With terms coming to an end on December 31, over a third of Brazilian state governors are set to leave their successors without money to pay expenses incurred during the current administration. This finding, obtained by Broadcast, is yet another example of the pitiful situation of state finances across the country.
It is the responsibility of governors to pay all expenses incurred during their term, but several states have already admitted they will have no resources to pay Christmas bonuses to public servants.
The outgoing state governors have until the end of the year to fix this situation and avoid incurring on a breach of fiscal responsibility legislation, although no previous governors have ever been punished under this law to date.
The 11 deficient states include Goiás, Maranhão, Mato Grosso, Mato Grosso do Sul, Minas Gerais, Pernambuco, Rio de Janeiro, Rio Grande do Norte, Rio Grande do Sul, São Paulo, and Sergipe.
Add to this the drastic situation in the northernmost state of Roraima, which has failed to pay salaries to its public servants for three months and is now being subjected to a federal intervention.
State finances: earning more, but spending more too
State finances are in a terrible situation all over the country, being hit particularly hard by a long-lasting recession and struggling to recover. Data from the Institute of Applied Economic Research (Ipea) has shown that despite efforts to increase revenue, primary results across the country are still showing a deficit.
States managed to increase their revenues by elevating rates of State Goods and Services Tax (ICMS)—their main source of resources—but all of these gains were swallowed up by increased spending on personnel.
Meanwhile, though state revenues have increased this year, at a total of BRL 628 billion they are still considerably lower than 2014 levels, exemplifying the struggle of a desperately slow economic recovery.
The main bottleneck for state finances around the country is spending on payroll. Data from the Public Treasury showed that only four of Brazil’s 27 states have managed to reduce costs on personnel this year, with some seeing huge increases, well above inflation.
In Mato Grosso do Sul, payroll spending increased by almost 20 percent after inflation, with Roraima and Rio de Janeiro each having hikes of 10 percent.
The Treasury stressed that the high percentage of spending on inactive personnel highlights the pressing need for a national pensions reform. While a majority of states have managed to reduce spending on active staff over the last few years, all but two states have seen increases in expenses on their inactive personnel.