Controversy about triggers for fiscal adjustment measures
The mandatory expenditures established in the federal budget draft for next year that the government submitted to Congress amount to less than 95% of total primary expenditures. Therefore, if constitutional amendment proposal 188/2019, known as federative pact PEC, had already been passed and were in force, the government would not be able to trigger measures of spending adjustment.
By altering the text of article 109 of the Act of Transitory Constitutional Provisions (ADCT), PEC 188 establishes that, if during the preparation of the budget draft is found that primary mandatory expenditures surpass 95% of total primary spending, the executive, legislative and judicial branches and the other bodies submitted to the spending cap will have to adopt measures to adjust their accounts.
Measures include the suspension of perks, promotions and salary raises, of alteration of the career structure, of hiring, of granting of bonuses or allowances, as well as of creation of mandatory expenditure.
In the budget proposal for 2021, total federal primary spending, which don't include payment of debt interest and amortization, was set at R$1.52 trillion, whereas mandatory expenditures were set at R$1.42 trillion. That is, the mandatory primary spending accounts for 93.7% of the total primary spending, therefore under the 95% limit established by PEC 188.
A high-ranking economic official told Valor that this occurred because the budget proposal for 2021 had already adopted some of the adjustment measures included in PEC 188 and in constitutional amendment 95, as for example the suspension of salary raise and other benefits to servants, according to complementary law 173/2020.
Yet there is a conceptual issue that the government apparently didn't consider: the difference between total primary spending and total primary spending submitted to the spending cap. Their dimensions are entirely distinct. For 2021, for example, the total primary spending is R$1,517 billion, whereas the total primary spending submitted to the cap is R$1,486 billion. The difference between them is R$30.9 billion.
For 2021, the mandatory primary spending accounts therefore for 95.6% of the total primary spending submitted to the cap (R$1,421 billion compared to R$1,486 billion). Thus, if this were the criterion adopted by PEC 188 to trigger the adjustment measures, the spending on personnel of the three branches and of the bodies submitted to the cap would have to be reduced by close to...
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