Deputy proposes including System S funds in the Budget – 12/08/2023 – Market

The billion-dollar revenue from System S was targeted by the rapporteur of the LDO (Budget Guidelines Law) of 2024, deputy Danilo Forte (União Brasil-CE), who proposed including the resources in the Federal Budget.

The publication of the opinion generated a reaction from entities, who fear being subject to blockages and resource constraints. They argue that the funds are not public revenue, and their inclusion in the Budget would be unconstitutional.

System S entities —including Senai, Sesc, Senac and Sebrae— are financed by compulsory contributions paid by companies on payroll, in percentages ranging from 0.2% to 2.5%.

The collection is made by the Federal Revenue, but the distribution of the money does not go through the Budget. This year, the transfer should be R$29.9 billion.

The charge is provided for in an article of the Federal Constitution and aims to promote labor qualifications and social activities. Concerned about the practical effects of inclusion in the Budget, leaders are already looking for congressmen and asking for “help”.

In the government of Luiz Inácio Lula da Silva (PT), the concern is with the impact of the change in the management of expenditure limits under the new fiscal framework. The understanding of technicians is that the transfer of funds would consume space within the rule, leading to cuts in other areas. When contacted, the Ministry of Finance declined to comment.

Forte, in turn, says he seeks only “transparency”. When contacted, the Ministry of Finance declined to comment on whether or not it is in favor of including the resources in the Budget and whether there are risks to the new fiscal framework, which limits government spending.

The deputy’s opinion says that the entities’ contributions will be collected, monitored and charged by the Federal Revenue Service and “will be part of the Fiscal Budget, transferring the proceeds of their collection to the entities”.

According to Forte, this does not mean that the institutions’ expenses will be included in the Budget in detail, detailing each item. The measure will apply to the collection, which will be included in the revenue forecast, and to the global transfer made to the entities.

“My maxim has always been: where there is public resources, there must be transparency. System S moves huge resources, collected by the Revenue, and society has the right to know the volume of this, to be able to monitor and verify what is being spent “, says Forte to Sheet.

“I’m not taking a penny from System S, just providing transparency about these resources, as has been the recommendation of several control bodies, such as the TCU [Tribunal de Contas da União]for example”, adds the rapporteur.

The allocation criteria and the lack of transparency in the use of these resources have been criticized by control bodies in the past.

Forte’s opinion will still be discussed and voted on by congressmen. However, there is already strong behind-the-scenes mobilization to overturn the article.

A message sent by members of these entities circulates among parliamentarians with warning sirens and an appeal. “We need help!! Our budget cannot be limited!!”, says the text shared by the messaging app.

The president of Sebrae, Décio Lima, who has already been a federal deputy for three terms, says he will call the LDO rapporteur, for whom he was a “partner and companion” during the legislatures in which he served in the Chamber.

“I’m going to look for him to discuss the matter and give our considerations”, he states.

“Contingency resources from Sebrae is taking money from the little ones”, says Lima. He also states that System S is already accountable to the TCU and has internal governance and compliance standards. “The supervision to which we are subjected is even greater than in public authorities.”

In a note, the CNC (National Confederation of Commerce) states that the resources allocated to Sesc and Senac, as well as other System S entities, “cannot be incorporated” into the Budget because “they are destined for private entities”.

The entity cites a judgment by the STF (Supreme Federal Court), in which the court recognized the private nature of these institutions as the basis for exempting them from public competitions when hiring employees.

The entities’ understanding is that, if they are private institutions, “the money is not public”.

“The intention to include System S resources in the Union Budget does not meet any constitutional principle or legal norm and even goes beyond the Brazilian legal order. These resources cannot be considered part of the treasury since, by constitutional definition, they do not their scope is to cover State expenses”, states the CNC.

When contacted, CNI (Industry), CNA (Agriculture and Livestock) and CNT (Transport) did not respond until the publication of this text.

The measure also worries the government of Luiz Inácio Lula da Silva (PT), for fear of the impact of the change in the management of expenditure limits under the new fiscal framework. The understanding of technicians is that the transfer of funds would consume space within the rule, leading to cuts in other areas.

Although the inclusion of this source of revenue in the Budget could expand the base of the DRU (Decoupling of Union Revenues), which authorizes greater flexibility over 30% of social contributions, the transfer to entities would represent a new expense under the framework’s limit.

It would be necessary to cut other expenses by the same amount to make the transfer viable. The impasse is considered within the government as one of the most serious problems in the LDO’s opinion, alongside the stamp of R$11.3 billion for commission amendments.

According to the TCU, System S is made up of private law entities that manage public resources. Therefore, they are supervised by the court.

In recent years, the court of accounts made recommendations to increase transparency about the use of money and pointed out irregularities in the hiring of managers or employees by companies to provide services, or even in the hiring of relatives to occupy jobs in the bodies.

Congress has tried to include these resources in the Budget on other occasions, but has encountered resistance from business leaders. There have also been attempts to change the allocation or even reduce the transfer of resources, initiatives that were equally blocked by the entities.

In the second term of Dilma Rousseff (PT), the then Minister of Finance, Joaquim Levy, proposed a 40% cut in transfers, without success.

About to take over the Ministry of Economy from Jair Bolsonaro (PL), Paulo Guedes defended, in December 2018, the reduction of transfers. “You have to put the knife in System S,” he said at the time. There were, however, no changes to the financing rules.