FPM: Budget Specialist says Lula should veto transition law to IBGE Census

The deadline is running out, but President Lula is still “on the table” of the bill that proposes gradual reductions over ten years, to readjust municipalities in the distribution of resources from the FPM (Municipal Participation Fund), according to the population indicated by the 2022 IBGE Demographic Census.

The proposal was approved by the Senate on June 14th and went on to be analyzed by the President – who, according to the rules, has 15 working days to sanction or veto, in whole or in part, the text voted by the parliamentarians. If the president sanctions the entire text submitted by parliamentarians, the project will become law immediately. But the president can also veto the text in part or in full. In this case, the passages that are vetoed by the Presidency of the Republic are returned to Congress which, in a joint vote by the Chamber and the Federal Senate, can overturn or maintain the vetoes.

In the opinion of Public Budget consultant César Lima, the president should veto the project in its entirety. According to him, the way the text was voted, the bill is unconstitutional and violates the LRF (Fiscal Responsibility Law). “My restriction in relation to this project, in addition to the fact that it is a very long transition — 10 years — is that it simply does not say where the money will come from that will guarantee that those who had an increase in their FPM indices receive and those who had a decrease in the FPM percentages you receive, don’t stop receiving them”, he explained.

“Where will the money come from?”

“The Constitution says how many percent of the IR (Income Tax) and IPI (Industrialized Product Tax) collections will be allocated to the FPM. This is not going to be changed, because this is an ordinary bill. So, where will the money come from?”, asks the consultant. “Where will this money come from that will guarantee that those who had an increase in their FPM coefficients receive and those who had a decrease do not fail to receive, at once — and this will be carried out in a period of ten years?, he asks.

For the economist, “this is the big question, there is a latent unconstitutionality because the Fiscal Responsibility Law, the Federal Constitution and budgetary norms provide that any bill that has a budgetary or financial impact, in the increase of expenditure or in the reduction of revenue, must have its compensations indicated”.

Goals

The project provides for a ten-year transition period for city halls to be reclassified in the Fund’s money distribution indices. FPM transfers to municipalities are defined by the number of inhabitants and per capita income in each state.

The objectives of the new law, which was created together with the CNM (National Confederation of Municipalities), is to gradually reduce the fiscal risk of city halls and avoid a sudden drop in the collection rates of hundreds of municipalities that have lost inhabitants in recent years.

Victory

The National Confederation of Municipalities (CNM) treats the approval of the project as an “achievement”. In a statement, the entity stated that the approved text “brings relief to managers who have shown concern about possible changes that would result in a reduction in resources and compromise local administration, especially in municipalities considered small.”

If sanctioned by President Lula, the new law should benefit around 800 Brazilian municipalities, according to CNM. These cities recorded, according to partial data from the 2022 Census, a population reduction in the last 10 years.

legislative process

When the Chamber of Deputies and the Federal Senate — which form the National Congress — approve a proposal to create a law, the so-called “projects”, the voted text is forwarded to the Presidency of the Republic, where the president has a period of 15 working days to sanction or veto the text of the matter (in whole or in parts).

Understand the process:

If the President of the Republic sanctions (confirms) the project approved by Congress, the proposal contained therein becomes law and is published in the Official Gazette (DOU). But the president can also veto the entire bill or just a portion of it, temporarily preventing it from becoming law.

If the president vetoes some passages, the part sanctioned by him becomes law, and the vetoed passages return separately for analysis by the National Congress (in a joint session of the Chamber and the Senate).