Proposals in Congress in an election year increase spending by BRL 46 billion, calculates Economy

The appetite of the National Congress for electoral measures triggered an alert in the economic team for the chance of advancing proposals that threaten the sustainability of finances not only of the Union, but mainly of states and municipalities.

Survey carried out by the Ministry of Economy at the request of the Sheet lists projects whose approval risk is considered “serious and very high” by the ministry, given the annual cost of at least R$ 46 billion for all federative entities.

There are proposals that provide for salary floors for health professionals, including those who work in the public sector, or who rescue trinkets such as the so-called quinquennium — an additional salary for every five years of service.

Technicians in the economic area remember that governors are already using the increase in revenue to grant readjustments to servers. Almost all states have recomposed or proposed measures in this direction.

Therefore, the government believes that the combination of the increases with the eventual approval of the proposals can create the conditions for a serious fiscal crisis in the states, in a process similar to what happened between 2014 and 2016.

At that time, the governors granted a series of readjustments amidst the electoral euphoria. Then they needed to pay in installments and knock on the doors of the Union to ask for help and renegotiate debts.

Last year, the states and the Federal District had a primary surplus of R$ 124.1 billion, that is, they collected more than they spent. In 2020, this slack had already been considerable, at R$ 64.8 billion, according to the National Treasury.

Technicians from the Ministry of Economy and experts from outside the government warn, however, that much of the increase in revenues is conjunctural, driven by the increase in the value of commodities (including oil) and higher inflation.

In this context, they are categorical in stating that there is no structural improvement in the state accounts that gives rise to a significant increase in spending.

In the federal government, the excess revenue trumpeted by Minister Paulo Guedes (Economy) has been used to fund tax cuts, as technicians seek to take off from state initiatives. The argument is that the exemptions help to boost the economy, helping to consolidate the recovery and sustain the collection.

The risk assessment carried out by the Economy includes a bill that establishes the minimum salary for nursing professionals, approved in the Senate and awaiting a vote in the House.

Anahp (National Association of Private Hospitals) calculates that the impact could reach R$ 5.7 billion for public sector establishments.

Another R$ 6.4 billion affects private non-profit institutions, an effect that may end up falling on the government, since part of these organizations are remunerated by the SUS (Unified Health System) for the provision of services.

The National Treasury, in turn, estimates an even greater impact, of up to R$7 billion in the case of public hospitals, and of R$8 billion in the case of philanthropic ones. According to government technicians, the additional cost falls almost entirely on the finances of states and municipalities.

There is also a PEC (Proposed Amendment to the Constitution) of 2011 that establishes a floor for community health workers. The text was released and approved in March by the deputies, but it still needs to be appreciated by the senators.

Other projects create salary floors for doctors, dentists and other professionals. In all, the impacts would reach R$ 17.2 billion in the public sector and R$ 13.9 billion in non-profit entities, according to Anahp.

The Senate also rescued a 2013 PEC to re-establish the so-called quinquennium in the Public Ministry and the Judiciary. The measure has garnered support among government allies and was defended by the president of the Senate, Rodrigo Pacheco (PSD-MG), although the Ministry of Economy is against it for fear of a cascading effect of trinkets.

The quinquennium would be an additional salary paid every five years. Government technicians estimate a cost of R$ 3.6 billion for the Union, states and municipalities if the proposal is approved.

There are already lawyers, public defenders and delegates demanding the same treatment. With that, the account would rise to R$ 4.5 billion.

In the midst of pressure to grant readjustments to federal employees, an eventual extension of the benefit to all careers would raise annual spending to R$ 10 billion in the three spheres.

Also on the economy’s radar is the pressure from city halls for the approval of an annual transfer of R$ 5 billion to help pay for the gratuity of the elderly in urban public transport. The mayors argue that the money would help to avoid a tariff in an election year.

Other proposals can also weigh on the bills, such as the eventual flexibilization of criteria for access to special retirement for workers exposed to harmful agents to health. In addition to the states, more than 2,000 municipalities have their own pension schemes and need to pay for the deficit. The impact of this project, however, has not yet been estimated.

Economist Vilma Pinto, director of the IFI (Independent Fiscal Institution), of the Senate. and a specialist in regional finance, warns that planning is needed to avoid future fiscal imbalances.

According to her, the growth in revenue has caused a “sense of improvement in the accounts”, but a good part of the increase comes from oil royalties (following the price of a barrel on the international market and the dollar) and inflation.

“The increase in revenue is conjunctural and will not necessarily be verified in the next few years. The expense is permanent”, he warns.

The specialist draws attention to the state personnel expenditure indicators. While the comparison with the RCL (net current revenue) shows a benevolent scenario, with almost everyone framed within the 60% limit of the LRF (Fiscal Responsibility Law), salaries continue to compromise a large part of budgets.

Rio de Janeiro, for example, ended 2021 allocating 47.6% of the RCL to the cost of the payroll. Personnel expenses, however, represent 64.7% of all primary expenditures in the state – that is, for every R$ 3 spent, R$ 2 goes towards paying civil servants. Governor Cláudio Castro (PL) granted a 13% increase in early 2022.

In Rio Grande do Norte, personnel expenses accounted for 65.1% of the RCL (above the legal limit) and 76% of total expenses — for every R$ 4 spent, R$ 3 goes to civil servants. Governor Fátima Bezerra (PT) granted a 15% readjustment.

“After this inflationary shock and the cyclical recovery of GDP [Produto Interno Bruto]the collection will decrease substantially and, with this, it will become more evident that the structural fiscal imbalance of the states remains”, evaluates the partner and chief economist of the manager Ryo Asset, Gabriel Leal de Barros, specialist in public accounts.

For him, it is reckless to use temporary revenues to grant permanent benefits, either by governors or by the National Congress. He points out that few states have reformed the careers of civil servants, and some have not yet changed the retirement rules for civil servants.