IFGF 2015

Transcription

IFGF 2015

Conjuntura Econômica
Conjuntura Econômica
IFGF 2015
FIRJAN FISCAL
MANAGEMENT INDEX
Based on 2013
MUNICIPAL PROFILE
NATIONAL SCOPE
June/2015.
IFGF 2015 - ÍNDICE FIRJAN DE GESTÃO FISCAL - ANO BASE 2013
PÁG. 2
Sistema FIRJAN
Federation of Industries of the State of Rio de Janeiro
IFGF 2015
FIRJAN FISCAL
MANAGEMENT INDEX
Based on 2013
MUNICIPAL PROFILE
NATIONAL SCOPE
PRESIDENT Eduardo Eugenio Gouvêa Vieira
Economic Development Board
DIRECTOR Luciana Costa M. de Sá
Economics and Statistics Management
MANAGER Guilherme Mercês
Division of Economic Studies
HEAD Livio Ribeiro
Business Economics Division
HEAD Tatiana Sánchez
Technical Staff:
Jonathas Goulart
Marcio Felipe Afonso
Nayara Freire
Paloma Lopes
William Figueiredo
Carolina Neder
Marcelo Nicoll
Raphael Veríssimo
Trainees:
Ihorana Cuco
Ana Carolina Resende
Study Preparation
GEE - Economics and Statistics Division
Translation
Plan Idiomas
Faust Maurer
Roger Stanley
www.firjan.org.br/ ifgf
Av. Graça Aranha, 1, 10º andar - Centro, Rio de Janeiro
economia@firjan.org.br
June/2015
SUMMARY
Municipal Fiscal Scenarios 4
The FIRJAN Fiscal Management Index
6
9
Data base General Panorama 10
IFGF Own Revenues 11
IFGF Personnel Expenditure
13
IFGF Investments 14
IFGF Cost of Debts 16
IFGF Liquidity 17
Largest and Smallest
19
Capitals
22
IFGF 2015 - FIRJAN FISCAL MANAGEMENT INDEX - BASED ON 2013
PAGE 3
MUNICIPAL FISCAL SCENARIOS
The Brazilian public sector collects tax revenues equivalent to 35.9% of the country’s total production. This percentage is similar to developed countries and almost twice greater than some
emerging economies. Nevertheless, there is great public demand for more spending, especially
in the social area, and investments both in infrastructure, worn out by the lack of conservation,
and to avoid the precariousness of essential public services becoming a drag on Brazilian economic growth.
Despite the already high tax burden and the huge spending need, recent years have been marked
by a significant deterioration of public accounts. At the federal level, the imbalanced accounts
were so great that last year, the public sector recorded the first primary deficit since 1998. In the
states, the picture is similar; in many there are not even enough resources to pay employees
and suppliers. The fiscal situation of more than five thousand Brazilian municipalities, however,
is not yet widely publically known.
Of the total Brazilian population collected taxes, considering the three levels of government,
more than R$ 400 billion (25%) are directed to the municipal administration1. To put into perspective, this volume of resources is the equivalent used to run the whole Argentine public
sector and twice that in Colombia. Therefore, it is essential to monitor how the resources are
managed by local council, the closest public sector link with the citizen-taxpayer.
The 1988 Constitution led in a new stage of Brazilian fiscal federalism, based on the principle of
decentralized administration. In this sense, the granting of exclusive tax powers and the increase
in funding transfers from the federal and state governments to municipalities should have had in
response the growing role of local governments in basic social programs, particularly in health
and education, and typical urbanization investments.
In the following decades, although the increased local economic growth has led to the amount
levied by municipalities, the high dependence on intergovernmental funds has crystallized amid
the Brazilian municipalities: 94% have received in transfers at least 70% of its current revenues.
Thus, the municipalities were left with little control over their revenues, contributing to the
loosening of the co-responsibility link between the citizen-taxpayer and the local government,
leaving the city halls vulnerable to economic conjuncture and politics.
1
Compared to 2006, the first of the IFGF series, the municipal administration resources grew 58% in real terms, while
total revenue advanced 48%.
PAGE 4
Not even the Fiscal Responsibility Law, which defined several public expenditure control mechanisms, has managed to contain this process. Proof of this is that only 61 of more than five
thousand Brazilian cities generated enough revenue to pay their employees2.
In recent years, the problem has worsened to the extent that staff costs have lagged behind the
slowdown in revenue due to the lower economic activity. Indeed, while current net revenue
came from a real advance of +12.1% in 2011 to an increase of only +0.6% in 2013, there was
continued growth in personnel costs, with relevant real peaks in 2011 (+8.3%), 2012 (+7.9%)
and 2013 (+6.7%). As a result, in 2013, more than a decade after the Fiscal Responsibility Law
enactment, almost 800 municipalities exceeded the 60% of current net revenue (RCL) limit set
to the civil service cost, the largest number of cases since the law enactment.
Faced with the combination of rising compulsory expenditure and a low local revenue capacity,
expenses are postponed as outstanding commitments recorded as the main variable adjustment
of municipal accounts at the expense of long-term debt contracting, restricted to financing
investments. In 2013, while only 13% of Brazilian municipalities had net consolidated debt, 91% of
them wrote up balances to be paid. The use of this accounting subterfuge has been so recurrent
that in more than 1,400 cities there is no available cash to cover short-term obligations. Indeed,
the difficulty of most municipalities is the short-term cost payments, not interest and long-term
debt repayments incurred in previous years - this is a problem concentrated in the major cities3.
This untoward mathematics leaves little room for investments, which in 2013 accounted for only
9.0% of the current net revenue, the lowest level since 2006 and well below the previous year
percentage of 14.2%. This means that investments in education, health and urban infrastructure
remained marginalized in the municipal budgets, increasingly committed to spending on public
servants and sensitive to the government transfer reductions4. Thus, this limits one of the main
expected benefits of the decentralization process initiated in 1988: to increase the quality
of public goods and services offered to the population, a key factor for the country’s socioeconomic development.
On average, personnel expenses are eight times larger than its own revenues.
This point is examined in more detail in the section referring to IFGF Cost of Debt.
4
In this sense, it is important to emphasize the reduction of Covenant Transfers - in median terms, fell 36.4% in
2013 after growing 54.9% in 2012. Although they are not the main source of funds of Brazilian municipalities, they
are voluntary transfers from the Union and the States mainly intended for the implementation of investments by
municipalities and therefore affect the amount allocated to this heading.
2
3
PAGE 5
THE FIRJAN FISCAL MANAGEMENT INDEX (IFGF)
Launched in 2012, the IFGF threw light on a very important issue for the country: how the
taxes paid by society are administered by the municipalities. Since then, the IFGF has brought
more transparency to the municipal accounts to facilitate the comprehension of the data
and information provided by local councils. Through a simple tool and available for public
consultation, all Brazilian citizens can now participate in the discussion about the fiscal situation
of their city.
The IFGF seeks to portray the challenges of municipal management in the allocation of
resources, given the budgetary constraints faced by Brazilian municipalities. On the revenue
side, the problem is the dependence on intergovernmental transfers. On the spending side, the
challenge is current expenditure management (mainly personnel expenses and debt service
charges), this heavy weight on the budget causes rigidity and may jeopardize funds planned
for other purposes, in particular public investments. Finally, it was found many municipalities
postpone expenditure to the following year without cash coverage, as an alternative form of
borrowing, thus generating a liquidity problem.
Based on this analysis five IFGF indicators were built: Own Revenue, Personnel Expenditure,
Investments, Liquidity and Debt Cost. The first four each have a 22.5% weighting of the total.
The Cost of Debt has a 10% weighting, given the low level of municipality indebtedness. This
reflects the inability of most municipalities to contract debt, whether by the numerous restrictions
to which they are subjected, or by the lack of collateral required by the credit market. Finally,
it should be noted that all indicators are in accordance with the parameters set by the Fiscal
Responsibility Law (FRL). The following is a description of each one:
IFGF Own Revenue: This measures the total municipality generated revenues in relation to the
total current net revenue (RCL)5. The index enables the degree of the municipality dependence
to be assessed with regard to transfers from the state and the Union.
IFGF Personnel Expenditure: This represents how much municipalities spend on staff pay, out
of the total current net revenue (RCL). Given that this is the expenditure with the highest share
Current Net Revenue (RCL) is the constitutional concept used to calculate the budgetary limits. This is the total
municipal budget revenues deducted of their servants’ contributions to fund their pension system and social welfare
and the revenues from the financial compensation of the various social security systems.
5
PAGE 6
in a municipality total expense, this indicator measures the degree of budget rigidity, i.e. the city
hall maneuverability to execute public policy, particularly in investments.
IFGF Investments: This accompanies the total investments, compared to current net revenue
(RCL). Paved roads, quality public lighting, efficient transport, schools and well-equipped hospitals
are examples of municipal investments able to increase worker productivity and promote the
people's welfare.
IFGF Liquidity: This verifies that the municipalities are reserving sufficient funds to meet its shortterm liabilities, measuring the municipality liquidity as a proportion of its current net revenues.
IFGF Cost of Debt: This corresponds to interest rate costs and amortization in relation to the
total actual net revenues6 (RLR). The index evaluates the budget commitment to pay interest
and loan repayments incurred in prior years.
Below the summary table of the indicators that make up the FIRJAN Fiscal Management
Index (IFGF) calculation.
IFGF
Own Revenue
Investments
Personnel
Expenditure
Liquidity
Cost of Debt
Capacity to obtain
revenue
Capacity to make
investments
Degree of rigidity of
the budget
Sufficient cash
resources
Cost of debt in the
long term
Own Revenue
Current Net Revenue
Investiments
Current Net Revenue
Staff Costs
Current Net Revenue
Funds to Meet Actual
Obligations
Current Net Revenue
Interest and Amortization
Actual Net Revenue
22.5%
22.5%
22.5%
22.5%
10.0%
Actual Net Revenues (RLR) is used to determine the payment threshold for state and municipality debt renegotiated
with the National Treasury and to calculate the ratio Financial Debt / Actual Net Revenues. For municipalities, the
concept of RLR excludes credit operations revenue, sale of assets, voluntary transfers or donations received for the
specific purpose of meeting capital expenditure from total revenues.
6
PAGE 7
Reading the results, by the indicators or the overall index, is quite simple: the score ranges
between 0 and 1, and the closer to 1, the better the municipality fiscal management for
the studied year. In order to establish benchmarks that facilitate the analysis four IFGF grades
were agreed:
Grade A (Management Excellence): Results higher than 0.8 points.
Grade B (Good Management): Results between 0.6 and 0.8 points.
Grade C (Difficulty in Management): Results between 0.4 and 0.6 points.
Grade D (Precarious Management): Results less than 0.4 points.
Another important feature is the IFGF methodology allows both relative as well as absolute
comparison, i.e., the index is not restricted to an annual photograph, being able to be compared
over the years. Thus, it is possible to precisely specify whether a relative ranking improvement
was due to specific factors in a particular municipality or worse relative to others.
PAGE 8
Data base
In this issue, the FIRJAN Fiscal Management Index (IFGF 2015) refers to 2013 and makes
comparisons with previous years in the series, which began in 2006. The index is built entirely on
the basis of tax results declared by the municipal’s own accountants, official annual information
made available by the National Treasury Secretary (STN) through the "Brazilian Finance" files,
known as FINBRA.
There were 5,243 municipalities evaluated, home to 191,256,137 people - 96.5% of the population.
Although of a statutory nature, until April 21, 2015, the data of 324 municipalities were not
available in the FINBRA file or had inconsistencies that prevented the analysis7. This represents
5.8% of the 5,567 Brazilian municipalities, being lower than that observed in 2012 (449), but
higher than the avoidance in the other years of the series. Only the states of Mato Grosso do Sul,
Roraima and Sergipe had data available for all their municipalities in 2013.
The FINBRA 2013 is the first that has municipalities that have already joined the new Accounting
Plan applied to the Public Sector (PCASP). This new accounting plan prepared by the National
Treasury Secretariat aims to standardize accounting practices to adapt them to current legal
provisions, to the Brazilian accounting standards applied to the public sector and international
accounting standards in the public sector. Thus this enables the consolidation of National Public
Accounts, as determined by the Fiscal Responsibility Law (FRL).
The municipalities have until 2015 to migrate their declarations to the new accounting plan, which
most of the municipalities have already done8. Thus, it was necessary to seek an equivalence of
the items used to prepare the IFGF between the two accounting plans, to make it possible to
compare the municipalities that have declared data on different 2013 forms. Furthermore, the
time series for each municipality was recalculated to enable similar time frame comparisons.
Therefore, it was necessary to change the IFGF Liquidity calculation. This indicator is now
represented by the ratio of assets available and current liabilities, which may be called the cash
sufficiency, as well as being considered by the Current Net Revenue (RCL). Thus, the indicator
maintains the principle to ensure if the municipalities are delaying payment of expenses to the
following year without leaving sufficient resources to cover them, as defined by Art. 42 of the LRF.
7
The Methodological Addendum lists the 324 municipalities where it was not possible to perform this analysis for lack
of official data. According to Art.51 of the LRF, the deadline for declaration of municipal public accounts with the STN
is until April the following year of the analyzed year, being April 30, 2014. Therefore April 21, 2015 was considered the
collection data deadline for this IFGF edition.
8
A total of 2,463 have already declared their accounts based on the new Accounting Plan applied to the Public Sector.
PAGE 9
General Panorama
0.5097
0.5079
2007
0.5104
0.4973
2006
in 2006. There was a decrease of 10.5%
0.4545
2010
2011
2012
2013
0.4699
0.4989
its lowest level since the beginning of series
0.5341
Chart. Evolution of IFGF
The IFGF Brazil9 hit 0.4545 points in 2013,
compared to the previous measurement
(0.5070), the biggest annual fall in the
indicator since the 2009 crisis. In other
words, the difficult fiscal situation that was
2008
2009
already found in most of the municipalities
became even more severe. Indeed, 3,339 Brazilian municipalities (63.7% of the total analyzed)
had a worse fiscal situation than in the previous year.
The results distribution shows that the number of good evaluated municipalities in the IFGF
(grades A and B) fell by almost half. In 2013, only 808 (15.4%) achieved grade B (GREEN),
indicative of sound fiscal management, and only 18 cities (0.3%) presented grade A (BLUE)
relating to management excellence. On the other hand, 4,417 Brazilian municipalities (84.2%)
showed a difficult or critical fiscal situation: 2,655 (50.6%) were assessed with grade C and
1,762 (33.6%) with grade D - bars YELLOW and RED the chart below, respectively.
Chart. Percentage of municipalities according to the results of the IFGF 2013
Grade A
50.3% 50.6%
Grade B
Grade C
Grade D
33.6%
2012
26.0%
2013
22.2%
15.4%
1.4%
D
C
B
0.3%
A
In a scenario of slowing revenues, the combination of rising staff costs and reduced investment
was crucial to the deterioration of municipal public accounts. In 2013, staff costs rose well
above revenues and thereby consumed an even larger share of the municipal budgets, leaving
little room for investments.
9
The IFGF Brazil is the simple arithmetic average of the consolidated IFGF of 5,243 municipalities analyzed in this edition.
PAGE 10
Thus, the IFGF Personnel Expenditure and the IFGF Investments showed a significant drop
compared to the previous year (-11.4% and -31.2%, respectively). In turn, the IFGF Own Revenue
(-0.8%) showed a slight decrease, to the extent that own revenues slowed more than transfers
from the state and the federal government. Therefore, neither the improvement of the IFGF Cost
of Debt (+4.8%) and the IFGF Liquidity (+1.3%) were enough to avoid the worst result of the series
for the IFGF Brazil. The chart below shows the IFGF indicators.
Chart. IFGF Brazil and its indicators (2012 and 2013)
0.7928
0.8306
0.5079
0.4924
0.4871
0.6277
0.4545
2013
0.4319
0.4808
0.5556
2012
0.2411
0.2393
IFGF
IFGF Cost of
Debt
IFGF Personnel
Expenditure
IFGF Liquidity
IFGF Investments
IFGF Own
Revenue
The status of the municipal accounts is worrisome. The dependence on transfers is chronic
and commitment to personnel expenditure is increasing, leaving local governments at the
mercy of economic and political developments. Thus, the postponement of expenses via
outstanding balances to be paid and the reduction of investments consolidate themselves as
typical adjustment variables, just as has occurred with the states and the federal government.
Changing this dynamic is the great challenge for Brazilian fiscal policy under the penalty of
having to live with a tax burden and/or public debt among the highest in the world. The first
step in this direction would be to create a rule that the current expenditures cannot grow above
revenues over the years.
Next, the analysis of fiscal management indicators is prepared according to the following order:
source of funds (IFGF Own Revenue), destination of resources (IFGF Personnel Expenditure,
IFGF Investments and IFGF Cost of Debt) and, finally, the cash available to cover short-term
obligations (IFGF Liquidity).
IFGF Own Revenue
The indicator measures the total revenues generated by the municipality in relation to the
total actual net revenue. It aims to evaluate the degree of municipal dependence with
regard to intergovernmental funding transfers.
PAGE 11
The 1988 Constitution granted the subnation-
Chart. Evolution of IFGF Own Revenue
al governments exclusive tax powers and au0.2248
0.2276
0.2377
0.2339
0.2411
0.2242
proposal was that the decentralization of rev-
0.2359
0.2393
tonomy to legislate, collect and fix rates. The
2008
2009
2010
2011
2012
enue collection would increase the bond between the citizen/taxpayer and the local government, providing increased quality of public
goods and services since there was also decentralization of responsibilities, especially in
2006
2007
2013
the areas of health and education. Subsequently, the LRF (2000) reiterated that the institution,
forecasting and collection of municipal taxes competence are essential requirements of accountability in fiscal management.
Many years after the Constitution and the LRF, the dependence on funds transferred by the
states and the federal government continues to be a chronic problem for municipalities. In
2013, the IFGF Own Revenue continued to be the lowest among the five indicators analyzed
reaching 0.2393 points10. The vast majority of Brazilian municipalities (83.0%) was evaluated
with grade D in IFGF Own Revenue. This means that 4,352 Brazilian municipalities generated
less than 20% of their revenues, with the remaining funds transferred by states and the Union.
Only 125 (2.4%) Brazilian municipalities have obtained grade A and 203 (3.9%) grade B in the
IFGF Own Revenue.
The geo-referenced map below, mostly red, leaves no doubt of the enormous dependence on
funding transfers in all regions of Brazil, although they are affected to different extents. Even in the
Southeast region, where 55.2% of the GDP is located, 74% of municipalities were assessed with
grade D. This percentage was 75% in the Midwest, 77% in the South, reaching 92% and 96% in
North and Northeast regions, respectively.
Chart. Distribution of municipalities by
the IFGF Own Revenue grade
Geo-referenced map. IFGF Own Revenue
82.7% 83.0%
2012
2013
11.0% 10.7%
D
10
C
3.9% 3.9%
2.4% 2.4%
B
A
In real terms (IPCA / IBGE), both own and transferred revenues were virtually stable in relation to 2012.
PAGE 12
IFGF Personnel Expenditure
This is how much municipalities spend on staff pay, out of the total Current Net Revenue.
Given that this is the expenditure with the highest share in total municipal expenditure,
the index measures the room municipalities have to maneuver implementation of public
policy, particularly investment.
Personnel expenditure is the main expense element of the municipalities. Because of its rigid
character, the over commitment of municipal revenues with this expense should be avoided, as
it implies the reduction of resources allocated for other purposes, affecting public policy11. Therefore, the Fiscal Responsibility Law (LRF, 2000) established a prudential limit and an upper limit for
these expenses: 57% and 60%, respectively.
However, contrary to this recommendation,
Chart. Evolution of IFGF Personnel Expenditure
2008
2009
2010
consumed by these expenses in Brazilian mu-
0.5556
2007
0.6171
0.6946
2006
proportion of the Current Net Revenue (NCR)
0.5740
0.6663
nicipal budgets. Between 2011 and 2013, the
0.6783
compromised an ever larger share of the mu-
0.5705
in recent years, spending on civil service has
0.4924
nicipalities increased from 48.5% to 53.0%.
Thus, the IFGF Personnel Expenditure reached
its lowest level since the beginning of the in-
2011
2012
2013
dex series reaching 0.4924 points, a decline of
11.4% compared to the previous year. Behind this lies the fact that the cost of staff is growing at
a higher rate than revenue.
In this disturbing dynamic, increasingly more municipalities exceeded the 60% RCL limit
established by law for the civil service costs: there were 796 (15.2%) in 2013, compared to 445
(8.7%) in 2012. By presenting values above the legal limit, these cities received a score of zero
and a grade D in IFGF Personnel Expenditure. To make matters worse, more cities are heading
toward the warning area - those with grade C on the indicator, which consume between 50%
and 60% of the RCL with staff costs increased from 2,432 (47.5%) to 2,777 (53,0%) in the same
period. Consequently, there was a reduction in the number of municipalities with grades A and
B, which were 2,241 (43.8%) in 2012 to 1,670 (31.9%) in 2013.
To avoid budgetary rigidity and ensure space allocation for other expenses, in 2000, the Fiscal Responsibility Law
(FRL) limited personnel expenditure to up to 60% of the RCL. In addition, Article 22 of that legislation created a
prudential limit, defined as 95% of the upper limit (or 57% of RCL), above which creations of offices, positions or
functions are prohibited, in addition to other restrictions.
11
PAGE 13
The regional IFGF Personnel Expenditure analysis shows a concentration of the worst results
in the Northeast region: of the 796 Brazilian cities with grade D, 563 (70.7%) are from that region
– the red dots on the following geo-reference map. This signifies that one third (33.7%) of the
Northeast municipal councils compromised more than 60.0% of their RCL to the civil service
payroll. In four regional states the proportion of councils in this situation is even greater. Alagoas
(66.0%), Sergipe (62.7%), Paraíba (56.2%) and Pernambuco (41.3%). In the North, the percentage of
municipal councils above the established limit is also high: 18.8% or 72 cities, half of them in Pará.
In contrast, in the other regions the proportion of municipalities that failed to comply with the
Fiscal Responsibility Law in this regard did not exceed 8%. The best situation is observed among
the municipalities in southern Brazil, where only 4.0% (47 municipalities) are above the LRF limit.
In the Southeast, it was 5.2% (83) and in the Midwest, 7.2% (31). Among the states, the positive
highlights were Santa Catarina (2.0%), Paraná (2.4%) and Rio de Janeiro (2.4%).
the IFGF Personnel Expenditure
Geo-referenced map. IFGF Personnel Expenditure
53.0%
47.5%
2012
37.0%
2013
27.9%
15.2%
8.7%
6.8%
D
C
B
4.0%
A
IFGF Investments
This measures the share of the municipal budget allocated to investments.
Asphalted/paved streets, quality public lighting, efficient transport, schools and well-equipped
hospitals are examples of municipal investments able to increase worker productivity and
promote the people's welfare. However, given the high commitment of local resources with
the civil service payroll, there were not enough resources left over for investments they have
oscillated at around 10% of the municipal budgets12 since 2000.
12
Given that the Union contributes 13% of the total applied by the public sector investments, the participation of
municipalities (34%) is even more important.
PAGE 14
The results of the IFGF 2013 ratified this di-
Chart. Evolution of IFGF Investments
0.6277
zilian IFGF Investments retreated by 31.2%
0.5527
0.6069
0.4562
invested less than in 2012. Thus, the Bra-
0.6149
0.5579
ments13: 3,559 (67.9%) municipalities have
0.5067
agnosis. There was a general fall in Invest0.4319
2012
2013
to reach 0.4319 points. In 2013, the average
percentage invested by Brazilian municipalities was only 9.0% of the current net rev-
2006
2007
2008
2009
2010
2011
enue (RCL), well below the percentage of
14.2% in the previous year and the lowest level observed since 2006, the beginning of the
IFGF series. More than half (52.8%) of Brazilian municipalities did not even invest 8% of its
RCL and thus received grade D. Similarly, the number of municipalities with grade A, namely those that allocated more than 16% of its RCL, fell sharply in actual value of investment
from 33.5% in 2012 to only 10.7% in 2013. There was also a reduction in the percentage of
municipalities with grade B (from 18.5% to 12.5%), while cities with C were practically at the
same level (23.1% to 24.0%).
The analysis of geo-referenced map below shows a mostly negative scenario in all regions. The
number of municipalities with grades C or D in IFGF Investments was 66.8% in the South, 70.6%
in the North, 79.4% in the Southeast, 81.1% in the Midwest and 81.7% in the Northeast. The South
and North regions had the largest share of municipalities with grade A in IFGF Investments in
proportion to their total municipalities: 15.5% and 15.1% of their cities have invested more than
16% of their RCL14 respectively.
Geo-referenced map. IFGF Investments
the IFGF Investments grade
52.8%
2012
2013
33.5%
24.8%
23.1% 24.0%
18.5%
12.5%
D
C
B
10.7%
A
13
In the case of investments, it is important to highlight the reduction of Covenant Transfers - in median terms, they
fell 36.4% in 2013 after growing 54.9% in 2012 in real terms (IPCA / IBGE). Although they are not the main source
of Brazilian municipal funds, these voluntary transfers from the Union and the States are primarily intended for the
implementation of municipal investments and therefore affect the amount allocated to this heading.
14
In the Southeast, it was 9.1%, the Midwest 8.9% and 8.2% in the Northeast.
PAGE 15
IFGF Cost of Debt
This index measures the commitment of Actual Net Revenues with the payment of
interest and loan repayments incurred in previous years.
Despite the debt size not being a problem for the fiscal management of Brazilian municipalities15,
arising charges must be monitored. As well as personnel expenditure, these charges have strict
contractual obligations, which make them a budget immobilization factor. In addition, the
recurring resorting to short term debt has resulted in increased debt funding costs.
In 2013, Brazilian municipalities consumed less of its budget with interest payments and public
debt repayments. Thus, the IFGF Cost of Debt increased 4.8% to 0.8306 points, its highest
level since the beginning of the IFGF series in 2006. This result is largely explained by the
amnesty of fines and tax installments and social security debts (PASEP) of the municipalities
with the federal government16.
The improved IFGF Cost of Debt is also
Chart. Evolution of IFGF Cost of Debt
0.8306
0.7923
0.7954
0.8065
0.7980
0.7928
with grade A: 66.1% of Brazilian municipalities
0.8021
already high percentage of municipalities
0.8087
illustrated by the significant increase in the
2006
2007
2008
2009
2010
2011
2012
(3,468) received this grade in 2013, compared
to 55.3% in 2012. Also in good standing are
the 1433 cities (27.3%) which obtained grade
B in this indicator. In contrast to these results,
273 (5.2%) cities were evaluated with grade C
2013
and 69 (1.3%) grade D - this means that only 6.5% of Brazilian municipalities had some difficulty
with interest payments and amortization.
In fact, the vast majority of Brazilian municipalities do not have access to the credit market,
causing difficulty with interest payments and amortization which is concentrated in the major
cities. To put in perspective, the average population of the municipalities that have grade D
in this indicator is 260 thousand inhabitants, ten times higher than the average of grade A
municipalities. Among the 69 grade D cities are the capitals São Paulo and Belo Horizonte.
In 2013, the municipal balance sheets show that 87% have negative consolidated debt, i.e. credit.
In 2013, the Federal Government published Law No. 12,810 and Decrees-Joint PGFN / RFB 03 and 04/2013, in
which, among other measures, granted amnesty to 100% of fines and procedural costs and 50% of interest on the
tax and social security debts (PASEP) of Brazilian states and municipalities, which could still spread the debt balance
over up to 240 months.
15
16
PAGE 16
the IFGF Cost of Debt grade
Geo-referenced map. IFGF Cost of Debt
66.1%
55.3%
2012
2013
31.7%
27.3%
9.7%
3.4%
5.2%
1.3%
D
C
B
A
IFGF Liquidity
This corresponds to the ratio between the municipalities cash sufficiency (cash availability
discounted the short-term liabilities) and its Current Net Revenue.
Originally, the item Outstanding Payable Bal-
Chart. Evolution of IFGF Liquidity
ance was designed to reconcile the public
0.4915
0.5071
2008
2009
2010
2011
0.4808
0.4807
0.4451
es coincided with the end of the year. How-
0.3976
financial year since not all payment of expens-
0.4875
0.4871
administration continuity with the end of the
ever, over the years, the outstanding liabilities
to be paid were being misused as an expense
delaying instrument in all government spheres,
largely due to a lack of planning17. Thus, regis-
2006
2007
2012
2013
tration of outstanding liabilities to be paid established itself as a common practice in almost all Brazilian municipalities: the currently outstanding liabilities to be paid account for over 90% of Brazilian
municipal short term liabilities, being the main cash sufficiency limiter of these entities.
To solve the accumulation of mandates, the LRF has forbidden the expense obligation contract that cannot be
met fully within a term of office that has installments to be paid in the following year without enough cash available
for this purpose. Article 42 was designed to avoid in the last year in office, irresponsibly contracted new expenses
that cannot be paid in the same year. Subsequently, the Law of Fiscal Crimes (2000) characterized it as a crime,
punishable with imprisonment from one to four years, to order or authorize the assumption of liabilities at odds with
the determination of Article 42.
17
PAGE 17
Given this situation, it is important to highlight the municipalities where the postponement of
expenses is a result of the budgetary imbalance from those where this mechanism is being
used in a planned manner. In practice this means checking if the municipalities are leaving cash
to cover expenses postponed to the following year. By measuring the cash sufficiency of the
Brazilian municipalities, taking into account the size of their budget, the IFGF Liquidity enables
this question to be elucidated.
In 2013, the IFGF Liquidity reached 0.4871 points, a figure quite close to the previous year (+1.3%).
The results distribution, however, proved to be uneven across the regions of Brazil - see georeferenced map below. On the one hand the average South and Midwest scores grew 17.8% and 9.0%
respectively, on the other hand, in the Northeast the average IFGF Liquidity retreated 15.9%18. That
is, even in a year of stagnant revenue and increased municipal budget stiffening, regions historically
better evaluated in IFGF Liquidity justified its good financial programming and gained better results in
IFGF Liquidity. While in the Northeast, a region more dependent on intergovernmental transfers and
where staff costs hold more weight in their budget saw its IFGF Liquidity worsen.
The distribution of municipalities by IFGF Liquidity grades also changed, despite the stability
of the Brazil index. The percentage of municipalities well evaluated in this indicator advanced;
there were 38.6% of cities with grades A or B. However, the proportion of cities with grade D
has also advanced from 25.1% in 2012 to 26.7% in 2013. This means that 1,401 cities ended 2013
with more obligations in circulation than cash to cover them in the next year and therefore
received a score of zero in IFGF Liquidity19 - among them, more than half (757, or 54.0%) are in
the Northeast. Not coincidentally, in the geo-referenced map below there is a predominance of
red areas in this region.
Geo-referenced map. IFGF Liquidity
Chart. Distribution of municipalities by the
IFGF Liquidity grade
41.6%
2012
34.7%
25.1%
2013
26.7%
19.7%
16.0%
D
C
B
18.9%
17.3%
A
In the other regions, there were no significant changes: Southeast (+ 1.3%) and North (+ 0.7%).
To calculate the index, it was agreed that if the council submits more short term liabilities than cash their score would
be zero. Although this condition is mandatory only in years of transitional government (art. 42 of the LRF), to start a year
with more debts to suppliers than cash resources is a problem that affects the financial management and the council's
credibility. In reading the results, the closer to 1.00, the municipality is postponing less payments to the following year
without proper coverage.
18
19
PAGE 18
THE BIGGEST AND THE SMALLEST
The comparative analysis between the biggest
and the smallest IFGFs leaves no doubt that
Geo-referenced map. Geographic distribution of the
500 biggest and 500 smallest IFGF results
the strong Brazilian economic and social
inequalities extend to fiscal management.
In the geo-referenced map the areas in RED
(grade D) represent the 500 worst cities in
the country with regard to the fiscal situation
and the areas BLUE (grade A) and GREEN
(grade B) the top 500. Clearly, the lowest
ranking municipalities are concentrated in
the Northeast, while the municipalities with
the highest marks are in the South, Southeast
and Midwest20.
Among the 500 biggest, the South held the lead, accounting for 39.8% of the municipalities,
even increasing its share in relation to the previous year. Despite Rio Grande do Sul (95)
having lost seven municipalities in the Top 500, it remained in second place among the states,
whereas Paraná (60) received 23 municipalities and has become the third state with the most
municipalities among the 500 biggest IFGFs in the country.
The Southeast, in turn, reduced its participation in the Top 500, accounting for one third of
this group. With the exception of Rio de Janeiro, which kept 15 municipalities among the 500
biggest, all the others lost their share: São Paulo (98) lost nine municipalities, but maintained the
first place in the country, Minas Gerais (46) lost six and Espírito Santo (9) lost four. The Midwest
also reduced its share among the 500 biggest due exclusively to Mato Grosso (30), which lost 10
municipalities as Goiás kept 24 and Mato Grosso do Sul (12) that added one to this select group.
20
The North, in turn, shows a balanced presence of municipalities from both ranking extremes.
PAGE 19
Chart. the 500 biggest IFGFs in 2013
Chart. the 500 smallest IFGFs in 2013
2012
39.8%
5.2% 7.8%
Northeast
North
MidWest
2013
37.8%
15.0% 13.2%
2012
18.4%
4.6% 5.6%
37.4%
33.6%
2013
68.2%
78.0%
Southeast
Northeast
Southeast
13.4%
North
3.6%
6.6%
MidWest
5.4%
1.0%
Southeast
4.4%
1.0%
Southeast
This chart also illustrates the other end of the national ranking, where the lowest ranking
municipalities in the Northeast region predominate (78.0%). Leading this list are the states of Bahia
(107 municipalities) and Paraíba (79). In the Southeast, which holds 13.4% of the 500 worst results
in Brazil, the state with the most representatives was Minas Gerais (59), the third state with more
municipalities in this part of the ranking21.
The 2013 results showed that the worsening economic scenario increased the regional contrasts
with regard to fiscal management. There was an increase in the proportion of municipalities in the
North and Northeast among the 500 smallest. While the North (33) included 15 municipalities,
nearly doubling its participation, the Northeast added 49 municipalities, increasing its share from
68.2% to 78.0%. In the other regions, all the other states reduced their share among the 500
smallest, the only exceptions were Rio de Janeiro (1) and Santa Catarina (2), which each added a
municipal council to this group, and Espírito Santo (1), which kept only one. On the other hand,
highlighting Paraná, Roraima and Mato Grosso do Sul, they were the only Brazilian states with
no city among the 500 worst results in the country.
More than portray regional inequalities, the analysis of the biggest and the smallest enables the
determining factors to be identified for a municipality to be placed at the top or the bottom of this
fiscal management ranking. Thus, it is possible to pave the way for a more efficient fiscal management,
an exercise of utmost importance when facing a country in which only 18 of the 5,243 evaluated
municipalities obtained the degree of excellence in the management of public resources.
The chart below compares the average score of the 500 municipalities better assessed and the
500 worst evaluated in 2013. The contrast leaps off the page, especially the liquidity, personnel
expenditure and investment indicators. The low level own revenue indicator in both groups
shows that dependence on state and federal funding transfers is a deficiency which includes
many cities in the Top 500, even if in smaller amounts. While the interest and amortizations are
problems for few municipalities, specifically the large ones.
Due to its high number of municipalities, Minas Gerais has a significant presence in both extremes of the ranking.
Thus, although it is the 3rd state with more representatives among the 500 smallest IFGFs of Brazil, in relative terms
only 7.3% of its municipalities are part of this list.
21
PAGE 20
IFGF
0.8522
0.7953
0.8523
0.7135
0.2223
0.6816
IFGF Own
Revenue
0.0462
0.1158
0.4704
0.1135
0.1915
0.6967
Chart. Average score and their fiscal management indicators
IFGF
IFGF Personnel
Expenditure Investments
500 Smallest
IFGF Liquidity
IFGF Cost
of Debt
500 Biggest
Among the 500 worst results, the lack of financial planning, combined with a strong commitment
of the budget with personnel expenditure, results in being punitive to investments. Indeed, 451
of them received grade D and zero score in the IFGF Liquidity, by finishing the year with more
accounts payable than cash resources, and 379 in the IFGF Personnel Expenditure, for exceeding
the limit for these expenses established by the LRF22. Consequently, in the IFGF Investments, 432
of those municipalities were assessed with grade D and none of them received grade A.
On the other hand, at the top of the IFGF ranking the combination of higher own revenues,
lower staff costs, and good financial planning created conditions for higher investments. Thus,
the municipalities of the Top 500 reached an IFGF Own Revenue 96.6% higher than the national
average, and IFGF Liquidity and IFGF Investments 75.0% and 65.2% higher, respectively.
22
In this group, 330 municipalities had zero scores in both IFGF Liquidity and IFGF Personnel Expenditure.
PAGE 21
CAPITALS
The capitals concentrate 22.7% of the population (45 million people in 2013) and administer 27.1%
of the municipal held resources. Unlike the other municipalities - which in many cases do not
even have a proper accounting framework for fiscal management - the Capitals have facilitated
access to the tools needed for efficient administration. However, these same municipalities
have the challenge of providing goods and services to a greater number of people.
In a context of lower revenue growth, the deterioration of the fiscal situation was less intense
in the capitals. While the IFGF Brazil fell by 10.5% compared to 2012, the IFGF average of
capitals retreated only 3.1%. This movement is explained mainly by an improvement of 1.9%
of IFGF Personnel Expenditure by the capitals, in contrast to the decrease of 11.4% of the
nationwide variable. The investment indicator showed a strong retreat, but to a lesser degree
than the national average (-21.8% against -31.2%). Also in relation to 2012, the average IFGF
Liquidity of the capitals also grew above the national average (4.6%, compared to 1.3%), while
there was stability in the IFGF Own Revenue (0.0%) and IFGF Cost of Debt (-0.7%).
Thus, the IFGF average for the capitals was 42.2% higher than the national, 0.6449 against
0.4545 points. The great advantage of the capitals is their own revenues: on average they
generated 42.4% of their own revenues, almost four times the national average (12.0%). In
addition, the commitment to personnel expenditure was lower, which, combined with higher
revenue collection capacity, allowed greater liquidity and more investments.
It is important to note that the average of the capitals was only lower than the IFGF Brazil in
the IFGF Cost of Debt. While the national average in this indicator was 0.8306, among the
capitals the grade was 0.7259. This result is explained by the difficulty of access to credit by
most of the Brazilian municipalities, which were subjected to various restrictions after the
renegotiation process of debt in the 1990s. Thus, the payment of interest and amortization
is restricted to those bigger municipalities, including the capitals. Both in IFGF Personnel
Expenditure (0.6477) and in IFGF Liquidity (0.6322) the result was about 30% higher than the
IFGF Brazil, while in IFGF Investments (0.4649) the result was 8% higher.
In this context, fifteen capitals were included in the 500 best results in the country, among
which the first five achieved a position in the select group of the top 100 IFGFs. In first place,
the city of Rio de Janeiro was the only capital to reach excellence in fiscal management
(grade A in IFGF). In a year in which only six capitals performed well in the IFGF investments,
Rio de Janeiro stood out with the third highest score among the capitals in this indicator,
while it posted a good performance in all other indicators.
PAGE 22
In second place, São Paulo showed significant improvement in the IFGF Cost of Debt, although
this indicator has remained the lowest for the city (grade D). In addition, the state capital was
the only one to get top marks in the IFGF Personnel Expenditure, moving it up five positions
in the ranking of capitals.
Beside the two largest cities of the country, Porto Velho, Recife and Rio Branco completed
the small group of capitals among the first 100 positions of the Brazilian IFGF ranking. In Porto
Velho and Recife the dynamics were quite different: while in the Pernambuco city the IFGF
Investments jumped from grade C to A between 2012 and 2013, in the capital of Rondônia
there was the reverse movement. Thus, the Recife IFGF advanced 6.2%, causing the capital
of Pernambuco to ascend from tenth to fourth place, while the Porto Velho score contracted
by 6.7%. In turn, Rio Branco maintained a good performance in the five indicators of fiscal
management, highlighting the highest score in the IFGF Liquidity. Although it has advanced
only 0.7% compared to 2012, the capital of Acre ascended three places in the ranking of
capitals due to the relative worsening of the other capitals.
In sixth place, Campo Grande was the only capital of the Midwest to perform well in 2013.
The Mato Grosso do Sul capital presented grades A or B in all aspects of the indicator, but
decelerated investments compared to the previous year, which explains the reduction of
12.9% in its score and the loss of positions in the list. In turn, the southern capitals being better
evaluated occupied intermediate positions in this ranking: Curitiba (eleventh) and Porto
Alegre (twelfth) - these cities, despite the high power of revenue collection (both recorded
top marks for Own Revenue), low investment - and in the case of Curitiba, also the low
liquidity - prevented a better performance overall. The context of high revenue collection and
low investment was also observed in Florianópolis (twenty-first), and in the capital of Santa
Catarina also the increased commitment of the budget on personnel expenditure against low
cash sufficiency, led the city to the bottom of the capital rankings.
In Belo Horizonte, the zero grades of IFGF Liquidity and IFGF Cost of Debt drew attention,
which meant that it closed 2013 with more accounts payable than cash resources and interest
expense and higher amortization than the legal established limit23. Nevertheless, the state
capital still held a good performance in the general index due to its high own revenues, low
personnel expenditure and the high investment - the city of Belo Horizonte recorded the
highest Investments among the Brazilian capitals.
23
According to Article 6, paragraph 2, of the Resolution of the Senate No. 47 of June 23, 2000, the maximum annual
expenditure on depreciation, interest and other charges of all municipal credit operations, already contracted and hiring
may not exceed 13% (thirteen percent) of the Actual Net Revenue.
PAGE 23
Compared with the previous assessment, three capitals stood out due to the significant IFGF
improvement: Natal (+66.7%), Macapá (+29.5%) and Salvador (24.6%), the three cities that had
occupied the last positions in the capital ranking. The IFGF Liquidity was the main growth vector
in both Salvador and in Natal, cities that had that received zero score in this indicator in 2012.
The capital of Rio Grande do Norte also drew attention with the significant advancement of
IFGF Investments - thus it most climbed positions in the capital ranking in 2013 rising from the
penultimate to seventh place. In turn, in relation to Macapá, the highlight was the recovery of
IFGF Personnel Expenditure, in contrast to the zero score received in the previous year.
On the other hand, the most significant decreases among capitals were João Pessoa (-29.2%),
Vitória (-20.5%) and Goiânia (-18.1%). João Pessoa and Goiânia, next to São Luís, occupy the
last three places in the ranking of capitals. Common among them is the low level of investment,
in addition to financial programming problems - the municipalities of São Luís and João Pessoa
even ended 2013 with more financial obligations for the coming year than cash to cover them
(score zero IFGF Liquidity). Whereas, Vitória, leader among the capitals in 2012, lost the top marks
observed in IFGF Investments and IFGF Liquidity and thereby fell seven positions in the ranking.
Brazil
Ranking
UF
Municipality
IFGF 2013
IFGF 2012
Var.
13/12
0.5079
Grade - Base Year 2013
Own
Personnel
General
Revenue Expenditure
IFGF
Investments
Liquidity
Cost of
Debt
A
-10.5%
C
D
C
C
C
16th RJ Rio de Janeiro
1st
0.8169
2nd
0.8555
-4.5%
A
A
B
B
A
B
36th SP São Paulo
2nd
0.7744
7th
0.7429
4.2%
B
A
A
C
B
D
53rd RO Porto Velho
3rd
0.7579
4th
0.8126
-6.7%
B
A
B
C
A
A
77th PE Recife
4th
0.7452
10th
0.7017
6.2%
B
A
B
A
C
B
86th AC Rio Branco
5th
0.7399
8th
0.7347
0.7%
B
B
B
B
A
B
6th
0.7212
3rd
0.8277
-12.9%
B
A
B
B
B
A
132nd RN Natal
7th
0.7170
25th
0.4300
66.7%
B
A
B
B
B
A
141st ES Vitória
8th
0.7134
1st
0.8970 -20.5%
B
A
B
C
B
B
146th CE Fortaleza
9th
0.7126
6th
0.7558
-5.7%
B
B
C
C
A
A
Brasil
121st MS Campo Grande
0.4545
196th PA Belém
10th
0.6976
5th
0.7784
-10.4%
B
B
C
C
A
A
239th PR Curitiba
11th
0.6877
13th
0.6923
-0.7%
B
A
B
C
C
A
275 RS Porto Alegre
12
th
0.6795
9
th
0.7345
-7.5%
B
A
C
C
B
B
346th AM Manaus
13th
0.6640
16th
0.6372
4.2%
B
B
B
C
B
B
350th RR Boa Vista
14th
0.6636
12th
0.6936
-4.3%
B
C
B
C
A
B
488th TO Palmas
15th
0.6419
11th
0.6956
-7.7%
B
C
B
C
A
A
512 BA Salvador
16
th
0.6364
24
0.5108
24.6%
B
A
A
D
C
C
647th MG Belo Horizonte
17th
0.6186
15th
0.6463
-4.3%
B
A
B
A
D
D
957 PI
th
18
0.5855
21st
0.5682
3.0%
C
B
C
C
C
A
1,126th SE Aracaju
19th
0.5705
14th
0.6841
-16.6%
C
B
C
D
C
A
1,140th AL Maceió
20th
0.5694
19th
0.5807
-1.9%
C
B
C
D
A
B
1,228th SC Florianópolis
21st
0.5617
17th
0.6361
-11.7%
C
A
C
D
C
B
1,379th AP Macapá
22nd
0.5511
26th
0.4256
29.5%
C
C
C
D
A
A
C
th
nd
th
Teresina
th
1,386th MT Cuiabá
23rd
0.5507
22nd
0.5456
0.9%
C
A
B
D
C
2,170th GO Goiânia
24th
0.4927
18th
0.6014
-18.1%
C
A
C
D
C
A
2,306th MA São Luís
25th
0.4834
23rd
0.5419
-10.8%
C
B
B
D
D
A
3,291st PB João Pessoa
26th
0.4153
20th
0.5788
-28.2%
C
B
C
D
D
A
-3.1%
B
B
B
C
B
B
Capital Average
0.6449
0.6657
PAGE 24

IFGF 2015

Transcription

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