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Money left? How are the state accounts


The strategies used by the government of Jair Bolsonaro (PL) to reduce the final price of fuels hit the finances of state administrations, highly dependent on the collection of the Tax on Circulation of Goods and Services (ICMS). Only Complementary Law 194/2022, which limited tax rates on fuel, energy, transport and communicationsit should reduce the revenues of the federative units in about R$ 54 billion until the end of the year, according to the state finance secretariats.

In front of the governors’ proteststhe federal government argues that state collections, savings and investments have grown in recent years due to gains provided by fuel and energy inflation in the economic recovery, in addition to federal transfers to combat the Covid-19 pandemic.

According to data from the National Council for Finance Policy (Confaz), in 2021 the net collection of ICMS from fuels and lubricants was R$ 112.5 billion, an increase of 40% compared to 2020, when R$ 80.4 were recorded. billion. The numbers were used by Senator Fernando Bezerra Coelho (MDB-PE), in his report to PLP 18, which gave rise to Complementary Law 194.

A report released at the end of June by the National Treasury Secretariat, of the Ministry of Economy, shows that all 27 units of the federation had growth in their revenues in the second two months, compared to the same period in 2021. The highest increases occurred in Rio de Janeiro. de Janeiro (40%) and Pará (34%).

According to the document, there was also an increase in expenses, but in 20 of the 27 federative units on a scale lower than that of revenues. In Rio de Janeiro, for example, spending rose 19%, and in Pará, 20%.

Growth in current income and expenses

  • Current income realized and expenses settled until the 2nd quarter of 2022 in relation to the same period of the previous year (%)

state

Revenue

Expense

B.C

20%

12%

AL

21%

23%

AM

17%

22%

BA

21%

10%

EC

18%

19%

DF

12%

6%

ES

31%

12%

GO

17%

two%

BAD

19%

27%

MG

9%

16%

MS

18%

0%

MT

26%

12%

SHOVEL

34%

20%

PB

25%

18%

FOOT

3%

5%

IP

19%

15%

PR

24%

9%

RJ

40%

19%

RN

16%

9%

RO

32%

38%

RR

10%

35%

LOL

4%

0%

SC

33%

16%

IF

14%

two%

SP

22%

19%

TO

27%

16%

Source: National Treasury Department

Another indicator that points to an improvement in the fiscal health of the states is current savings, that is, the difference between current revenues and current expenditures committed. According to the National Treasury, the data, if positive, points to the autonomy to carry out investments with own resources.

The best indicator was observed in Amapá, where the difference between income and expenses reached 60% of net current income (RCL). In the second quarter of 2019, before the pandemic, the state’s current savings level was 47% of the RCL. At the time, states such as Goiás and Rio Grande do Sul had negative rates of 7% and 6%, respectively. According to the latest report, they now have 22% and 21%.

Current savings in relation to current net income (RCL)

state

Current savings/RCL

B.C

37%

AL

28%

AM

25%

AP

60%

BA

33%

EC

34%

DF

25%

ES

39%

GO

22%

BAD

26%

MG

20%

MS

29%

MT

48%

SHOVEL

33%

PB

33%

FOOT

29%

FOOT

29%

IP

32%

PR

42%

RJ

31%

RN

28%

RO

37%

RR

34%

LOL

21%

SC

33%

IF

22%

SP

35%

TO

31%

Source: National Treasury Department

As a result, states are able to pay off outstanding amounts, that is, expenses budgeted during a fiscal year that were not honored. The Federal District even paid 74% of the expenses registered at the end of 2021. Paraíba got rid of 72% of its remaining payables, and Pará, 70%. At the other end, Rio Grande do Sul, Amapá and Minas Gerais managed to pay off only 9%, 10% and 11%, respectively.

As a result, there was an increase in state investments. Until the second quarter of 2022, Bahia invested 10% of its total revenue with this type of expense. Espírito Santo, Maranhão and Alagoas invested 9%, while Mato Grosso do Sul, Piauí and Santa Catarina invested 8%. To give you an idea, in 2019, in the same period, the highest rate, in Bahia, was 5%.

Composition of expenses in relation to total revenue

state % costing % guys % investment % debt

B.C

17%

47%

two%

5%

AL

24%

46%

9%

6%

AM

25%

40%

3%

3%

AP

12%

37%

two%

0%

BA

22%

46%

10%

3%

EC

22%

44%

4%

5%

DF

26%

51%

1%

two%

ES

21%

39%

9%

3%

GO

27%

52%

two%

1%

BAD

28%

44%

9%

7%

MG

19%

50%

5%

15%

MS

17%

55%

8%

4%

MT

10%

46%

two%

6%

SHOVEL

24%

45%

7%

two%

PB

12%

54%

5%

two%

FOOT

24%

48%

4%

two%

IP

25%

45%

8%

6%

PR

12%

48%

3%

two%

RJ

22%

50%

two%

1%

RN

10%

65%

1%

1%

RO

19%

46%

0%

1%

RR

19%

47%

1%

3%

LOL

15%

65%

two%

1%

SC

17%

50%

8%

4%

IF

27%

51%

4%

3%

SP

21%

45%

3%

8%

TO

18%

53%

two%

3%

Source: National Treasury Department

States claim that growth is not structural

The states, in turn, claim that the record increase in revenue was not structural. “ICMS revenue grew much higher than usual, jumping from 7% to 7.6% of GDP, without a real increase in the tax burden for taxpayers, nor any other structural change in the economy that would justify the belief that this result will be repeated over the next few years”, says the National Committee of State and Federal District Finance Secretaries (Comsefaz), in a note.

Based on an analysis by economist Sérgio Gobetti, the entity claims that state revenue from ICMS could fall by up to 1.5% of GDP in the coming years, as a result of the reversal of extraordinary collection gains obtained in 2021 and the permanent reduction in tax rates. fuel, energy and telecommunications.

According to the economist, the recent rise in revenue was a combination of atypical factors, which tend to reverse. “What happened was the combination of two extraordinary events: the increase in the price of oil well above the historical average and the growth of industrial GDP, which serves as the basis for ICMS, well above the general GDP of the Brazilian economy”, explains Gobetti. .

Although they have reduced their ICMS rates, 11 states are still trying to reverse in the Federal Supreme Court (STF) the effects of Complementary Law 192/2022, which established a single and uniform rate for the entire country of ICMS on fuel. On Monday (18), Minister Gilmar Mendes, rapporteur of the case at the Court, determined the creation of a special conciliation commission with the objective of seeking a consensus of the interests of the states and the Union.

For economist Raul Velloso, a specialist in macroeconomic analysis and public finance, there is not exactly one right side in this dispute. “There are interests intersecting. From the federal government’s point of view, the ideal is for there to be no inflation, for Petrobras to continue profiting and for ICMS rates to decrease so as not to have this impact on people who consume fuel at gas station pumps,” he says.

“From the point of view of the state manager, he tends to be against this because he will always seek to increase the collection not only to pay his debts, but also to face the expenses he needs to make and which have also gone up a lot”, he explains. “The state is the federation’s poor cousin.”

According to Velloso, who was secretary of Economic Affairs at the Ministry of Planning, several federative units have faced serious crises due to the disproportionate increase in expenses with state pensions, which force them to reduce investments.

“States will end up losing expenditures financed by captive revenues in the areas of education and health, which are also critical. But pension is a bill that needs to be paid. It went up, you’ll have to face it, and then what’s left is to cut investments. This is what is happening in Brazil: we have been cutting investments for 12 years in order to pay the social security bill”, he says. “What governors are seeing now is a possibility to better react to this.”

In a live promoted by the newspaper Valor Econômico, economist Daniel Couri, executive director of the Independent Fiscal Institution (IFI), said that the limitations on the collection of ICMS from the states should represent, later on, a kind of “forced tax reform” in the States.

“No state that has a significant loss of revenue like this will stand still,” he said. For him, the impact of the measures must be heterogeneous, “but everyone will feel it somehow”.

“We have several special regimes at the state level. This loss of revenue from PLP 18 will force all state governments to rethink other benefits that will be granted,” said Couri. “This will force us to have a different composition of state revenue than we have today.”

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