the education decentralization in 1992 modified the negotiation structure of teachers' salaries between government authorities and the teachers' unions. in 1998 a federal fund called faeb was created to help the states finance education. this document explores the effects of the new negotiation structure and the effects of the distribution of faeb among the states on expenditures on teachers' salaries. it is found that states with a high percentage of state teachers previous to decentralization provide teachers with lower salary increases. this is mainly because such states face higher education costs, due to the distribution rules of faeb.