Evaluation of the social economic indicators of the municipalities of the Sao Paulo State Groups 1, 2 and 3 with the use of multivariate analysis of Variante/Avaliacao de indicadores socioeconomicos dos grupos 1, 2 e 3 de Municipios Paulistas com o uso da analise multivariada de variancia/Evalucionde indicadores socioeconomicos enlos grupos 1, 2 y 3 de Municipios de Sao Paulo con el uso de analisis multivariante de la varianza.

AutorGouvea, Maria Aparecida
CargoArtigo--Administracao Publica
  1. INTRODUCTION

    In the last decades, one of the core issues of State reform is the radical change in the rule concerning the social division of labor, that is, the responsibility taken by municipalities and by the private sector in the production of goods and services, which were considered a duty of the State (OSZLAK, 1998, p. 53).

    In the specific case of the municipalities, decentralization has been the strategy of choice both for the State reform process and for the redemocratization of the country, making possible the transfer of power, resources and attributions to local governments.

    Local governments were the major beneficiaries of the tax decentralization started in the second half of the 1970s and reinforced by the 1988 Constitution, especially due to the federal and state transfers they received. The federal Municipalities Participation Fund (FPM) and the state Tax on the Circulation of Goods and Services (ICMS) quota are the main transfers made to the municipalities.

    To the majority of municipalities, constitutional transfers represent the most significant source of funding for their expenses. Bovo (2001, p. 114) states that, for more than 3.000 out of the 5.550 or so municipalities in the country, constitutional transfers, especially the FPM, make up 90% of their resources.

    It must also be stressed that the main municipal taxes--the Tax on Services (ISS) and the Tax on Urban and Territorial Property (IPTU)--show greater power of collection in medium-sized and large municipalities. Moreover, in the criteria for the transfer of the ICMS tax quota belonging to the municipalities (25% of the total collected by the State), the intensity of economic production exerts great influence--that is, the transferred values are directly related to the potential for wealth generation at the municipal level. "[...] the predominant logic underlying this tax is to reward economically successful municipalities." (ABRUCIO; COUTO, 1996, p. 44).

    The criteria for distribution of the resources which make up the FPM has a significant impact on the finances of small municipalities. According to Subsection II, art. 161, of the 1988 Federal Constitution, is the duty of the complementary law to establish rules on how FPM resources must be distributed, seeking a socio-economical balance between municipalities. Currently, the main criterion for FPM allotment is the size of the population. However, one may inquire whether this criterion alone would be enough to achieve the socio-economical balance intended, as the differences between the municipalities are not restricted to this factor exclusively, but are also dependent on economic terms, urbanization levels, physical conditions, capacity for tax collection, and other factors, besides proper resource management by the municipality.

    Analysis of the reality of local governments in Sao Paulo state under the lens of the Sao Paulo State Social Responsibility Index (IPRS) shows groups of municipalities with different combinations of wealth levels, longevity indicators, and education indicators (FUNDACAO SEADE, 2005a). The present study focuses on three groups of municipalities with discrepancies in wealth levels and social indicators. One hypothesis raised is that the criteria for FPM distribution influence the capacity for social investments of the groups by being a means of income redistribution.

    Based on the premise that larger municipalities have higher economic output and, consequently, collect more taxes and are given larger ICMS transfers, FPM transfers should favor small municipalities. Thus, the following research question was established:

    Are the mean values of the variables (i) per capita tax revenue, (ii) per capita ICMS quota, and (iii) per capita FPM different between groups of municipalities within the state of Sao Paulo as defined by the IPRS?

    The aim of this study is to ascertain whether some of the groups of Sao Paulo state municipalities as defined by the IPRS have different mean per capita values of FPM transfers, ICMS quotas, and collected tax revenue. Furthermore, we will attempt to determine the relationship between these variables as a set and the classification of the municipalities given by the IPRS.

  2. THEORETICAL BACKGROUND

    This section presents the theoretical framework on which the study is based.

    2.1. Municipalities Participation Fund--FPM

    The main feature of the Brazilian experience concerning the decentralization process was the lack of coordination, which, in turn, brought consequences such as an increase in inter- and intra-regional socio-economical inequalities and inadequate distribution of fees to the three federal levels by the Federal Constitution of 1988, which implies the coexistence of gaps or an overlapping of functions (AFFONSO, 1996). This was due to the fact that the decentralization process, which began in the late 1970s in the context of redemocratization, was commanded by the states and, mainly, by the municipalities, not by the federal government (AFFONSO, 1996).

    The Constitution's lack of definition on the division of competencies notwithstanding, states and municipalities ended up taking on new responsibilities due to an increase in the volume of available resources coming from fiscal decentralization, decreasing federal expenses and pressure from civil society (AFFONSO, 1996).

    According to Abrucio and Couto (1996), municipalities began to face a double challenge: to ensure basic social welfare conditions for their populations (welfare function) and to promote the economical development based on actions at the local level, in partnership with civil society (development function).

    To the authors, facing these challenges would depend on three parameters: the federal fiscal structure, the socio-economical differences between the municipalities, and the characteristic political dynamic of municipal government (ABRUCIO; COUTO, 1996).

    The fiscal decentralization process, which began in the 1970s, was reinforced by the Federal Constitution of 1988, having as its main consequences an increase in the tax-levying power of subnational unities within their own jurisdictions and an increase in the availability of non-earmarked resources for municipalities, as a result of constitutional transfers, including the Municipalities Participation Fund (FPM) and participation in ICMS revenue (ABRUCIO; COUTO, 1996).

    Although local governments had increased their fiscal potential, this process did not occur in a homogeneous fashion among Brazilian municipalities. Bovo (2001) points out that the main source of tax for the municipalities are the Tax on Services Rendered (ISS), the Municipal Real Estate Tax (IPTU) and the Property Transfer Tax (ITBI), which are taxes with better collecting potential in medium-sized and large municipalities, as urban property and the service sectors in small municipalities, which are eminently rural, are of little significance.

    "The insufficiency of available redistributive tools, especially at the municipal level, is an aggravating circumstance" (ABRUCIO; COUTO, 1996, p. 43). Resources transferred by the Union and by the states to municipalities should serve as a device for generating equitable conditions to allow Brazilian municipalities to face the new social responsibilities. However, this is not always the case, as with the ICMS quota, which rewards economically successful municipalities (ABRUCIO; COUTO, 1996, p. 44).

    Thus, municipal performance in the social area is highly influenced by the redistributive efficiency or inefficiency of the Municipality Participation Fund. The FPM is a constitutional transfer made by the Union to the municipalities, which comprises 22.5% of the Tax Revenue (IR) collected and the Tax on the Industrialized Products (IPI).

    The transfer of the resources that make up the FMP is divided into three parts:

    * 10% are distributed to the state capitals according to coefficients that take into account the inverse of per capita income and the...

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