However, they also state that the number of cities that depend on external sources to maintain their public administration remains consistently high.
This number is even higher when considering municipalities where their own revenue accounts for 20% or less of their gross revenue. In 2024, this was the case for 4,156 cities, or 80% of Brazilian cities.
This dependency reflects what experts describe as an unchecked phenomenon of emancipations following the 1988 Constitution, which granted municipalities the status of federative entities and gave them greater administrative autonomy, enabling them to manage a wide range of local services.
The Constitution not only elevated the status of municipalities within the federal system but also facilitated their creation by delegating to the states the power to legislate on the matter—until then, the creation of a new city depended on federal law.
The proliferation of municipalities was a practical consequence.
At least 1,400 cities have been created since then, something “frequently motivated by interests of a political or electoral nature, without criteria of administrative or economic viability,” says Carlos Figueiredo Mourão, a master in constitutional law from PUC-SP (Pontifical Catholic University of São Paulo).
For him, “it should not be possible to create municipalities that do not have the real capacity to sustain their administrative structure based on their own tax revenue.”
The country even tried to curb the proliferation of new municipalities with a constitutional amendment approved in 1996 that conditioned their creation on the enactment of a federal law regulating the matter.
It didn’t work, and states continued to create municipalities based on their own laws. The case went to the STF (Supreme Federal Court) based on the argument that the regulations contradicted the 1996 amendment.
Congress found a way around it. In 2008, it approved a new constitutional amendment validating all laws that created new federative entities and that had been published up to 2006.
The creation of new cities has been paralyzed since then. Some were eventually established after that, but these involve municipalities whose emancipatory laws were approved in the early 2000s and whose implementation ended up being litigated.
This is the case of Boa Esperança do Norte (MT), a municipality created in 2000 based on a law contested for more than 20 years. The STF only gave its approval for its effective establishment in 2023 based on the argument that the law that emancipated it met the requirements of the time.
The phenomenon of the proliferation of cities challenges the oversight of public funds, says lawyer Gabriele de Jesus Marques, a postgraduate in constitutional law, because it causes external control to “operate under a predominantly formal logic, in a scenario that compromises the quality of public spending.”
According to her, there are difficulties in ensuring that the allocation of resources is effectively verified given the insufficient number of external control bodies due to the sheer number of municipalities.
This does not mean that the emancipations are entirely bad, says economist Felipe Soares Luduvice, PhD in economics from FGV (Fundação Getulio Vargas) and current general coordinator of economic and fiscal models and projections at the Ministry of Finance.
He is one of the authors of the research “Fiscal Effects of Municipal Subdivisions in Brazil” and told Folha that there are studies indicating that subdivided municipalities show better results in areas such as sanitation or reduction of infant mortality, for example, compared to those of similar size that were not fragmented.
The problem, says lawyer Júlio Edstron Secundino Santos, PhD in constitutional law from Uniceub, is that this was not accompanied by incentives for efficiency or financial autonomy because most of the country’s revenue is concentrated in the Union.
The FPM (Municipal Participation Fund), the main source of transfers to municipalities, comes from
For example, a portion of income tax and IPI (Tax on Industrialized Products), both federal taxes.
Since the resources are predictable, says Santos, this ends up discouraging independent fiscal efforts.
In the case of ICMS (Tax on the Circulation of Goods and Services), there are states that guarantee higher transfers to cities based on good education indicators—such as São Paulo and Ceará, among others.
“The ‘convenience’ of the FPM drastically reduces the political incentive to face the burden of modernizing tax administration and effectively monitoring local taxes. Revenue becomes an end in itself, and not a means to autonomy,” wrote the scholar in the research “Current Brazilian Federalism and the Mirage of Autonomy,” published last year.
Add to that the issue of mandatory expenses—at least 25% of revenue must be allocated to education and another 15% to health—and personnel expenses, for which “almost every municipality spends between 50% and 51% of its net current revenue,” according to Santos.
“This paralyzes the administration and leaves no room for investment in other areas, while municipalities often lack even basic services like sewage,” he says.
There are cases, as reported by Folha last year, where the annual spending of municipalities on salaries for the mayor, vice-mayor, and secretaries exceeds everything the municipality collects in its own revenue throughout the fiscal year.
Not by chance, says lawyer Omar Augusto Leite Melo, professor of law and economics at ITE (Toledo Institute of Education), such transfers serve an ambiguous function: they guarantee the material existence of the municipality while simultaneously affecting its long-term planning capacity.
“Often,” he states, “they don’t replace efficient public policies; they only prevent the institutional collapse of a city hall.”
https://www1.folha.uol.com.br/cotidiano/2026/04/4-em-cada-10-cidades-brasileiras-dependem-em-90-ou-mais-de-verba-do-estado-ou-da-uniao.shtml
Reproductions
FAROL DA BAHIA
4 out of 10 Brazilian cities depend 90% or more on state or federal funding
https://faroldabahia.com.br/noticia/4-em-cada-10-cidades-brasileiras-dependem-em-90-ou-mais-de-verba-do-estado-ou-da-uniao
PALAVRA PB
4 out of 10 Brazilian cities depend 90% or more on state or federal funding Union
4 em cada 10 cidades brasileiras dependem em 90% ou mais de verba do estado ou da União
MEDIA NEWS/CUIABÁ
4 out of 10 cities depend on state or federal funding for 90% of their budget.
https://www.midianews.com.br/politica/4-em-cada-10-cidades-dependem-em-90-de-verba-do-estado-ou-uniao/517576
JORNALDEBRASILIA.COM.BR/BRASÍLIA
4 out of 10 Brazilian cities depend on state or federal funding for 90% or more of their budget. Union
4 em cada 10 cidades brasileiras dependem em 90% ou mais de verba do estado ou da União
ES HOJE/VITÓRIA
Four out of 10 Brazilian cities depend on 90% or more of state or federal funding.
CONTEXTO EXATO/BRASÍLIA
Four out of 10 Brazilian cities depend on 90% or more of state or federal funding. Union
https://www.contextoexato.com.br/post/4-em-cada-10-cidades-brasileiras-dependem-de-90-ou-mais-de-verba-do-estado-ou-da-uniao-2026-04-05
ACESSA.COM/JUIZ DE FORA
4 out of 10 Brazilian cities depend on 90% or more of their funding from the state or the union. Union
https://www.acessa.com/noticias/2026/04/318596-4-em-cada-10-cidades-brasileiras-dependem-de-90-ou-mais-de-verba-do-estado-ou-da-uniao.html
Folha de S.Paulo, April 4, 2026, 12:45 PM
