The Constitution Amendment Proposal report (PEC) dealing with emergency aid provides for the payment of the benefit without cutting expenses immediately. The text, obtained by GLOBO, abandons almost all of the immediate cost-cutting measures discussed until the end of last year, and proposes freeze public servants’ salaries and hiring staff for two years.
Senator Márcio Bittar’s report (MDB-AC) can still be changed until the vote scheduled for next Thursday. The text treats emergency aid as “residual” to “face the social and economic consequences of the Covid-19 pandemic”.
For this reason, he takes the aid of fiscal targets, the spending ceiling (which limits Union spending) and the golden rule (which prevents indebtedness to pay current expenses).
The aid is expected to be extended in March. Values and duration are still discussed.
The government and Bittar gave up the immediate cut of expenses, such as the revision of the salary allowance and the cut of wages and the reduction of public servants’ hours by 25%.
In the report, the main savings – which have not yet been calculated – will come from the freezing of salaries, hiring and progression in the career of civil servants for two years from the moment of decree of the state of public calamity. This will apply to the Union, states and municipalities. Congress will be responsible for decreeing the calamity, at the request of the government. This must be done after PEC approval.
A public contest will also be prohibited for two years, except for replacement of vacancies; creation or increase of aids, advantages, bonuses, allowances, representation fees for civil servants; creation of mandatory expenditure; readjustment of mandatory expenditure above the variation in inflation; and granting or expanding a tax incentive or benefit.
The wage freeze for the Federal Government, states and municipalities is already taking place this year, as a counterpart to a financial bailout from the federal government to the states and municipalities to compensate for the drop in revenue that occurred in 2019. The measure, therefore, would be valid for another two years .
The State of Public Calamity will allow the replication of the “War Budget” that was in force last year and allowed the payment of emergency aid until December and other government programs, in addition to the release of resources for health, without following the tax rules.
This regime will also allow the federal government to adopt “simplified processes for hiring personnel, on a temporary and emergency basis, and for works, services and purchases”.
The PEC also regulates what the government calls “triggers” to cut spending by the Union, states and municipalities. This measure is structural and long-term and was already foreseen in the PEC of the Federative Pact.
In the case of states and municipalities, these triggers may be triggered whenever current expenses exceed 95% of current revenues in a period of 12 months. Governors and mayors are not required to take measures, such as freezing civil servants’ salaries. Activation at 85% is optional and will depend on the approval of the Legislature.
For the Union, the metric will be when the mandatory expenses reach 94% of the total expenses.
According to the text, President Jair Bolsonaro will have to forward in six months from the promulgation of the PEC a project to Congress a plan to detail cuts in tax benefits. The cuts are expected to be 10% in the first year. The costs of these benefits are expected to be reduced from 4.2% of GDP today to 2% in eight years.
The proposal also presents other long-term measures. It states that “intergenerational fiscal balance” must be observed in the promotion and enforcement of social rights. It also says that a law, in the future, will address the sustainability of public debt.
This law must observe indicators of the calculation, levels of compatibility of the fiscal results with the debt trajectory, trajectory of convergence of the debt amount with the limits defined in legislation, adjustment measures, suspensions and prohibitions, and asset disposal planning with a view to reducing the amount of debt.
The proposal also prohibits the linking of public revenues to an agency, fund or expense, with the exception of revenues from the collection of fees, contributions, donations, compulsory loans and activities for the supply of goods or services and the sharing with states and municipalities.