Growth in municipal expenses is almost double the increase in revenue in 2023, study shows

Last year, municipal spending grew at almost twice the rate of revenue growth. Collection from own taxes and transfers from states and the Union grew 6.8% compared to 2022, equivalent to R$57.4 billion. The problem is that expenses increased by 14.8% — R$114.3 billion more than in the previous year. The difference was almost R$57 billion. This is what a study by the National Confederation of Municipalities (CNM) points out.

Professor at the São Paulo School of Business Administration at Fundação Getulio Vargas (FGV EAESP) Renan Gomes de Pieri believes that, in the 1988 Federal Constitution, municipalities received more obligations than revenues—which helps explain the growth in debt of these entities.

“City councils are responsible for some basic services that are very relevant and costly. Basic health care, for example, education in terms of daycare and all early childhood education and also primary education. The social worker part has a lot of thing too. Anyway, there are a series of expensive services. In the constitutional pact back in 1988, the municipal government was the least privileged with resources”, he assesses.

According to the expert, however, this is not the main reason behind the insolvency of municipalities. Also contributing to the situation, says Pieri, is the lack of structure in smaller cities.

“We have created many municipalities over the years, municipalities that are unable to support a political structure with a Chamber, with City Hall, so I think this affects these municipalities not only in terms of resources — meaning less resources — but also in terms of capital human, quality team capable of implementing public policies”, he highlights.

Municipalities in the red

According to the survey, 48% of small Brazilian municipalities (up to 50 thousand inhabitants) ended last year in the red. But the situation was even worse in medium and large cities: 57% of cities with a population between 50,000 and 300,000 closed 2023 in the negative, while this percentage was 56% in those with more than 300,000 residents.

The funding of the public sector was the main villain of the deficit primary registered last year. This includes expenses with service providers hired by city halls; the rental of labor, such as surveillance, property security and cleaning services; and the distribution of free material, such as textbooks and medicines.

In second place come personnel expenses, especially salary adjustments and the admission of new public servants. Third, the increase in public investment, driven by the resumption of works and the acquisition of machinery.

The three items correspond to 98% of the increase in municipal spending in 2023.

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