Doria and Eduardo Leite had pensions and taxes as challenges in the pandemic – 11/19/2021 – Power

Toucans João Doria and Eduardo Leite received their states under very different conditions when they began to govern them nearly three years ago, but they faced similar obstacles in trying to promote reforms and in dealing with the challenges posed by the coronavirus pandemic.

Rio Grande do Sul was broke when Leite took office. The salaries of civil servants were paid late and in installments. Suppliers and mayors also did not receive what the state owed them on time. The payment of the debt with the Union was suspended by the courts.

In São Paulo, after two decades of administrations led by the PSDB, the accounts were settled when Doria came to power. Despite the prolonged economic crisis of previous years, the state had managed to maintain a balanced budget and some investment capacity with its own resources.

The two governors had to deal from an early age with the increase in the payroll of public servants, caused by the aging of the workforce, the automatic granting of benefits based on length of service and the increase in expenses with retirement and pensions.

Despite reforms made in previous governments, in both states, public servants’ contributions are still insufficient to cover the benefits of inactive workers, and the Treasury is responsible for 86% of the expenses, including regular contributions and contributions necessary to cover the breach in the system. The two governors promoted new changes in the pensions of employees after the enactment of the Social Security reform negotiated by the Jair Bolsonaro administration with Congress, at the end of 2019. The two states aligned themselves with the new federal rules, making some adaptations.

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In Rio Grande do Sul, the social security contribution rates for public servants were raised to a range of 7.5% to 22% of maturities, as in the federal sphere. In São Paulo, they were adjusted to a range of 11% to 16%, easing the taxation of servers with higher salaries.

The reform proposed by Leite applied the same rates of civil servants to military police and firefighters. Doria extended to military police officers from São Paulo the benefit guaranteed by Bolsonaro to members of the Armed Forces, a lower contribution rate of 10.5% as of this year.

In the short term, the impact of the Rio Grande do Sul reform was more significant. According to calculations by the National Treasury, the social security deficit covered by state coffers in Rio Grande do Sul was reduced from 29% to 23% last year. In São Paulo, the gap increased from 16% to 19% in the same period.

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​The two governors also promoted administrative reforms. Leite convinced the Legislative Assembly to cut surcharges for seniority, automatic promotions and other benefits. Doria managed to close government offices and changed rules for granting bonuses for performance.

According to the Treasury, the government of Rio Grande do Sul managed to reduce its personnel expenses by 5% last year and the São Paulo government increased spending on payroll by 3%. In relative terms, as a proportion of total expenses, both maintained personnel expenses at the same levels as in the previous year.

As governments were legally prevented from granting salary increases last year, because of the pandemic, the increase in São Paulo’s expenses with civil servants is a reflection of the pressure exerted by benefits granted by legislation and the growth of pensions and retirement benefits.

Although the two governors have a large majority in state assemblies, both have stumbled in their attempts to articulate tax reforms to correct distortions of the ICMS (Tax on Circulation of Goods and Services), the main tax collected by the states.

Doria got the Legislative Assembly’s approval for an ambitious project to cut tax benefits, but powerful sectors such as agribusiness and others such as bars and restaurants, especially harmed by the stoppage of activities at the height of the pandemic, made him back down.

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Leite wanted to reduce ICMS rates to alleviate the tax burden on companies, offsetting the loss of revenue from increased taxes on vehicles, donations and inheritances, but he also had to take a step back and settle for temporary adjustments in ICMS rates .

Doria, who in the previous tucanas defended the privatization of Petrobras and Banco do Brasil, promised as governor to privatize the state sanitation company, Sabesp, but did not pursue the idea further, limiting himself to commissioning studies to assess options for the future from the company.

Leite sold CEEE’s power transmission and distribution operations, earning extraordinary revenues to close the year’s accounts and bringing some relief to the state’s debt. The Legislative Assembly also authorized him to sell a gas distributor and a coal mining company.

During the pandemic, the Gaucho imposed stricter social distancing policies than those adopted by São Paulo to contain Covid-19, according to the Solidarity Research Network, a group of academic researchers that monitored the actions of the states in fighting the virus .

Vaccination advanced more quickly in São Paulo, thanks to Doria’s efforts to bring immunization agents against the disease from China. In São Paulo, 94% of adults have completed the first vaccination cycle. In Rio Grande do Sul, the adult coverage rate reached 83% last week.