To reduce inequality and variation in per student spending between different regions and schools, in 1996, the government introduced and expanded education finance equalization policies, in particular through the creation of FUNDEF (1996-2006) and FUNDEB (2006-present), both of which entailed policies about allocation of education funding and increases in overall funding of education.
FUNDEF
The Fund for Maintenance and Development of the Fundamental Education and Valorization of Teaching (Fundo para Manutenção e Desenvolvimento do Ensino Fundamental e Valorização do Magistério (FUNDEF)) was introduced in 1996 to reform the funding of education in Brazil. It was established to make sure that money mandated by the constitution is actually spent on education and to establish a per student spending floor for the whole country. The policy mandated redistribution of funds within states across municipalities, so that all municipalities could reach the per student spending requirement. Additionally, federal government then supplemented spending in states and municipalities that could not afford the national spending floor. Finally, FUNDEF required that 60% of spending go towards teacher salaries and 40% go towards school operations.
In 1998, when FUNDEF was implemented, 30.6 billion reais(R$) were redistributed to six different states. Overall spending increased from approximately 2% of GDP in 1995 to 4% of GDP in 2008. Additionally, teacher salaries increased by an average of 70% in the first few years of implementation. According to research done by the Organization for Economic Cooperation and Development (OECD), FUNDEF played an important role in increasing enrollment rates over that period, particularly in small municipalities. It was, however, limited in scope, entailing the investment of funds only to elementary education and expiring in September 2006 when it reached 10 years of creation.
FUNDEB
On January 24, 2006, the House of Representatives approved the Proposal for Amendment to the Constitution creating the Fund for the Development of Basic Education and Appreciation of the Teaching Profession (Fundo de Manutenção e Desenvolvimento da Educação Básica e de Valorização de Profissionais de Educação (FUNDEB)), intended to finance elementary education (kindergarten, preschool, elementary, and high school education).
FUNDEB was made effective for fourteen years and has been gradually implemented. It was formed by allocating 20% of resources from state and federal taxes, and distributed these among each State and Municipality in proportion to the number of students enrolled. FUNDEB entailed committing R$2 billion in the first year, R$2.9 billion in the second year, R$3.7 billion in the third and R$4.5 billion in the fourth year and successive. It extended the financing equalization introduced under FUNDEF to secondary school and pre-school education, in order to ensure funding of basic education for all students in Brazil. FUNDEB also explicitly ensured funding for indigenous communities. As a result, FUNDEB increased the volume of federal funds committed to basic education by ten times, injecting new funds into all the stages of basic education and allocating resources for programs targeted to youth and adults.
The main objective of FUNDEB is to continue to redistribute resources related to education across the country, taking into account the social and economic development of regions. The federal government provides supplementary funds targeted to regions where the investment per student is below the minimum value for each year, allocating funds according to the number of students in basic education based on school census data from the previous year. Additionally, federal, state, and municipal councils, empowered by the Ministry of Education, provide monitoring and control of distribution, transfer and use of program resources.