States’ investment increased threefold in first half
State governments have increased nearly threefold investments in the first half of this year, in real terms, driven by this year’s elections and a fiscal situation favored by extraordinary factors. The 26 states and the Federal District jointly invested R$31.4 billion between January and June 2022. In the same months last year, they injected R$11.8 billion. In 2018, also an election year, they invested R$13.48 billion, according to figures adjusted by inflation. Current revenues, which include collections and transfers from the federal government, rose 7.3% year-over-year, in real terms, in the first half of the year, and 21.7% compared with 2018.Representatives of states and experts in public accounts say the situation of revenues is still influenced by cyclical and non-recurring factors. The picture is likely to begin to change in the second half.Changes on how states calculate sales tax ICMS levied on fuels, electricity, and telecommunications are expected to at least slow down the increase in the collection of the main state tax. Besides this, expenditure pressures, such as salary adjustments granted during the first months of the year, are seen as weighing more heavily in the second half. Even so, in general, specialists say the result of 2022 is expected to be positive given the good performance of the first half and previous periods. As for the fiscal situation in 2023, they still see many uncertainties.A set of cyclical factors, which included extra transfers from the federal government due to the pandemic and higher revenue driven by the recovery of the economy, inflation, and high commodity prices, played a role, said Ursula Dias Peres, a professor of public policy at the University of São Paulo (USP) and a researcher for the Solidary Research Network. These factors provided the states with more funds in 2022 than at the end of the previous terms in 2018, when the Brazilian economy was coming out of a recession."There are two distinct periods," she said. Part of what caused the most recent increase in revenues helped the states in the first half of 2022 and, for this reason, despite recent measures to reduce ICMS rates in key sectors, states may end the year with a better relative collection than in 2018 or 2021.Besides revenues, what helps explain such an increase in investments this year was the space opened by the restrictions on salary adjustments for public servants resulting from Complementary Law 173/20, she said. The...
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