Tax Reform changes funding for universities – 07/10/2023 – Market

The Tax Reform will mean that the government of São Paulo, still under the management of Tarcísio de Freitas (Republicans), will need to define a new funding model for the three state universities of São Paulo, USP (University of São Paulo), Unesp (University Paulista State) and Unicamp (State University of Campinas).

Currently, they receive a percentage of the ICMS share (Tax on the Circulation of Goods and Services). The tribute will gradually cease to exist from 2029. The text approved by the Chamber provides that ICMS and ISS will be completely extinct in 2033.

This Monday (10th), the deans of the three institutions met with Tarcísio after the launch ceremony of the Provão Paulista, a new entrance exam model for public school students. They heard from the governor that commitments to a funding model that gives autonomy to universities are being maintained.

The Tarcísio de Freitas administration said, in a note, that it will discuss funding for public higher education in the state at an opportune time.

“The final text of the Tax Reform, which is still under discussion in the Senate, even if approved without changes, provides for a transition from the current model of taxation to the new one by 2033. Therefore, there is enough time to address the issue, which will have all the attention of the Government and its commitment to public higher education of excellence.”

For the rector of USP Carlos Gilberto Carlotti Jr, the governor “understands that the qualification of São Paulo universities comes from this financing model”.

Pasqual Barreti, rector of Unesp and current president of Cruesp (Council of Rectors of São Paulo State Universities), says that managers are “obviously worried”, but this Monday’s meeting served to calm spirits.

Even before the prospect of the end of ICMS, universities in São Paulo had been dealing with a smaller budget as a result of the tax cut on electricity and fuel. According to Barreti, the institutions will receive 9% less than what is foreseen in the budget law for this year.

In the conversation with Tarcísio de Freitas this Monday, it was agreed, according to the deans, that the discussions for the design of a new calculation be resumed as soon as the processing of the proposed amendment to the Constitution (PEC) of the Tax Reform ends.

“We are going to do a new calculation so that there is no loss for universities, we are going to analyze the historical series of tax collections to suggest a model. Certainly, the value will be less in percentage, compared to what exists today, but not in values “, says Carlotti.

Still during the electoral campaign for the government of São Paulo, in 2022, the then candidate for the Republicans met with the deans, who wanted to hear him about the financing model. Back then, he would have ensured that the current model would be maintained.

The risk of interrupting the model linked to ICMS exists because it was not provided for by law, nor is it included in the state Constitution. The definition was made through a 1989 decree, signed by the then governor Orestes Quercia.

Alterations approved in 1992 and 1995 changed the percentage transferred to universities and, since 1995, it has been at 9.57% of the ICMS share, which, in turn, is equivalent to 75% of the collection of this tax. For years, entities linked to public education in São Paulo have demanded that the 9.57% be readjusted to 11.6%.

The percentages of the cake that reach each university were defined by the board of rectors. USP receives 5.0295%, Unesp, 2.3447%, and Unicamp, 2.1958%.

The transition time until the universities feel the effects of the end of the ICMS tax is relatively long, but, according to Carlotti, from USP, the deans want the new model to be defined during the Tarcísio government.

ICMS and ISS (municipal tax) will be transformed, together with PIS, Cofins and IPI (these last three federal taxes), into a IVA (Value Added Tax). The new taxation model will be dual. One part will be administered by the federal government through the CBS (Contribution on Goods and Services), and the other, by states and municipalities through the IBS (Tax on Goods and Services).

The deans also want to take advantage of the discussion of the new linkage model to include funding for universities in the State Constitution, as is the case with FAPESP (Foundation for Research Support in the State of São Paulo), which receives at least 1% of state tax revenue.

“Our wish is that funding be constitutional and there are sectors of the government that defend this. At the moment, what we had guaranteed at the meeting [com o governador] is that we will have, at least, by the same decree, as it is today, but that autonomy is maintained”, says Barreti, from Unesp.

If universities lost this ICMS percentage, they would continue to be financed by the state government, but would be more subject to cash conditions each year and available to the occupants of the Palácio dos Bandeirantes. Therefore, for the rectors, the model created in the late 1990s and replicated by all governors until then, gave autonomy to the institutions.

The expectation of the rectors is that from the beginning of the transition of the Tax Reform, even with a new transfer model, there will be a reduction of what will enter the cash of each one, demanding better management on the part of the universities.

“With the reserves, it will be possible to survive until a more stable regime comes in. It will be necessary to be austere and careful with perennial expenses”, says Barreti, from the council of rectors.