Author: Joaquim Castanheira

Source: ETCO Magazine, No.11

There are some national themes in Brazil with such a long life that they seem immortal. One of them refers to public spending and its implications for the country's high tax burden. As in other countries, the subject divides opinions. On the one hand, people who defend the idea that public spending should go through a severe regime, with cuts in expenses and services offered by the State. On the other hand, the defenders of the increase in the tax burden, for understanding that this is necessary to meet the growing demands of the population for more social services. From this clash, there remains a question that does not want to remain silent. Aren't there other options besides these two? The answer is yes. Brazil has a superlative revenue level and increasing it seems out of place. The way, then, is to rationalize public spending so as to do more (and better) with the same money. Management in some states, such as Espírito Santo and Minas Gerais, and in municipalities such as Diadema, in São Paulo, demonstrate that this concept is not only viable, but guarantees good results. “Public spending should aim to improve the quality of life for citizens. There is no need to raise taxes to meet these needs, ”says Professor Adriano Biava, from USP's Faculty of Economics and Administration. The businessman Jorge Gerdau Johannpeter is a longtime scholar on the issue of public management. Founder of the Competitive Brazil Movement (MBC), which develops actions to improve the administration of states and city halls, Gerdau goes to the point that seems crucial. "The resources exist, but they are insufficient in view of the country's social demands", he says. “The challenge, therefore, is to do more with less, which requires efficient resource management. The Brazilian tax burden, without a doubt, is one of the highest in the world, which burdens society as a whole, impacting the competitiveness of the private sector. ”

It is undeniable that in recent years Brazilian public expenditure has taken an Olympic leap. However, they were surpassed by the extraordinary performance of revenues (read tax collection). Between 1991 and 2007, the tax burden jumped from 24,61% to 37,19% - and total public spending registered the same pace. Discounting the payment of interest on public debt and transfers to Social Security, most of the funds raised by the government go to sectors such as education, health and security.

"Brazil spends a lot on education, in relative terms, but the results are meager"
Hélio Zylberstajn, author of a study on the quality of public spending in Brazil

The real increase in the minimum wage also consumed a significant portion of the money that enters the official coffers, due to the impact on payments to retirees and Social Security pensioners. According to the Brazilian Institute of Geography and Statistics, IBGE, of the approximately 4.600 municipalities in Brazil in 1992, just over half had health posts or centers. In 2005, there were only six of the 5.600 Brazilian cities without medical posts. Now see the results in education. In 1980, almost 81% of children between 7 and 14 years old were enrolled in school. In 2000, this index had jumped to 97%. The data are from the National Institute of Educational Studies and Research Anísio Teixeira, Inep. Well, ask any Brazilian if he is against this evolution. It is like proposing a petition signed in favor of electricity. Everyone supports unconditionally - even those who fight, in principle, any form of increase in public spending. “The increase in federal, state and municipal government expenses meets a demand from the population itself and is legitimate”, says André Montoro, president of ETCO. "It is a mistake to think that this, in itself, is bad." The most common complaint focuses on the low quality of these essential services. “Brazil spends a lot (in relative terms) on education, but the results are meager. There is certainly room to improve results, with the same level of spending, ”says researcher Hélio Zylberstajn, from Fipe, author of the study“ Quality of public spending in Brazil: suggestions for improving public policy results, without increasing taxes". According to a survey by the Zylberstajn team, “in a group of selected countries, which spend 3,7% to 8,8% of GDP on education, Brazil appears in the group of those who spend the most, with our 6,6% national income ”. A similar finding holds true for other sectors, such as health and safety.

“The resources exist, but they are insufficient in view of the country's social demands”
Jorge Gerdau Johannpeter, founder of the Competitive Brazil Movement

In general, government officials counter criticism with the claim that money is short and that there are many needs for little budget. José de Filippi Júnior, mayor of Diadema, municipality in the metropolitan region of São Paulo, usually says, in a good-humored way, that “painting with paint is easy. I want to see paint without paint ”. The city run by Filippi has been the scene of a successful experience in security management. No fees or taxes were created to fund the necessary investments to reduce the alarming rates of violence registered in the city, but the results bring an interesting revelation: the solution of basic problems of the population automatically feeds improvements in other sectors and strengthens the economy of the benefited region. .

 

 

“Painting with paint is easy. I want to see paint without paint ”
José de Filippi Júnior, mayor of Diadema

 

Notice what happened in Diadema. In 1999, the city recorded 374 homicides, which equals 111 per 1.000 inhabitants, an index almost four times higher than what the UN considers as a state of civil war. “Residents lived by jumping over dead bodies,” says Regina Miki, Diadema's secretary for Social Defense. Instead of betting only on a repressive policy, the City Hall invested in intelligence work. It mapped the incidence of crimes by crossing this information with the areas of social vulnerability and the presence of bars. The survey showed that 60% of homicides occurred in the vicinity of establishments that served alcoholic beverages in the period between 23 pm and 4 am. With these data in hand, a bill proposing the closure of bars in that time interval was approved by the City Council. Inspection to ensure compliance with the law also received special attention. “At the same time, we created assistance programs, in areas such as health, education and leisure, in the neighborhoods with the highest crime rates”, says Regina.

 

"We have not increased the property tax in the last three years and we have not created new municipal taxes"
Regina Miki, Secretary of Social Defense of Diadema (SP)

 

These initiatives brought down the statistics of violence. In 2007, 80 homicides were registered in the city, less than 20 per 1.000 inhabitants. Today, according to City Hall surveys, 93% of the population does not want the bars to reopen at night. In five years of validity of the legislation, the economy in the area of ​​health with accidents and homicides related to alcohol consumption totals 36 million reais. "These resources were used for preventive health programs", says Regina. The security climate attracted investments to the city. Since 2003, 300 companies have been installed in Diadema. Interestingly, the largest beverage manufacturer in the country, AmBev, built one of its largest distributors in the municipality, generating 1.700 jobs. The return on business investments caused a jump in the budget, which went from 209 million reais in 2001 to 620 million reais in 2009. “We have not increased the IPTU in the last three years and we have not created new municipal taxes”, says Regina.

Although the culture of raising the tax burden resists bravely, there are signs of a change in the mentality of some public officials. "It is necessary to seek more efficiency in the use of public money", says Montoro. "You can do more with less or more with the same." One way is to create models for managing and monitoring public spending, suggests Professor Zylberstajn, from Fipe. Montoro, from ETCO, witnessed an interesting example in Germany, more precisely in Hamburg. The city had an honorary mayor. He was responsible for the political role of negotiations and the establishment of priorities for the administration of the municipality. “And there was a professional responsible for managing the projects and the public machine,” he says.

In a way, a similar experience occurs in the State of Minas Gerais. When he took his first term in 2003, Governor Aécio Neves implemented what came to be known as a management shock. The coordination of this project was handed over to the current vice-governor, Antonio Augusto Anastásia, and to his right arm Tadeu Barreto Guimarães, who occupies the Secretariat of the State Program for Results. Political and general coordination work rests with the governor. “The secret of the management shock is double planning”, summarizes Guimarães. "At the same time that we put out the fire, we built the new house." In 2003, Minas Gerais had a budget deficit of 2,4 billion reais. Wages were late and development projects were shelved. At the same time that the scissors were spent on all expenses, such as daily fees, travel, renovations of public buildings, among others, the government defined 29 projects aimed at infrastructure and serving the population. One of them provided for the connection of the 224 municipalities of Minas Gerais by paved roads. Another aimed to irrigate a vast area in the north of the state to enable fruit development. “In this way, any money that was left over due to expenditure cuts already had an expected destination and was one of those 29 projects”, says Guimarães. "The savings generated are allocated to development, not to increase the fiscal surplus." In the first six months of management, 150 million reais were allocated to the projects. Over the years, new plans have been incorporated. Today, there are 57. The resources allocated to them jumped from R $ 253 million in 2003 to R $ 3,6 billion at the end of this year. The source of this money is the public machine itself, which has undergone a severe weight loss regime. In total, more than 40 state agencies were extinguished. Three thousand positions of trust ended up in the freezer, while the number of secretaries dropped from 21 to 15. "Even with this downsizing, we did not fall into the error of devaluing the public servant," he says. “On the contrary: we seek to motivate you with training and a variable remuneration policy, linked to pre-established performance goals.” Among the 450 thousand employees of the State, there were those who received 93% of their monthly salary as a bonus.

The need for involvement with employees led the Minas Gerais government to sign a “results agreement” with the Secretaries of State. Each of them is committed to concrete performance goals. Upon reaching them, they are accredited to obtain more resources for their folders. The management model, combined with more rigid and modern inspection, raised the state budget - it will be 35 billion reais in 2009, 11 billion reais more than five years ago. “Without any increase in the tax burden”, guarantees Guimarães. "In fact, we exempt 150 products from the basic basket from ICMS collection."

"It is necessary to build partnerships with the third sector, the State alone does not solve the problems of society"
Paulo Hartung governor of Espírito Santo

Some public managers have used creativity to meet social needs more quickly. In the state of Espírito Santo, partnerships with social organizations were signed to manage prisons, hospitals and public libraries. To increase young people's access to education, the government bought places from private institutions, especially in high school technical courses, language schools and colleges. "It is necessary to build partnerships with the third sector, since the State alone does not solve the complex problems of society," says Paulo Hartung, the state's governor.

Hartung took office in 2003 and found a government virtually bankrupt. Short-term debts, with suppliers and payment of salaries, amounted to four months of state revenue. A fiscal adjustment has fought hard against privileges and tax evasion. More than 300 special ICMS regimes have been revoked. With the initial sanitation of public accounts, Hartung took the step that he considers most important for the effective management of public resources: planning. "We don't believe in improvisation," he says. Without this, Hartung believes, the money raised remains at the disposal of needs that are not always a priority and is applied in a diluted manner. For this reason, the government team designed a strategic plan with a 20-year horizon, named Espírito Santo 2025. A total of 24 projects were defined and, to manage and monitor them, a “project office” was created, a kind of special secretariat. Hartung likes to quote at least two statistics as a result of the managerial turnaround promoted by his government. First: the participation of the State in the national GDP went from 1,83% to 2,2% between 2003 and 2005. Second: in the ranking of States with the lowest degree of poverty, Espírito Santo rose from the ninth place to the third, behind only from Santa Catarina and São Paulo. Based on his experience at MBC, Gerdau identifies some of the main obstacles in improving public services and in managing money from taxes paid by Brazilians. “The lack of focus on concrete objectives is the main reason for the dispersion of resources. The lack of management and planning efficiency, coupled with the non-use of best practices, also represents important obstacles in public management ”, he says. “Public management needs to be modernized, adopting the practices already established by private activity. Adapted, these tools can lead to a more efficient administration, highlighting the possibilities of reducing expenses, diagnosing problems such as waste and showing investment needs. ” There are those who agree. There are those who disagree. The debate, therefore, is open and must be carried forward - not least because the country cannot wait any longer.

 

 

“The savings generated are allocated to development, not to increase the fiscal surplus”
Tadeu Barreto Guimarães, secretary of the State Program for Results of MG

ETCO Magazine (No.11, Dec / 2008)