Study reveals legislative power over city budgets and federal influence loss over mayors
11/04/2024
In the past four years, parliamentary budget allocations to municipalities have nearly doubled the amount voluntarily transferred by the federal government to local administrations, according to an exclusive study by the technical advisory team of Congressman Pedro Paulo obtained by Valor.
These sums are already significant relative to what smaller municipalities receive annually from the Unified Health System (SUS), the Fund for Maintenance and Development of Elementary Education (FUNDEB), and the Municipal Participation Fund (FPM).
The report highlights the growing influence of the Legislative branch over city budgets, particularly in smaller municipalities, and the declining federal government influence over mayors. From 2016 to 2020, the federal government allocated R$66.4 billion to municipalities through voluntary transfers, while parliamentary allocations totaled R$43.6 billion. Between 2021 and 2024, this trend reversed: mayors received R$96.5 billion endorsed by lawmakers, compared to R$49.9 billion in discretionary federal funds.
This figure masks that in 2023, half of the R$21.3 billion in discretionary spending by the Lula administration in municipalities was directed by congressional indications. This resulted from a deal to pass the so-called Transition Constitutional Amendment Proposal (PEC). In exchange for releasing R$170 billion for the Executive, Congress maintained control over “secret budget” funds, which the Supreme Court had abolished the previous year.
According to the study, the federal government’s voluntary transfers to municipalities were mainly through discretionary ministry funds and the former Growth Acceleration Program (PAC). These Executive resources reached R$27 billion in 2020, during the pandemic. Since then, Congress has assumed control over these funds by creating the so-called rapporteur allocations (popularly known as the “secret budget”), expansion of other transfers, and the end of PAC. Municipal allocation funds increased to R$28.8 billion in 2024 from R$7.8 billion in 2019, a 269.2% growth.
Parliamentary preference is for transfers to municipalities. Last year, the amount reached R$23.1 billion, equivalent to 15.2% of what they received from the Municipalities Participation Fund (FPM)—distributed based on population size and local income, historically the primary revenue source for small cities. For state governors, lawmakers and senators’ allocations totaled R$4.5 billion in 2023, just 3.5% of the R$129.3 billion received via the State Participation Fund (FPE).
Regarding health and education funds, the smaller the city, the more significant the impact of parliamentary transfers. In municipalities with fewer than 5,000 inhabitants, the average per capita budget allocation was R$355.80, equivalent to 71% of what they received from SUS and 36.5% of FUNDEB (although not all municipalities in this category received all three transfers). In contrast, those with over 50,000 inhabitants received R$105.2 per capita—24% of the funds from SUS and 12% from Fundeb.
The data also show that the lower the Human Development Index (HDI), the higher the value allocated by parliamentarians. Municipalities with an HDI below 0.600 received R$263 per capita. Those with an HDI between 0.600 and 0.750 received R$143 per inhabitant, while those with an HDI above this range received R$47 per resident.
On the other hand, the study also points out significant discrepancies among municipalities. “There is a notable concentration of entities receiving amounts below R$200 per inhabitant [in 2024],” it said. The average value was R$236.30 per resident, but 89 locations exceeded this by almost four times, reaching over R$919.
“The ten municipalities receiving the least per capita allocations [in 2024] had a total of R$6.7 million for a population of 3 million, averaging R$2.20 per inhabitant,” the report noted. Leading this list is Itaí (São Paulo), with R$21,500 in parliamentary transfers for its 25,900 residents, equivalent to R$0.80 per capita. The list also includes the capital, Belém, with R$3.7 million in allocations for a population of 1.4 million.
“Conversely, the ten municipalities with the highest per capita transfers totaled R$76 million for a population of just 33,000, with an average transfer of R$2,300,” the study said. Davinópolis (Goiás), with 1,900 residents, tops the list with R$2,745.40 per capita.
Twenty-six cities received more from direct transfers to states and municipalities without the need for agreements than from the FPM. Of Roraima’s 15 towns, 12 are in this situation. This method is favored by mayors and congress members because it allows funds to arrive more quickly, as it doesn’t require a project submission or federal government evaluation. However, it faces criticism for its lack of transparency.
Lawmaker Pedro Paulo, who commissioned the study, believes the data show that although parliamentary allocations require improvement, they have effectively delivered federal resources to where people live. “What I’m highlighting is that transparency needs significant improvement. However, parliamentary transfers are a channel for more Brazil and less Brasília,” he said.
The lawmaker argues that municipalities face public pressure for actions that fall under state and federal government responsibilities and parliamentary allocations are a way to empower them after years of revenue concentration in the federal government. “In the Rio de Janeiro election, the primary topic was public security, which is a state responsibility,” he said.
He suggested, as part of the study, reserving 3% of parliamentary allocations for municipalities with up to 10,000 inhabitants and an HDI below the national average, creating a “national portfolio of local investment projects,” and allocating funds to cities that improve their fiscal and public policy indicators, along with implementing more transparency, traceability, and growth control rules.
“There’s no doubt that we have a Frankenstein compared to other countries, but wait. Just like FUNDEB, SUS, FPM, and FPE, it’s a resource that somewhat reduces the federal authoritarianism of the government. Even if unintentionally, in a haphazard way, it is taking on a redistributive and progressive character,” he said.
*By Raphael Di Cunto, Marcelo Ribeiro — Brasília
Souarce: Valor Inernational