Government ignored Treasury by issuing MP with R$20 billion for secondary education scholarship – 01/09/2024 – Market

The National Treasury, the body that manages federal public accounts, was ignored in the preparation of the MP (provisional measure) that authorized an investment of up to R$20 billion in a private fund to finance the scholarship to encourage students to remain in education average.

Document obtained by Sheet through the LAI (Access to Information Law) shows that the consultation on the content of the policy was sent for analysis by technicians on November 27, 2023, the same day the MP was signed.

In an order, the deputy secretary of the National Treasury, Viviane Varga, states that “there was no time for the body to demonstrate.”

The letter with the response was issued on December 1st, with the text already in force. The MP was signed by President Luiz Inácio Lula da Silva (PT) and ministers Fernando Haddad (Finance) and Camilo Santana (Education).

SOF (Federal Budget Secretariat), linked to the Ministry of Planning, was not even contacted.

In reply to Sheetalso through the LAI, the body stated that the measure was not processed by the secretariat, “which is why no documentation was produced by this technical area to support the formulation of the aforementioned MP”.

The records show the absence of technical opinion from the bodies responsible for public expenditure on a measure that allows new spending of up to R$20 billion — double what was allocated to the Minha Casa, Minha Vida housing program in 2023 (R$9, 3 billion).

The policy was considered positive by experts, for whom it is important to tackle the more pronounced school dropout rate among teenagers in high school, but it generated fiscal concerns.

The first version of the MP allowed the amounts in the fund to be paid in with resources from the Budget, shares in federal state-owned companies or companies in which the Union had a minority stake.

The proposal generated noise within the government and in the market, as it could open loopholes for expenses outside the Budget and for the erosion of fiscal rules. After negotiations with Congress, there was an agreement to eliminate the possibility of using state-owned shares.

A second concern arose with the government’s successful articulation to allow a first contribution outside the spending limit in force in 2023. The Legislature approved the extra expenditure of up to R$6 billion, which, in a context of fiscal deficit, means an increase of public debt.

With the approval of congressmen, the transfer was carried out following an order from the Ministry of Finance on December 27, 2023. The operation was seen as a type of creative accounting, as it allowed the anticipation of expenses for 2024, reducing pressure on the Budget this year.

At the time of negotiation, government members recognized the convenience of using the space in the 2023 fiscal target to bring forward spending that, if maintained in 2024, would put pressure on Minister Fernando Haddad’s (Finance) objective of fiscal rebalancing.

In general, measures that result in increased spending are analyzed by the National Treasury or SOF so that the areas can prepare technical subsidies on the impacts of the policy on federal expenses, public debt and fiscal management as a whole.

Something similar occurs in the preparation of measures that result in tax waivers, which need to be evaluated by the Federal Revenue Service, the body responsible for collection.

Therefore, the lack of a more in-depth analysis of the secondary education measure by the Treasury and SOF is seen behind the scenes as problematic and goes against the flags that the government itself has defended.

The Ministry of Planning, under the command of Simone Tebet, wishes to implement a medium-term logic to the Federal Budget, highlighting the future effects of decisions taken today.

In the case of the fund to finance secondary education scholarships, new contributions of approximately R$7 billion are planned for 2025 and 2026 each year.

The transfer must occupy space in the Budget and within the limits of the new fiscal framework. Even so, the policy was not vetted by the areas that will need to deal with the consequences of this decision.

In the response provided via LAI, Planning highlighted that the LDO (Budget Guidelines Law) of 2023 itself requires that acts that create or expand mandatory expenditure of a continuous nature be forwarded in advance to government bodies for a statement on budgetary compatibility and adequacy and financial.

As the law was approved in 2022, still under the configuration of the Jair Bolsonaro (PL) government, the responsible body listed is the Ministry of Economy. Technicians understand that, under the new Esplanada organization, the analysis would be the responsibility of Finance and Planning — more specifically, the Treasury and SOF.

Planning, however, did not even sign the MP, although minister Simone Tebet made the high school scholarship one of her flags during the presidential campaign and, later, when negotiating support for Lula’s ticket.

At the Ministry of Finance, three other areas provided technical advice to the high school MP: PGFN (Attorney General of the National Treasury), the department’s legal body, SPE (Secretariat of Economic Policy) and SRE (Secretariat of Economic Reforms).

In an opinion prepared within four hours, the SPE gave a favorable opinion regarding the merits of the proposal, but suggested consulting the Treasury and SOF regarding the analysis of the financial and budgetary impact of the measure.

The PGFN noted in its opinion that “the deadline granted for legal analysis, of just one day, hindered the adequate examination of the matter”, but was also favorable.

The legal body adopted the understanding that the MP would “only” authorize the contribution of up to R$ 20 billion, but the decision to execute it would occur at a second stage, with “the increase in expenses being absent at this stage of creating the program “.

The SRE gave a favorable opinion, but requested adjustments to the wording to provide that “the regulation of values, payment methods and criteria for operationalization and use of savings will be published by a joint act of the Ministries of Education and Finance”.

As shown by Sheetthe fragmentation of fiscal decisions has been highlighted by experts as a relevant challenge for the government in the coming months.

The same government that seeks to rebalance the accounts announces a scholarship program for high school students (with a first contribution outside the spending limit), accelerates the granting of social security benefits and grants a tax incentive for companies to acquire new machinery and equipment.

“Important expenses are being decided in very different instances”, warned economist Manoel Pires, coordinator of the Fiscal Policy Observatory at FGV Ibre (Brazilian Institute of Economics at Fundação Getulio Vargas). For him, this makes good fiscal management difficult.