Fiscal framework: senators want to change Fundeb – 05/31/2023 – Market

The inclusion of expenses from the FCDF (Constitutional Fund of the Federal District) and basic education under the new fiscal framework approved by the Chamber of Deputies entered the sights of senators, who articulated to change these points of the text.

The need imposed by the new rule to cut almost BRL 40 billion in discretionary expenses in the submission of the 2024 Budget also raised alarm among parliamentarians, who are concerned about the repercussions of this on spending for next year.

The deadlock points would be discussed by Senate leaders in a meeting with Minister Fernando Haddad (Finance) this Thursday (1st), but the meeting was canceled at the request of Senate President Rodrigo Pacheco (PSD-MG), due to the vote on the MP (provisional measure) that deals with the administrative structure of the government – ​​the deadline for analyzing the text ends this Thursday.

The economic team aims to speed up this process, which is one of the main pillars of fiscal policy, but there is also recognition that there are points of doubt among senators. There is still no new date for the meeting between Haddad and the leaders.

The proposal’s rapporteur, senator Omar Aziz (PSD-AM), told the Sheet that there are three main points that are targets of parliamentary demands: article 15, which deals with extra expenses in 2024, Fundeb (Fund for the Maintenance and Development of Basic Education) and FCDF.

Behind the scenes, senators claim that any possible change in the text must be combined with the House, which will have to reconsider the proposal after the changes in the Senate. As the deputies have the final word on the project before the sanction, the most prudent thing would be to promote an agreement between the two Houses.

The Federal Government’s complement for Fundeb today is outside the spending ceiling, the current fiscal rule that limits the growth of expenses to inflation variation. Haddad’s team maintained this design in the original proposal, but the rapporteur in the Chamber, deputy Cláudio Cajado (PP-BA), included the expenses under the new framework.

The Secretary of the National Treasury, Rogério Ceron, has already said publicly that the measure makes the rule “tighter” in the medium and long term, since these transfers grow more quickly than other expenses. Aziz said that the bench linked to education has already requested conversations to discuss the device.

There is also the FCDF impasse, a fund supplied by the Union with resources from taxes paid by the entire population. The money finances DF expenses with public security and other policies, under the justification that the district government must take care of the space occupied by the federal administration.

Transfers to the FCDF are also outside the current spending ceiling, but were included in the framework by the rapporteur in the Chamber. The text also unlinks the fund from revenues and predicts that the values ​​will follow the rule of correction of the general limit of expenses – with real gains between 0.6% and 2.5%.

The DF parliamentary bench has exerted great pressure to exclude this change from the text.

The third target of controversy is article 15, which deals with extra space for spending in 2024. As a general rule, the growth in the spending limit for the following year must be equivalent to 70% of the variation in revenue in the 12 months accumulated until June of the year period, already discounting inflation for the period.

The percentage resulting from this calculation must respect the range of 0.6% to 2.5%. In practice, these are the floor and ceiling for advancing expenses, regardless of the country’s economic situation. Today, economists estimate that the percentage for preparing the 2024 Budget will be around 1.5%.

Article 15 authorizes the government to open additional credits over the next year, up to a 2.5% increase, if the 2024 collection rises more significantly compared to 2023. However, as shown by the Sheetthe confusing wording of the device ended up leaving gaps for interpretations that could facilitate the reach of this space.

“Article 15, people are not understanding it well, its wording is confusing,” said Aziz.

On the other hand, one point concerns parliamentarians. The text approved in the Chamber left the rule tighter at the exit, as the 2024 Budget will have to be prepared with data on inflation and revenue growth until June 2023 —less favorable than the indicators that will be used in the adjustments allowed in the year next.

Minister Simone Tebet (Planning and Budget) recognized that this can bring challenges. “Today, the way the project is, it would have to cut discretionary expenses by around BRL 32 billion to BRL 40 billion [em relação ao previsto na Lei de Diretrizes Orçamentárias] because of the alteration that the rapporteur made”, he said on Tuesday (30).

The minister’s alert reverberated among parliamentarians, as it may mean a smaller margin for Congress to allocate resources in the Budget vote. Even if the government could open new credits throughout 2024, this would be done without much control by the Legislative.

To get an idea of ​​how much is at stake, the Chamber of Deputies Budget consultancy simulated the scenarios. According to the framework’s general rule, the expenditure limit would increase by BRL 112.54 billion next year —a space that will need to be used to accommodate expenses such as the new minimum wage appreciation policy and the resumption of health and revenue-linked education.

Article 15 could allow for a gain of over R$16.73 billion, thanks to the greater variation in the actual limit on expenses. There is also the device that allows to incorporate, on a permanent basis, the effect of the acceleration of inflation until the end of this year —an extra space of R$ 37.55 billion.