Posted by Helio Tollini
Brazil is a country in which the Congress influences significantly the budget process, both in terms of legislation and allocation of resources. The Congress undoubtedly contributed to huge transparency improvements in the budget process throughout the last 20 years (Brazil ranked 8th in the 2008 International Budget Partnership transparency evaluation). One of the strengths of the system is the existence of specialized budget advisors, selected through a competitive public contest, in both houses of Congress (House of Representatives and Senate). It is widely recognized that they are influential in the annual discussions of the draft budget guidelines and budget laws.
However, two features of the legislative appreciation process strike international observers: the approval by Congress of more than 10 thousand amendments each year and the existence of a specific “reserve” for legislative allocation of about US$ 2 billion, which finances part of the approved amendments (each congressman receives a “financial quota” for his/hers individual or collective amendments).
I discuss these and other issues in a paper recently published in the OECD's Journal on Budgeting vol.9 (2009) Reforming the Budget Formulation Process in the Brazilian Congress. To minimize the negative side effects related to rent seeking and corruption, I recommend the adoption of four measures to avoid the inclusion of new appropriations in the budget law without a deeper analysis of the impact in the public policies and to transform the budget law into an instrument for planning and allocating public spending:
• Respect for the spirit of the constitutional text, which does not foresee the possibility of the legislative branch re-estimating the revenue included in the draft budget;
• The imposition of stricter financial and quantitative rules on amendments proposed by individual congressmen and by State representations;
• The analysis and voting of the draft budget law by permanent thematic committees in the House of Representatives and the Senate, in their respective fields of competence, while reserving to the Congress Budget Committee the responsibility to co-ordinate, systemize, impose limits, and consolidate the examination process; and
• The merging into a single body of the House and Senate units of technical experts in the budgetary field, at the same time providing the technical expertise for Congress with some autonomy from political pressure.
After 21 years (1964-1985) of military regime, the National Congress approved a new Constitution in 1988. Thereafter, the legislature regained budgetary rights, with almost unlimited powers to amend the draft budget (except for personnel, mandatory transfers to local governments, and debt related expenditures).
However, due to the lack of agreement between the Executive and Legislative regarding the nature of the budget execution, a new public finance organic law has not been approved. Therefore, the old complementary law from 1964 is still partially in place in what it is compatible with the 1988 Constitution.
Recently, three senators presented different draft legislation for reforming public finances, meaning that the debate might rise once again. One of these drafts incorporates most of the suggestions proposed in this article. Apart from the regulation of the amendment process, I suggest to define rules to address issues such as:
• The use of a controversial clause (“errors or omissions”) to circumvent the Constitution and introduce higher revenue estimates (usually around US$ 5 billions), which happens every year regardless of the economic indicators (although these changes are always based on a “deep” technical study);
• The tendency of congressmen to transfer resources to private entities, which added to a fragile and untimely control of these expenditures leads to repeated congressional investigations on the receiving of bribes by congressmen;
• The bicameral examination process of the draft budget is centralized in a joint budget committee, leaving basically no role to each house’s permanent committees; and
• The existence of two institutional advisories in budgetary matters, one on each house.
For more information read the OECD's Journal on Budgeting, Vol.9 (2009), Reforming the Budget Formulation Process in the Brazilian Congress by Helio Tollini.
