New Federative Pact Proposes ‘Sophie’s Choice’: Spend More on Education or Health?

RIO DE JANEIRO, BRAZIL – The permanent tension between the Presidency and Congress grew exponentially on Wednesday, February 19th, when the angered speeches of General Augusto Heleno, leaked from a private meeting in which he criticized an attempted “disguised parliamentariy coup,” became public.

The turbulent relationship between the two powers should see new chapters -and new characters- when the government’s proposal for a constitutional amendment (PEC) for a new Federative Pact reaches Congress.

The bill, which aims to change the percentage of constitutional spending on health and education, will also place governors in the middle of a fiery debate. The year started under a bitter mood between the Planalto Palace and the state governments and should sour a little more when measures that affect the state treasuries come up for debate.

The new pact’s plan is to unify minimum spending on health and education for the federal, state and municipal government. This means that, without allocated resources, administrators could be flexible and offset spending from one area to another. For most experts heard by newspaper El Pais, the proposal needs to be carefully assessed, since it could trigger a dispute between the two portfolios, in which the loser could be the citizenry.

“They are asking for several Sophie’s choices, there is no way to choose whether education is more important than health,” says Daniel Cara, general coordinator of the National Campaign for the Right to Education.

According to the Constitution, states should allocate 12 percent of their revenues to health and 25 percent to education. Municipalities, in turn, are required to spend 15 and 25 percent, respectively. Currently, the spending levels with the two areas are corrected by the previous year’s inflation, according to the spending ceiling rule. With the new proposal, this division would be set by each municipality and state.

During the introduction of the Federative Pact PEC, last November, the Finance Secretary of the Ministry of Economy, Waldery Rodrigues, advocated the unification of the limits, arguing that administrators would have more flexibility to allocate the funds. “This is good. If there is an area requiring more resources than another, it is logical to allocate more resources. We have fewer and fewer children in the key age bracket, and the population is getting older,” he said.

Esther Dweck, an economist and professor of economics at the Federal University of Rio de Janeiro (UFRJ) disagrees. In her opinion, if there is no definition of percentages, one of the areas that could be affected is education. “Health costs have very high inflation. And most municipalities spend well above the minimum on health. They’re going to use the minimum of education to cover health and they’re going to set education aside,” says Dweck, who is a former Budget Planning secretary.

In the current model, there is an overload in both areas, as resources are lower than the commitments made. According to the 2018 National Confederation of Municipalities data, at least 92.69 percent of municipalities spend more than 25 percent on education. In the health area, 99.28 percent invest more than 15 percent. In 2018, Brazilian municipalities invested, on average, 21.68 percent of their budget on health, which is approximately seven percent more than the constitutional minimum; and 28.98 percent in education, almost four percent above the established.

According to Daniel Cara, by joining the resources in a single bracket, which for municipalities will be 40 percent of the budget, whoever has more bargaining power with the administrator and congressmen will better meet their demands. “If the medical corporation is better organized, the doctors will get more. If it is the educational corporation, it will be education. And, in this dispute, the person who suffers the real damage will be the citizen”, he explains. “Now you have to decide whether to increase enrolments or build hospitals. An absurd decision”.

Erika Aragão, president of the Brazilian Association of Health Economics (ABRES), agrees that the great risk of decoupling education and health spending is to create a dispute between the two. “Instead of joining forces, they’ll be antagonistic sectors in the fight for budgets, two areas that are considered a basic right in the 1988 constitution,” she explains. Aragão points out that the context is even more troubling because the PEC also creates triggers to be used in the case of noncompliance with the limits for public accounts, such as reducing the work of civil servants with a proportional decrease in salaries.

“This proposal does not protect the health and education sector. Only judges, prosecutors, diplomats and police officers will not fall under this rule. And in a situation where there is less money, an even greater demand for health will be created,” she explains. “In saying it provides flexibility, it seems good, but in fact it will lead to an internal dispute in a context of drastic reduction of resources,” she adds.

A study by the Institute of Applied Economic Research (IPEA) pointed out that the budgetary tie to health spending continues to be crucial even if it does not solve the problem of financing the system, since health spending is still very low compared to that of countries with similar income, that do not have a universal health system. “However, it is an important protection measure against setbacks in the supply of health goods and services,” says the report, published in October.

Sandro Cabral, a professor of public sector strategy at INSPER, believes the PECs proposed by the government have little chance of being passed in Congress, but he believes the proposal to decouple spending is an interesting financial option for the administrator to allocate the resources to what the cities really need. “It’s hard to have things heavily earmarked, It becomes easy to misspend. In a city that is aging greatly, it might be better to allocate more resources to health,” he says. However, he weighs up the concern that such freedom will prevent money from going to those in need. “Links are there so that somehow the resources will serve the collective interest,” he says.

Source: El Pais