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This is the highest cash availability in the last 19 years.
Despite the new pandemic coronavirus
, states and municipalities closed 2020 with almost double the money in ATM
compared to the previous year, according to data from National Treasure
we do central bank
.
According to the two institutions, the balance of states and municipalities went from R $ 42.7 billion in 2019 to R $ 82.8 billion, at the end of last year, an increase of 94%
. This is the highest cash availability for mayors and governors in at least 19 years
.
Even so, it is insufficient, according to the evaluation of the president of the National Committee of the Secretaries of Finance of the States and the Federal District (Comsefaz), Rafael Fonteles, secretary of Finance of Piauí.
According to Fonteles, the improvement in the states’ cash flow is “absolutely temporary.”
“This respite came about thanks to three extraordinary events: the transfer made by the Union; payment of emergency aid; and the suspension of the state debt. It is a real improvement, however temporary, absolutely temporary. Concern about the fiscal situation of the states continues ”, he declared.
In total, the states and municipalities received R $ 60 billion in four installments, paid between June and September, according to data from the Treasury and BC. In exchange, federation entities were prohibited from granting salary adjustments to officials until the end of 2021.
These transfers were the second largest federal government expenditure in the fight against Covid-19. They were only behind the emergency aid, which cost R $ 293 billion and benefited almost 68 million people.
In addition to the re-loan, the states and municipalities had, throughout 2020, the suspension of the payment of debts with the Federal Government, also for the amount of R $ 65 billion. That is, in total, the aid package was close to R $ 125 billion.
But, without the provision of new transfers and without the definition of a new round of payment of emergency aid, the situation of the state and municipal funds may deteriorate again – Fonteles maintains that the states returned, as of January 1, to pay the installments of the debt owed to the Union.
Last month, Comsefaz asked, in a letter to the Legislative Branch, the extension of economic measures to face the second wave of the Covid-19 pandemic.
“Our health spending has increased a lot in the past year. With the continuation of the pandemic, with the delay in the vaccination schedule in relation to what we have seen in the rest of the world, this year we will continue to spend a lot on health. Last year’s emergency aid generated consumption, increased collection with ICMS [Imposto sobre Circulação de Mercadorias e Serviços, estadual]. If it weren’t for him, we wouldn’t have that slack seen in the numbers. “
Income improvement
For the Independent Fiscal Institution (IFI), a body linked to the Federal Senate, data from the National Treasury show that the rescue of the Union ended up being more generous than necessary.
This is because state and municipal tax revenues fell much less than expected at the beginning of the pandemic; in some cases, they even increased. Data from the IFIs indicate that, in some states, the improvement in tax revenues even exceeded double digits.
The main driver was emergency aid, which boosted consumption and boosted the collection of the ICMS, in the case of the states, and the Tax on Services (ISS), in the case of the municipalities.
In this scenario, the federal government closed 2020 with a leak of R $ 745.3 billion in public accounts. The states and municipalities went in the opposite direction and presented a positive result of R $ 38.7 billion.
States want more help
Despite strong cash growth, finance secretaries from 18 states came together earlier this year to call on the National Congress to extend economic measures to tackle the second wave of the pandemic.
In a letter, the members of the National Committee of Secretaries of State for Finance and the Federal District (Comsefaz) requested the renewal of emergency aid, the state of public calamity and the “war budget” for six months.
In addition, they requested the suspension of the payment of court orders and the possibility of suspending the payment of amortizations and interest on debts with the Federal Government, public banks and credit operations carried out with financial and multilateral institutions guaranteed by the Federal Government for one year.
The economic team already admits to renew the emergency aid, but in a more agile version, which reaches only half of the 2020 beneficiaries. And this would happen within the ordinary budget, with the counterpart of the approval of fiscal measures.
Need for reforms
Economists and the National Treasury itself warn that, despite the momentary relief in the cash of the states and municipalities, these governments have registered an accounting decline in recent years.
The scenario is strongly related to the increase in expenses with public officials, which reinforces the need for structural reforms. In 2019, nine states exceeded the limit of the Fiscal Responsibility Law (LRF) for personnel expenses. The law says that states cannot spend more than 60% of current net income on payments to employees, including active and retired employees.
Currently, only Rio de Janeiro is part of the Tax Recovery Regime, a mechanism created to help and restructure the finances of states in crisis. But at least three other governments are negotiating membership: Minas Gerais, Rio Grande do Sul and Goiás.
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