Principal investigator: Viviane Pires Ribeiro
Article title: The Relationship Between Government Transfers, Own Tax Revenue, and the Education Index of Municipalities in the State of Minas Gerais
Article authors: Cleyde Cristina Rodrigues Caetano; Lucimar Antônio Cabral de Ávila; Marcelo Tavares;
Location of the intervention: Minas Gerais, Brazil
Sample size: All municipalities in Minas Gerais
Main theme: Education
Primary variable of interest: Investments in Education
Evaluation method: Others
Evaluation Context
The changes brought about for Brazilian municipalities with the promulgation of the 1988 Federal Constitution were significant, as they acquired greater independence and financial autonomy in the allocation of their own resources, in the financing and administration of their revenues, and in the expansion of municipal competencies. According to Caetano et al. (2017), Brazilian municipal units experienced a significant increase in revenues from fiscal transfers from the states and the Union and from resources obtained through their own collection; however, these units began to bear the burden of responsibility for managing these resources and offering basic public services to the local population. Some legislative changes in the 1990s imposed on municipalities the obligation to act primarily in primary education and early childhood education, determining the allocation of a minimum of 25% of tax revenues to educational services. In this context, Caetano et al. (2017) verifies the relationship between government transfers, own tax revenue and the education index of municipalities in the state of Minas Gerais, based on the hypothesis that a greater availability of financial resources would positively impact the quality of municipal education.
Intervention Details
The study sample encompasses all municipalities in the state of Minas Gerais, subdivided into 12 mesoregions, for the period from 2009 to 2013. The financial information for each municipal unit was obtained through the Public Education Budget Information System (Siope), operated by the National Fund for the Development of Education (FNDE), from which the Statements of Revenues and Expenditures on Maintenance and Development of Education were collected.
The variables used by the authors are: Percentage of own tax revenues, which expresses the degree of financial autonomy of each municipal entity; Number of inhabitants of the municipal units, established based on the 2010 Demographic Census and the municipal population estimates sent to the Federal Court of Accounts; Own tax revenue per capita, the ratio between own tax revenue and the number of inhabitants; Fiscal transfer per capita, the ratio between revenue from constitutional and legal transfers and the number of inhabitants; Percentage representation of the municipal GDP; Additional Percentage of Investment in Municipal Education (Pade); Percentage of municipal revenues applied to education; and the Municipal Education Index (Iedu), a municipal indicator provided by Firjan, ranging from 0 to 1, the closer to 1, the greater the municipality's development in education.
Methodology Details
In order to compare the levels of municipal autonomy among the municipalities that make up the mesoregions of the state of Minas Gerais, Caetano et al. (2017) performed an analysis of variance in randomized blocks, using the percentages of own tax revenues, which demonstrate the level of autonomy of the municipality. Thus, the years 2009, 2010, 2011, 2012 and 2013 were considered blocks. To determine the existence of a linear correlation between the variables, Spearman's correlation coefficients were calculated.
Subsequently, in order to reduce disparities in municipal characteristics, a grouping was carried out based on estimates of average percentages of own tax revenue, using the k-means cluster analysis method. Finally, to verify the relationship between per capita own tax revenue, per capita fiscal transfers, the additional percentage of investment in education, and the Firjan municipal education index, the authors used multiple linear regression.
Results
The results found by the authors infer that the percentages of own-source tax revenues of the municipalities that make up the mesoregions of Minas Gerais show statistical differences, at a significance level of 95%. The same analysis shows that during the period from 2009 to 2013, these percentages were statistically similar. The Scott-Knott test performed to compare the mean estimates of the percentages of own-source tax revenues among the mesoregions shows that the state was divided into three blocks, statistically different from each other, at a significance level of 95%.
The results from the Spearman correlation test between the aforementioned variables suggest a positive and considerable relationship, statistically significant at the 1% level, between the percentages of own tax revenues and the percentage representation of Minas Gerais municipalities in relation to total GDP. In the analysis of the relationship between the variables "Percentage of own tax revenues" and "Additional percentage of investment in municipal education," it is observed that Minas Gerais municipalities exhibit significant Spearman coefficients at the 1% level, but the association between the variables shows a negative and low behavior, indicating that these municipalities, even with greater autonomy, do not make greater investments in education than less autonomous municipal units. The Spearman correlation test proved that there is no relationship between financial autonomy, investments, and educational indices.
In seeking an answer to the main hypothesis of the study, the authors presented multiple linear regression models for the formed clusters, characterized by the non-statistical significance of one model (cluster 3) or by the presentation of very low coefficients of determination, which conferred little predictive capacity to the analysis. Thus, it became evident that the quantity of own tax revenues per capita and fiscal transfers per capita, as well as the additional percentage of investment in education, did not impact the education index designated for the research. According to the researchers, the proximity of the values of the municipal education indices can be pointed out as one of the justifications for the impossibility of constructing empirical models with significant predictive capacity.
Lessons in Public Policy
Is there a relationship between the degree of financial autonomy and investments in education? In a study conducted by Caetano et al. (2017), the authors statistically demonstrated that there is no relationship between the degree of financial autonomy and investments in education. In other words, the group that brought together small municipalities, considered less autonomous, on average, ends up making greater investments in education. This can be explained, according to the researchers, by the lower demand from students and the fact that smaller cities are not affected by some problems prevalent in large municipalities, such as security, transportation, basic sanitation, housing, etc. Furthermore, the municipalities with greater financial autonomy showed that property tax (IPTU) and service tax (ISS) constitute important taxes in the constitution of their own revenue, indicating that municipal governments should implement improvements regarding the assessment, collection, and oversight of these taxes.
Caetano et al. (2017) emphasize that the fact that no empirical relationship was found between education spending and the quality of education does not negate the importance of financing municipal education services, as resources may be being mismanaged due to possible inefficiency in the public sector. In this case, municipal administrators should pay closer attention to the management of available funds and be concerned with the return and efficiency of the services offered.
References
CAETANO, Cleyde Cristina Rodrigues; ÁVILA, Lucimar Antônio Cabral de; TAVARES, Marcelo. The relationship between government transfers, own tax revenue and the education index of municipalities in the state of Minas Gerais. Public Administration Magazine, v. 51, no. 5, p. 897-916, 2017.
