Government postpones decision on readjustments and installment cut in Budget

The government postponed the final decision on readjustments to civil servants, in the face of the impasse involving President Jair Bolsonaro’s (PL) promise of a more generous increase in police careers in an election year, and split the cut in this year’s Budget in installments.

In his weekly live, the Chief Executive mentioned the need to block almost R$10 billion. At the beginning of the night of this Thursday (19), a figure that circulated among government technicians was that of a cut of R$ 8.7 billion.

The final amount still needs to be validated by the JEO (Budget Execution Board), formed by ministers Ciro Nogueira (Casa Civil) and Paulo Guedes (Economy).

According to government officials, the decision is to postpone an additional block of around R$5 billion to July to accommodate the impact of the 5% readjustment to all servers and a differentiated increase for police officers.

By dividing the cut into two phases, the government now avoids imposing a more severe restriction on ministries, which have their discretionary funds (which include funding and investments) reduced whenever there is a rise in mandatory expenditures.

There is an understanding that Bolsonaro can send the bills that deal with the readjustments to Congress and sanction them after approval by parliamentarians without having a prior reservation in the Budget for the increase in spending.

The only condition, according to these technicians, is that all the steps until the publication of the laws occur until the beginning of July – when the prohibition of the LRF (Law of Fiscal Responsibility) of increase of expenses with personnel in the last 180 mandate days.

as showed the Sheet, the government estimated that it needed a blockade of around R$ 15 billion to compensate for the growth in mandatory expenses and also the readjustments. Another R$ 2 billion would be needed to cover readjustments in the other powers.

“The budget is small. In giving 5% [de reajuste]it will be R$ 17 billion”, said the president.

In recent days, however, the discussions on how the remuneration of civil servants will be marked by comings and goings. Bolsonaro wants a different treatment for public security servants, an idea that faces resistance within the first echelon of the government due to the risk of dissatisfaction from the other categories.

Given the lack of definition and the tight deadline —the budget assessment report needs to be released this Friday (20)—, the technicians’ option was to leave the impact of the readjustments to be incorporated in the report that will be presented by July 22nd.

Internal calculations indicate that the Executive needs another R$ 4.6 billion to be able to afford the 5% linear adjustment for all servers. The total cost of the measure is R$ 6.3 billion, but the Budget already has a reserve of R$ 1.7 billion.

If there is a one-off restructuring of the careers of the PRF (Federal Highway Police) and Depen (Department of Penitentiary), there will be an additional impact of R$300 million to R$400 million.

Bolsonaro wants to grant a greater readjustment to security careers to fulfill a promise made to the group, which makes up his electoral base. In the polls of intention to vote for the dispute for the Palácio do Planalto, he appears in second place, behind former president Luiz Inácio Lula da Silva (PT).

The president’s original desire was to cover all corporations, but, given the strong restriction of resources, the most recent discussions indicate that the government should focus only on the PRF and Depen, which have lower salaries than the PF (Federal Police).

The proposal that has gained strength in recent days is to carry out a restructuring to match the salaries of PRF agents to those of the Federal Police, in addition to serving Depen.

In addition to Bolsonaro having assistants who belong to the PRF, the nod to the corporation is also attributed to his proximity to the president, since these police officers are responsible for security on motorcycles, among other functions.

Government officials also say that the presidential decree that will authorize the appointment of another 625 PF agents and another 625 PRF agents is being drafted. The resource for this measure, however, is already foreseen in the Budget and will not require additional cuts.

There remains, however, the fear at the top level of the government that the differentiated approach will make the strategy of appeasing the spirits of the civil servants unfeasible with the 5% readjustment. There are categories on strike, such as Central Bank employees, and others that have adopted a kind of slow-moving operation to press for higher remuneration.

“There are several proposals, for example, I’m not going to say it’s going to happen. They want to meet the federal highway police officer there to get to the same level as the Federal Police agent. It’s not the police chief, it’s the agent. around BRL 1,500 [de aumento], as well as the people from Depen, who are earning well down there and dealing with people who are extremely dangerous. If I’m not mistaken, it’s in the order of BRL 6,000, BRL 7,000 the top of their career, the idea is to give 50%”, said the president.

“This is where a problem arises, is what can be done now. Several other categories say ‘look, if I’m going to give 10% to the federal highway police and 30% to the Depen people, my category that I represent, which already wins R$ 30,000, I also want 30%, otherwise I’ll stop Brazil’. This is the impasse that is happening”, he added.

In the cut to be announced this Friday, the greatest pressure comes from RPVs (small value requisitions), convictions suffered by the Union in the amount of up to 60 minimum wages, and court sentences. According to estimates, the net increase is R$ 4.3 billion.

Although the National Congress approved last year a sub-ceiling for precatories, which also covers these RPVs, technicians interviewed by the report informed that the limit is applied in the preparation of the Budget.

If projected spending on sentences rises during the year, as is the case now, the government needs to meet this need by cutting other non-mandatory spending. It is not possible to cut the other precatorios already accounted for in the sub-ceiling.

It will also be necessary to increase by R$ 2.5 billion the forecast of resources of the Safra Plan, which finances the producers of the crops. The funds will finance the reopening of operations for the 2021/2022 period and the launch of the 2022/2023 Plan in July.

The technicians also mapped the need to increase by R$ 2 billion the budget for Proagro, a guarantee program for financing in the rural sector.

There is also an increase of R$ 1.9 billion in the forecast of expenses with the payment of the salary bonus — a kind of 14th salary paid to workers with a formal contract and who earn up to two minimum wages — and of R$ 0.9 billion in the BPC (Continued Payment Benefit).

A few expenses should register a decline, so that the balance of the impact on mandatory expenses is below R$ 10 billion.

The cuts will result in a strong squeeze on discretionary spending by the portfolios, which include administrative costs and investments.

This is because, according to behind-the-scenes reports, Bolsonaro wants to shield the rapporteur’s amendments, an instrument used by Congress to irrigate its electoral bases with federal resources without following principles of transparency or equity in the distribution of funds.

The 2022 Budget was approved with an amount of R$ 16.5 billion for the rapporteur’s amendments. Of this amount, R$1.7 billion was blocked in March to accommodate an increase in mandatory expenses.

Technicians collected information on the low execution of the rapporteur’s amendments — so far, only R$ 200 million have been executed, equivalent to about 1.3% of the authorized allocation. Therefore, from an operational point of view, it would make sense to reallocate resources and avoid a collapse in the folders that are already heavily compressed.

However, in an election year and under strong pressure from allies, the president’s orientation is to stay away from these funds when applying the budget cut.

New expenses that the government tries to fit into the 2022 budget execution:

• Readjustment for civil servants (5% for all, and even more for police officers): R$ 4.6 billion, at least
• Judgments (increase in amounts charged to the Union by courts): BRL 4.3 billion
• Safra Plan (expansion needed to fund loan operations for the agricultural sector): R$ 2.5 billion
• ProAgro (need to expand the guarantee program for financing in the rural sector): R$ 2 billion
• Salary allowance (increase in demand for payment expenses, kind of 14th salary for formal workers who earn up to two minimum wages): R$ 1.9 billion
• Continuing Provision Benefit (increase in demand for payment to people with disabilities and needy elderly people): R$ 0.9 billion