Lei De Responsabilidade Fiscal: Efeitos Sobre O Gasto Com Pessoal Dos Municípios Brasileiros

This work studies the effect of the recent budget rule adopted in Brazil, called Lei de Responsabilidade Fiscal (LRF), on its municipalities. It investigates if the problems of fiscal deficits and expenditures on salaries and wages of public employees, including retirement expenditures, were so high as to justify the imposition of a fiscal rule as were in the case of Brazilian states. It also evaluates if the limit established by the law on government's payroll had any effect on the mayors behavior towards this item of the public budget and contributed to reduce the public spending. In regard of the fiscal situation of the Brazilian municipalities, neither the fiscal deficit nor the government's high payroll appeared as generalized problem. These are problems restricted to a small number of cities, which indicates that the LRF should not have a significant effect on government's payroll. In fact, the limit imposed by the LRF is not biding for the majority of cities. On the other hand, when the analysis of the LRF's effect on the government's payroll is restricted to the cities that had a high spending on salaries and wages, the result is that the limit imposed by the law has the expected effect of controlling the high expenditures.