulates the rules of the regime provides that the Economy can only give the endorsement when the opinions are favorable, with or without reservations, which is not the case.

The economic team will still give Rio de Janeiro a period of ten days to express itself in relation to the position of Organs federal agencies, but it is unlikely that the state will be able to correct all the flaws within that period.

Therefore, technicians assess that the proposal should be buried once and for all in the Ministry of Economy. In this case, it would not even be sent to President Jair Bolsonaro (PL), responsible for the approval of the plan.

The expectation, however, is that the government of Rio de Janeiro will not be satisfied with the result and will end up resorting to the STF (Federal Supreme Court) to remain with debt payments suspended – a procedure that has already been adopted on other occasions.

RRF is a relief program designed for indebted states. Rio de Janeiro was the first to enter, in 2017, and is now applying for a new membership after changes to the program’s rules.

Upon joining the regime, the state has immediate relief in the payment of debts with the Union and other creditors, in exchange for the implementation of fiscal adjustment measures.

The state government is committed to carrying out concessions, privatizations and other actions to improve collection and reduce expenses. At the same time, it needs to respect the prohibitions on creating new positions, granting raises and raising expenses.

RECUPERATION PLAN

Since joining the program, Rio de Janeiro has already had relief of R$92 billion in its debt, according to internal calculations by the federal government.

At the same time, it was the target of 31 cases to investigate irregularities in the implementation of the regime. In three of them, violations were proven, with an impact of R$ 4.5 billion due to increases in expenses with healthcare personnel.

In addition, recent laws have granted readjustments to employees of the Executive, Legislative, Judiciary and Public Defender’s Offices. A resolution by the TCE (State Audit Court), in turn, approved an indemnity amount of R$12,000 to counselors, which in practice raises the monthly salary from R$35,000 to R$47,000.

In the plan presented, the state also provides for the granting of salary adjustments in all years of the recovery regime. The percentages would be 5.8% in 2022, 3.5% in 2023, 3.25% in 2024 and 3% per year between 2025 and 2030.

Finally, in the week in which the federal government would complete the analysis of the recovery plan for Rio de Janeiro, the governor, Cláudio Castro (PL), announced on his Twitter account an increase in bonuses paid to military police officers and firefighters in the state.

Castro, who took over the government after the ouster of Wilson Witzel (PSC), intends to run for re-election in 2022.

Last Wednesday (12), he was at the Planalto Palace to meet with Bolsonaro, who was a federal deputy for the state for seven terms.

At the time, Castro said he had presented arguments to the president that part of the measures identified by the technical area as violations was already foreseen in the plan.

The governor also questioned the interpretations adopted by the technical area to criticize the recovery plan for Rio de Janeiro.

A leaf found that one of the violations pointed out by the PGFN was the maintenance of the so-called triennium (additional salary for every three years of service) for employees who are already active.

The RRF law provides that the state must extinguish benefits that have already been eliminated in the federal public service, which includes biennium, triennium, premium leave and the like.

The PGFN has the interpretation that the cut should reach all servers, including those who have already entered the career.

The law passed by Rio de Janeiro, however, ends the benefit only for new civil servants, which delays the adjustment in state public accounts.

“The Assembly understood that the end of the triennium should be only for new members of the public career”, explained Castro on Wednesday. For the governor, the federal bailout law “is not clear” about which format should be adopted.

“Each one made an interpretation, in a law that opens a gap for both sides. These are undoubtedly minor discussions, which should not impact the decision of Rio de Janeiro to enter the regime or not”, he said.

In the Union, however, the extinction of additional salary reached employees who were already active. The amounts already incorporated into the remuneration were maintained, but no new increase for length of service was granted.

The same was done by the state of Goiás, which had to approve the measure to join the RRF and had its plan approved by Bolsonaro.

In the federal government, the assessment is that the Rio de Janeiro plan poses great risks to the Union, which may end up assuming the cost of aid to the state.

At the same time, its eventual maintenance in the regime is considered an affront to other states, such as Goiás and Rio Grande do Sul, which have adopted adjustment measures to maintain the benefits of the plan.

The interpretation of technicians is that, without Rio de Janeiro’s adjustment measures, the government is simply donating resources to a state that has made little effort to rebalance its accounts.

In December 2020, for example, the Federal Government paid BRL 4.7 billion that Rio de Janeiro owed to BNP Paribas, referring to a loan contracted in 2017, right at the beginning of the tax recovery regime.

The contract had the shares of Cedae (Companhia Estadual de Águas e Esgotos) as a counter-guarantee – which assured the federal government the right to federalize the state-owned company in the event of default.

In 2021, the state pocketed BRL 18.2 billion with the Cedae concession auction, but did not reimburse the Union a single cent. The governor wants to use the money for investments. The AGU (Advocacy-General of the Union) joined the STF asking for the blocking of amounts, but is still awaiting a decision.

Marianna Holanda collaborated