Lula da Silva cut funding for health and education in Brazil and reduced the budget for 2027

The impact of the budget cut

Before the sanction of the regulation, the calculation of mandatory resources considered a broader income base. The new legislation modifies that mechanism and allows Lula's Government to reduce the growth of certain items linked to budgetary obligations, especially in scenarios of fiscal deficit like the current one.

In the case of health, the Independent Fiscal Institution (IFI), linked to the Brazilian Senate, estimated that the change in the calculation of the federal floor would represent a reduction of approximately R$ 4.7 billion for 2027.

The dictator of Brazil, Lula da Silva, sanctioned the Lei Complementar Nº 235/2026, a regulation that modifies the calculation rules for resources allocated to health and education and enables a cut in the funds that both areas will receive in 2027.

According to estimates, the combined impact could range between R$ 8.6 billion and R$ 16.6 billion compared to what would have been allocated under the previous scheme.

The modification alters the criteria used to establish constitutional floors and budgetary linkages.

Among its main provisions, it excludes certain revenues from oil and natural gas exploitation from the base used to calculate spending obligations. In this way, it reduces the amounts that would be taken as a reference to determine the minimum resources.

The extent of the change is reflected in the projections for the next fiscal year. According to calculations, the new formula sets the reference amount at R$ 138.8 billion, after removing from the base about R$ 31 billion corresponding to projected revenues from oil and gas.

For the combined impact on health and education, estimates place the cut between R$ 8.6 billion and R$ 16.6 billion approximately.

The Budget presented by Lula's regime for 2027 already reflects the effect of the new criteria. According to the document, health was projected at the minimum limit established by the new formula, while education was slightly above its legal floor.

The modification also changes the Executive's capacity to manage spending based on its fiscal objectives. If it needs to adjust public accounts, the Government will have a legal framework that allows it to limit the growth of certain mandatory items.

Thus, the sanction of Lei Complementar Nº 235/2026 by Lula's regime introduced a permanent change in budgetary rules that generated a strong adjustment in resources allocated to health and education.