State-owned companies and the nursing floor leave the framework limit – 04/18/2023 – Market

The government included in its proposed fiscal framework a list of more than ten items that will be left out of the new spending limit to be created from next year. The text, as reported to the Sheetremoves from the scope of the lock transfers to municipalities for the payment of the nursing floor, resources destined to agreements with precatories and contributions in state companies.

The proposal contains a series of exceptions to the rule that until now had not been announced by the government. If the proposal is approved in this way for state-owned companies, for example, the government will be able to maintain the free transfer of resources to public companies without this investment compromising the space available for other federal expenses.

The release of capital increase in public companies is similar to that in force in the current spending ceiling – which will be revoked when the new framework is sanctioned. The government’s proposal maintains the prediction in the new regime, with a difference.

The new proposal removes financial companies from this stretch — that is, any contributions made to public banks such as Caixa and BNDES consume the available expense space. The same happens in the case of state-owned companies dependent on the Treasury, as foreseen in the current ceiling model.

Contributions outside the ceiling in state-owned companies was an instrument used by the government of Jair Bolsonaro (PL) that has already drawn the attention of the TCU (Union Court of Auditors) for creating a kind of parallel budget. The then president released an extraordinary credit of R$ 7.6 billion to capitalize Emgepron, a state-owned military company that manufactures vessels for the Navy, at the end of 2019.

The portfolio directed resources as a capital increase to the state-owned company, which later acquired vessels to operate in the research base in Antarctica. With this maneuver, the Ministry of Defense got rid of expenses on its balance sheet.

The rapporteur of the process, Minister Bruno Dantas, pointed out at the time evidence of outsourcing expenses from ministries to state companies. Even with the caveats, however, Bolsonaro’s accounts for that year were approved.

The government claims that the list of measures follows the logic employed in the spending cap. In addition to the operation with state-owned companies, the Lula government also foresees in its proposal the removal of the limitation on expenses for the payment of precatorios that are targets of discounted agreements.

Since 2021, those who are entitled to resources and have not been paid as a result of the amendment to the Precatories (which changed the payment mechanism for these papers) can choose to receive a 40% discount.

In addition, extraordinary credit expenses are outside the scope of the lock – as provided for in the ceiling rule today. The instruments are used for unpredictable and urgent cases, such as those arising from war, internal commotion or public calamity.

Also outside the expenditure limits of the new framework are a series of resources passed on to states and municipalities.

Among them, sending resources to comply with the nursing floor, constitutional transfers, transfers to the health funds of the entities and additions to Fundeb (Fund for the Maintenance and Development of Basic Education and the Valuation of Education Professionals).

In addition, resources transferred to the management of governors and mayors when resulting from forest concessions in Union areas will not be included in the limit, in addition to the money sent when obtained from the sale of properties located in the entities’ area.

Socio-environmental projects or those related to climate change funded with donations (or resulting from judicial or extrajudicial agreements signed due to environmental disasters) will also be removed from the account. The measure should release the unrestricted use of Amazon Fund resources, fed by foreign countries.

Also excluded from the ceiling were expenses incurred by universities and public companies providing services to university hospitals when paid for with their own revenues.

The list completes expenses defrayed from transfers from other entities of the Federation to the Union intended for the direct execution of works and engineering services, non-recurring expenses of the Electoral Justice with elections and expenses related to the collection for the management of water resources of the Agency National Water.

The following will not be included in the calculation basis and in the expenditure limits:

1. Constitutional transfers to states and municipalities and to the Federal District fund by way of education, sharing with oil resources and tax sharing.
2. Fundeb complements to states and municipalities
3. Legal transfers to states and municipalities of resources obtained from forestry concessions
4. Transfers to state and municipal health funds to complement resources for compliance with national nursing floors
5. Extraordinary credits, released in unpredictable and urgent cases (such as those resulting from war, internal commotion or public calamity)
6. Expenses with socio-environmental projects or related to climate change funded with resources from donations, in addition to expenses with projects funded by judicial or extrajudicial agreements signed due to environmental disasters
7. Expenses of universities and federal institutions, and public companies of the Union providing services to federal university hospitals, when funded with own income, donations or agreements
8. Expenses incurred with funds arising from transfers from other entities of the Federation to the Union intended for the direct execution of works and engineering services
9. Expenses with precatories agreements to be paid with discount
10. Expenses with Fundef writs owed to states and municipalities
11. Non-recurring expenses of the Electoral Court with holding elections
12. Expenses with capital increase of non-financial and non-dependent state-owned companies
13. Expenses related to the collection for the management of water resources by the National Water Agency.