Justice Flávio Dino freezes payments until lawmakers create rules for traceability, efficiency
08/15/2024
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Flávio Dino — Foto: Antonio Augusto/STF
Justice Flávio Dino of Brazil’s Supreme Court ordered the suspension of all mandatory parliamentary budget allocations until Congress establishes new guidelines to ensure transparency, traceability, and efficiency in the disbursement of these funds. Exceptions are made only for ongoing infrastructure projects and emergency disaster relief efforts.
These mandatory budget allocations, which the federal government is required to execute, are divided into two types: individual allocations (which include so-called “direct transfers,” where funds are sent directly to state and municipal governments) and group allocations. Together, these allocations amount to approximately R$40 billion.
Justice Dino’s ruling caught members of Congress off guard. Lower House Speaker Arthur Lira convened a meeting with party leaders from the governing coalition and opposition to discuss a response, but no consensus had been reached by the end of the night. Mr. Lira also planned to consult with Senate President Rodrigo Pacheco. One idea under consideration is to request that Chief Justice Luís Roberto Barroso reassign the case to another justice.
In a related move, the chairman of the Congressional Joint Budget Committee, Congressman Júlio Arcoverde, hastily called a session on Wednesday night to vote down a provisional executive order that would allocate R$1.3 billion in credit to the Judiciary. This action was taken in retaliation for what lawmakers perceived as an infringement on their legislative authority. However, by the time of publication, there was still no quorum to vote on the measure, and the Lula administration was hesitant to support the initiative pushed by the center-right bloc and opposition.
Mr. Arcoverde’s session was convened just minutes after Justice Dino’s decision. Earlier in the day, Mr. Arcoverde had scheduled a session to address Justice Dino’s concerns by approving a bill that would amend the 2024 Budget Guidelines Act to specify the use of “direct transfers.” However, this plan was abandoned following Justice Dino’s latest decision to suspend all budget allocations.
In his decision, Justice Dino said that the execution of budget allocations must comply with standards of efficiency, transparency, and traceability. He argued that mandatory parliamentary allocations should comply with constitutional requirements and should not be subject to the “absolute discretion of the lawmaker proposing the allocation.”
“It is important to clarify: ‘Mandatory Budgeting’ should not be confused with ‘Arbitrary Budgeting.’ While public administration allows for discretion in various aspects, it must not lead to arbitrariness that disregards constitutional and legal norms,” the justice wrote.
Justice Dino also expressed concern that the current process for distributing these funds limits the Executive Branch’s ability to implement public policies and effectively turns members of Parliament into “expense coordinators.” He further noted that it is “incompatible with the constitutional order” to execute the public budget privately and secretly.
“As it stands, the detailed execution of the budget no longer depends on administrative decisions within the Executive Branch, but merely on rubber-stamping decisions made by another branch of government,” Justice Dino wrote.
According to the rapporteur, amendments to the federal constitution cannot violate fundamental clauses such as the principle of separation of powers. He also pointed out that the Executive Branch must check whether the funds are fit for implementation per the Constitution.
The preliminary injunction was issued in response to a Direct Action of Unconstitutionality (ADI 7697) filed by the Socialism and Freedom Party (PSOL), which challenges constitutional amendments passed between 2015 and 2022 that mandate the execution of individual and group parliamentary budget allocations.
Justice Dino’s move is the latest in a series of actions aimed at curbing the practice of so-called “secret budgeting.” He is also overseeing a case that questions whether non-mandatory budget allocations, which were significantly increased in this year’s budget, are being used to maintain non-transparent funding practices similar to those previously associated with the so-called “rapporteur amendments,” banned by the Supreme Court in 2022.
These “rapporteur amendments,” identified by the RP9 marker, were officially attributed to the budget rapporteur but were, in practice, a tool for executing spending recommendations made informally by other lawmakers through backroom political deals.
In addition to overseeing the case on non-mandatory allocations, Justice Dino is also responsible for reviewing the “direct transfers,” created in 2019 and currently under scrutiny by the Supreme Court. Initially challenged by the Brazilian Association of Investigative Journalism (Abraji) and more recently by the Prosecutor-General’s Office, these direct transfers are a form of individual budget allocation that sends funds directly to states and municipalities without requiring them to be tied to a specific project or activity.
The mechanism was introduced to reduce bureaucratic hurdles in implementing projects, but experts have raised concerns about transparency, as it is possible to identify who requested the funds, but not how they will be spent, unlike other types of budget allocations.
*Por Flávia Maia, Raphael Di Cunto, Marcelo Ribeiro, Valor — Brasília
Source: Valor International