The National Confederation of Municipalities (NCM) disclosed that 51% of cities faced a fiscal deficit in the first half of 2023.
This marks a significant jump from 7% for the same period in 2022. From January to August, cities spent 89 of every 100 currency units in revenue. Last year, they spent 80.
NCM surveyed about 3,000 mayors. The survey found 44.3% predict worsening finances in the months ahead. Conversely, 38% feel optimistic.
Additionally, 48% anticipate a balanced budget by year-end, while 34% foresee a deficit.
Personnel cuts have plagued 48.7% of municipalities. Moreover, 10% are behind on payments, mostly in the last two months.
Nearly half, 47.8%, owe money to suppliers.
Paulo Ziulkoski, NCM’s leader, plans to submit the data for review. He seeks an audit by the Court of Auditors of the Union.
The NCM links the deficits to pension debts and mandatory minimum wages, including community workers and nurses.
Municipalities owe nearly 40.9 billion units in pension debt, affecting 77% of them.
NCM also highlighted overspending on health and education.
Cities spent 46 billion more units on health than the constitutional mandate of 15% of the municipal budget. Also, the Union owes cities over 47 billion units.
This week, more than 2,000 municipal heads are convening. They gather in the capital to discuss legislative changes, financial transfers, and fiscal flexibility.
Topics on the agenda are various and aim to find economic solutions for cities.
Background
The financial situation of many cities is a serious concern. This data reveals a broader issue affecting municipalities and potentially entire nations.
Fiscal instability can lead to service cuts, impacting the quality of life. Yet, it’s not just a domestic problem.
Local financial instability can deter foreign investment, hurting national economic prospects.
Furthermore, rising pension debts are alarming. They can create long-term obligations that cities may find challenging to meet.
Clearly, the need for systemic fiscal reforms at the local level is urgent, as the data suggests immediate and collaborative action is essential.