During the 2018 elections, fiscal adjustment was one of the main campaign issues. Several governors were elected promising to cut personnel costs, while others, on the contrary, proposed that the state should expand during times of crisis. In the realm of rhetoric, anything goes, but let's analyze the data and understand who expanded and who contracted spending.
Through the excellent Finances of Brazil (Finbra) database available on the website of the Brazilian Public Sector Accounting and Fiscal Information System (Siconfi) [1] it is possible to compare the performance of Brazilian states in the first year of the governors' work.
This post will be divided into four sections. This brief introduction, a second section on methodology (I try to explain in a didactic way how I obtained the data for an audience less familiar with Public Accounting), a third section presenting the data itself (divided by total personnel expenses, expenses with active personnel, and expenses with inactive personnel), and finally, a conclusion.
Exclusive
Personnel expenses will be measured according to the classification of budgetary expenditure by nature of the Manual of Accounting Applied to the Public Sector (MCASP)[2].
According to this concept, budgetary expenditure consists of:
a) Economic Category
b) Expenditure Nature Group
c) Expense Item
The nature of the expenditure is complemented by information called "Application Method," which aims to clarify whether the resources are applied directly by the same level of government or not.
In addition to classifying expenses by nature, it is also important to understand the phases of expense execution. According to the method established in Law No. 4.320/1964, it occurs through three stages: commitment, liquidation, and payment.
According to Article 58 of Law No. 4.320/1964, commitment is the act issued by a competent authority that creates an obligation for the State to make a payment, whether or not subject to the fulfillment of a condition. It is basically a reservation of a budget allocation for a specific purpose. Liquidation consists of verifying the right acquired by the creditor based on the titles and documents proving the respective credit; that is, in liquidation, the Public Administration recognizes that there has been a service rendered or a purchase of goods, and the individual or legal entity then has the right to receive the funds from the Union. The payment phase is when the Public Administration transfers the funds to the person who owed them.
In this analysis, we will work with data on expenses that have been settled.
Therefore, for measuring personnel expenses totalThe account 3.1.90.00.00 (3.X.XX.XX — Current Expenses, X.1.XX.XX — Personnel and Social Charges, XX90.XX — Direct Application Modality) will be adopted for measuring personnel expenses. inactiveThe accounts 3.1.90.01.00 (note that the numbering is the same as the previous one, but now includes the element "RPPS Retirements, Paid Reserve and Military Retirements"), 3.1.90.03.00 (element "RPPS and Military Pensions"), 3.1.90.05.00 (element "Other Social Security Benefits for Civil Servants or Military Personnel") and 3.1.90.07.00 (element "Contributions to Closed Pension Entities"). For measuring personnel expenses. active, personnel expenses will be used. total subtracted from personnel expenses inactive.
The routine developed in the R language is available on my GitHub (https://github.com/claudiomar23/Gastos-com-pessoal-Estados)
Expenses are deflated using prices from February 2021 (that is, they are presented after discounting inflation).
Results
Total personnel expenses
Firstly, total personnel expenses (3.1.90.00.00), including active and inactive employees, ranked as follows:
States, in a supposed year of fiscal adjustment, increased their personnel expenses by an average of 4,6%, even after discounting inflation.
Analyzing the data presented, it is clear that there is strong regional heterogeneity. However, when analyzing the profile of the governors, a certain ideological pattern emerges. Among the states that cut personnel expenses the most, those with governors whose ideological profile is more aligned with the right stand out.
First, Minas Gerais has the only governor elected by the Novo Party, Romeu Zema, who continues to uphold one of the party's main principles: fiscal responsibility. Rio de Janeiro, the Federal District, Paraná, and Mato Grosso, the states that follow, have governors from right-wing parties (MT — Democrats) or who were elected with the support of Jair Bolsonaro (Witzel in Rio, Ibaneis in the Federal District, and Ratinho Júnior in Paraná). Among the states that have cut personnel expenses the most, only Maranhão has a governor with a left-leaning ideological profile, Flávio Dino of the PCdoB.
Among the states that expanded spending the most, governors were those more left-leaning.
First, Rio Grande do Norte stands out, whose governor, Fátima Bezerra, was elected by the PT (Workers' Party). Piauí, governed by the PT, and Amapá, governed by the PDT (Democratic Labour Party), also have governors aligned more to the left. However, it is noteworthy that Goiás and Roraima, two states with right-wing governors, are among those that showed the greatest expansion in personnel expenses.
Expenses related to active personnel
However, total personnel expenses say very little about the governor's management. Basically, the governor can only influence and cut spending on active personnel (essentially avoiding salary increases and new public service exams, given that firing employees to cut costs is virtually impossible), considering that retired employees and their dependents have the acquired right to receive their pensions, and even if a state pension reform is implemented, it takes several years to take effect. Let's look at the data:
It is noticeable that, as expected, the percentage growth in assets is lower than that of total expenditures. It averaged 2,26%, already discounting inflation. This reflects that in a situation of fiscal contraction, such as the current one, states have little room for expansion.
Once again, Minas Gerais continues to stand out with a strong adjustment of almost 10% after discounting inflation. Among the top five, there is only a change between the 3rd and 4th positions, with Paraná overtaking the Federal District.
Among the expansionist states, Rio Grande do Norte remains in first place. However, Piauí no longer appears among the five that spent the most on personnel. The number of states governed by right-wing governors also becomes the majority.
Expenses related to retirees
Now let's analyze the governors' "Achilles' heel": spending on retirees. As explained in the section on spending on active employees, governors, because it is an acquired right, have little control over the expansion of spending on retirements and pensions. As would be expected, states show much stronger expansions in spending on retirees than on active employees.
Among the 27 states of the Federation, only Alagoas shows a slight decrease in spending on retirees, while Piauí and Paraíba show strong growth of almost 50% in spending. From one year to the next. Even though a pension reform has been approved, as already explained, it will take several years to take effect, and significant increases in spending on retirees should be expected in the coming years.
The states showed an average growth of an impressive 10,91% in spending on retirees. From one year to the next.
Final Words
It is possible to observe that, moving beyond rhetoric and focusing on the data, the fiscal adjustment that was so often promised or criticized has barely occurred in the first year of the newly elected governors' terms. This is due both to the almost complete lack of flexibility in spending on active personnel during times of crisis and to the generous pension legislation that has remained in place for all these years and now significantly increases spending on retirees in the states.
It's important to remember that this analysis involved a pre-pandemic year, and 2020, when the data becomes available, will likely see a significant expansion in spending on active personnel due to the need to hire healthcare professionals to address the health crisis in Brazil. Let's wait for the data, which should be available around July.
