FPM: find out what interior municipalities are and the distribution criteria for these cities

The categorization of municipalities into “Capitals” and “Interior” within the scope of the FPM emerged in 1967. All cities that are not the capitals of their states, regardless of location or size, were classified as being in the interior when the subject is the sending of transfers from the Union.

Ilhéus (BA), which is on the coast of Bahia, for example, is inland. The same goes for Osasco (SP), a municipality that is part of the São Paulo Metropolitan Region and has more than 720 thousand inhabitants.

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For the FPM transfer, Ilhéus and Osasco are as much inland as Crateús, which is in the hinterland of Ceará. Therefore, the transfer to these municipalities takes into account the same criterion: the size of the population in relation to the total population of their respective state. Public budget specialist Cesar Lima explains that a second factor, which is the state’s income per inhabitant, is included in the calculation.

“First is the population, of course, and secondly we also have income per capita state average. When you calculate from the interior, you are taking into account its population, in relation to the state’s population. However, the state’s percentage has already computed these two indicators, population and income per capita average. So when you move to the interior, he also has the issue of income in this account. per capita state average.”

The greater the number of inhabitants, the higher the individual participation coefficient, as shown in the table below.

In the case of Crateús, for example, the population of 76,390 people guarantees a coefficient of 2.6. This value is divided by the housing coefficient of all cities in Ceará combined, which is 271.8. The result is equal to 0.0095. This means that, of the entire amount allocated to municipalities in the interior of the state, Crateús is entitled to 0.95% 95 cents for every hundred reais received by Ceará.

FPM

The FPM emerged in 1966. Since the beginning, the fund’s resources have come from the Union’s income tax (IR) and the Tax on Industrialized Products (IPI). Initially, municipalities received 10% of the federal collection of these taxes, a percentage that gradually rose, until reaching 22.5%, in 1993.

For 14 years, this was the percentage of federal revenue transferred to municipalities. In 2007, 2014 and 2021, amendments added more resources, which this year total 25%.

The transfer of IR and IPI resources to the FPM occurs every ten years, that is, every ten days. Of the total fund, 10% is allocated to the capitals, 86.4% to the interior municipalities; and 3.6% for the reserve municipalities, which are those in the interior with a population of over 142,633 inhabitants.