Opposition takes place amid pressure from wings of the government to increase spending; court has no date scheduled for decision

03/19/2024

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Jhonatan de Jesus — Foto: Divulgação/TCU

The technical department of the Federal Accounting Court (TCU) concluded that the government’s proposal to limit budget resources’ maximum contingency to R$25.9 billion in 2024 could constitute a violation of the Fiscal Responsibility Act and public finance law and that the public officials in charge of it could face penalties.

This conclusion is included in the consultation opened by the Ministry of Planning and Financial Budgeting. Justice Jhonatan de Jesus, the rapporteur of the case, may or may not agree with the technical area’s conclusion. The plenary session has not yet been scheduled.

In the consultation, the government argues that a section in the 2024 Budget Guidelines Act exempts from contingency the expenses necessary to guarantee a real growth of 0.6% in spending—the minimum required by the new fiscal framework. This was one of the conditions set by President Lula to maintain this year’s primary target at zero.

Thus, the maximum amount of locked resources would decrease from R$56 billion to R$25.9 billion in 2024. This “restriction” occurs when it is necessary to curb spending to ensure compliance with the fiscal target.

According to TCU auditors, the section included in the Budget Guidelines Act undermines the Fiscal Responsibility Act’s mandate for spending freeze. An excerpt from the opinion obtained by Valor indicates that by allowing the government to enact a restriction that fails to meet the fiscal result target, the provision undermines the “binding power of fiscal law”—in other words, it effectively allows a breach of the Fiscal Responsibility Act.

They further note that the Budget Guidelines Act is an ordinary law and thus cannot modify the rule set forth in the Fiscal Responsibility Act—a supplementary law that remains effective and fully operative, they emphasized.

Moreover, the experts state that the restriction should only cover the essential expenses necessary for the operation of the public administration, as outlined in the new fiscal framework, not a broader set of expenses to ensure a minimum real growth of 0.6%.

“The provision mentioned in the 2024 Budget Guidelines Act does not create an expenditure condition, but a value condition, which contradicts the Fiscal Responsibility Act’s stipulations, thereby establishing a new maximum level of restriction to replace the one provided in Supplementary Law 200/2023,” one of the technical area’s opinions further explained.

The opposition comes amid government pressure to increase spending. Earlier this month, President Lula suggested that higher-than-expected revenue is an opportunity to review spending limits in Congress. Since last year, the president and parts of the government have advocated for expanding spending as a means to stimulate growth, a stance criticized by analysts.

On Monday (18), Chief of Staff Rui Costa stated that this debate on spending “is not on the table” within the government. According to him, any discussion in this regard will take place after the release of the bimonthly revenue and expenditure assessment report, scheduled for Friday (22).

“This is not on the table at the moment, and we will only discuss this issue and any others related to budget execution and planning after the report for the two-month period expected next week,” said Mr. Costa, following a cabinet meeting at the Planalto Palace.

The evaluation of the spending freeze limit also requires analysis by the plenary body of the Federal Accounting Court. Speaking to Valor, Chief Justice Bruno Dantas notes that the court has decision-making governance that “ensures multiple opinions are exposed and considered,” but he emphasizes that the court “only issues decisions through its plenary body.” “Opinions, however respectable and well-founded they may be, are only opinions. Only the plenary of ministers has the constitutional competence to decide,” he stated.

*Por Murillo Camarotto, Jéssica Sant’Ana, Guilherme Pimenta — Brasília

Source: Valor International

https://valorinternational.globo.com/