FISCAL FEDERALISM AND SOCIAL EXPENDITURE IN THE 1988 FEDERAL CONSTITUTION: ANALYSIS OF THE CAPACITY OF PROVIDING SOCIAL SERVICES BY MUNICIPALITIES

Abstract

The fiscal federalism adopted by the Federal Constitution of 1988 is marked by na intense process of decentralization and by having made the municipalities federative entities endowed with autonomy, with its own prerogatives, resources and responsibilities in the fulfillment of its functions.  This work aims to make a general assessment of the ability of Brazilian municipalities to implement public social policies since the 1988 Constitution was enacted. The parameter used to measure this implementation capacity is social spending, which in turn comprises a set of spending functions. How social spending itself evolved, as well as its composition in terms of spending functions, the legislative changes that contributed to explain this evolution, always taking into account the state of the art on Brazilian fiscal federalism in the period, are the focus of this work. For this purpose, data available by the National Treasury Secretariat are used in the construction of social spending series. The results show that municipal social spending has grown in real terms and proportionally to total spending, especially after the beginning of the 2000s, a period when important regulatory innovations in terms of public finances took place, such as the Fiscal Responsibility Law. In addition, fiscal decentralization has evolved in the sense that municipalities are increasingly responsible for certain spending functions, especially health and education.