By Paulo Prada

RIO DE JANEIRO (Reuters) - Across a busy street from the Maracanã stadium, host of two World Cup finals and next month the stage for the opening of the first-ever Olympics in South America, squats the massive concrete complex of the State University of Rio de Janeiro.

But the university, a pioneer in offering scholarships for low-income and minority students, has not enjoyed the same government largesse as the emblematic stadium, recipient since 2010 of more than 1.2 billion reais ($370 million) in state funds for World Cup and Olympic remodeling.

Even as producers test lights at the Maracanã for showtime Aug. 5, garbage mounts at the campus where 23,000 student have not attended classes since March because of missed payments to professors, contractors and university staff.

A nearby university hospital, a regional center for transplants and cancer treatments, has been so short of funds that doctors have this year regularly had to cut back on treatment because they lacked syringes, latex gloves, chemotherapy medicines and antibiotics.

"It has never been so precarious," says Edmar Santos, the hospital's director, explaining that cutbacks in the state budget mean the facility some days treats fewer than half the patients it normally would.

Two weeks before the Games begin, a recession and fiscal crisis are biting deep into the lives of more than 12 million people who live in and around this coastal city, stoking resentment over the some 40 billion reais ($12 billion) spent on Olympic projects.

State pensioners and employees, including teachers, health workers and police, have been getting paid late or not at all.

Many residents are unhappy that so-called Olympic legacy projects, including a new subway line and bus corridors, do little to help most of the population, instead further benefiting upscale districts.

On Tuesday, a leading pollster said half the Brazilians it surveyed are opposed to hosting the Olympics and 63 percent believe the Games bring more costs than benefits.

Vandals earlier this week spray painted the cars of a new light rail system that runs through central Rio, a project criticized by many as useful only for tourists. "Luxury transport, trashy hospitals," they painted.

"You have to wonder about their priorities," says João Machado, a 69-year-old doorman, who because of backlogs waited nearly six months for a prostate operation normally done within weeks. "Here we are making a show for the world and we can't even take care of ourselves."

When Rio won the rights for this year's Olympics in 2009, Brazil could do no wrong.

Flush with revenue from soaring commodity exports, it was eager to showcase its ascent and the revival of Rio, which was once Brazil's capital but has in recent decades lost economic and political clout to São Paulo, the country's financial center, and Brasilia, the seat of government.

But now, Brazil is suffering its worst recession since the 1930s, making Olympic spending especially glaring.

Rio's state government is responsible for about a quarter of the 40 billion reais in Olympic costs, according to organizers. Most of that is for the subway line, two times costlier than originally budgeted and so delayed that it is only expected to start running, with partial service, days before the Games begin.

The city, with private partners, has spearheaded nearly twice as much spending - roughly 20 billion reais - on projects including new roads, the light rail line and some smaller athletic venues.

But the city is not facing the same financial strains as the state government, which is responsible for much of the health, education and security across Rio.

Falling tax revenue because of the recession, combined with plummeting royalties from offshore oil fields, will cause a 2016 state deficit of as much as 20 billion reais, according to government figures. Of projected spending of more than 78 billion reais this year, the state has only paid out 25 billion.

In June, Rio's acting governor declared a financial emergency and secured a loan of 2.9 billion reais from Brasilia just to cover looming Olympic costs.


The city still struggles with endemic violence. One drug gang recently sent more than two dozen armed bandits to storm a public hospital and rescue one of its leaders, killing a police officer in the raid.

Brazil's reputation has also been hit by corruption scandals and political chaos. President Dilma Rousseff is awaiting an impeachment trial because of irregularities in the federal budget.

To be fair, Olympic visitors are unlikely to encounter the same problems as locals.

During the Games, which end on Aug. 21, Rio will be flooded by more than 85,000 police, soldiers and other security personnel.

Brazil's government says it will ensure that all essential services in Rio are guaranteed during the Games, including at hospitals, where temporary reinforcements will be on hand.

But that is little comfort for locals, who increasingly fret about the future once the spotlight moves on, leaving much of Rio no different than before.

"We lost a big opportunity to really improve the city," says Alessandro Molon, a leftist federal lawmaker who has been critical of local authorities and is running for mayor of Rio in October. "The money has run out and very little has changed."

At the university, where volunteers have formed garbage and gardening brigades to stave off disrepair, months of missed and late payments led staff to go on strike in March.

For 2016, the state government approved financing for the university of about 1.1 billion reais. So far, though, only about a third has been paid, according to state figures.

Students and teachers contrast that with the sporting bonanza, especially as a state auditor this month said the Maracanã overhaul went 62 percent over budget because of inflated billing by builders.

"You could run this place for more than a year with that money," says Mauricio Santoro, a political science professor at the university.

The problems weigh on many students.

Leticia Vieira da Silva, a 21-year-old international relations student who is black, came from the neighboring state of Minas Gerais, attracted by a student body with many low-income and minority students.

Silva had wanted to graduate this year but, unable to attend classes, she is rethinking plans to stay for post-graduate studies and a possible faculty position. "I hoped to stay here and teach, to give back," she says. "But I may even leave the country."

(Reporting by Paulo Prada; Editing by Christian Plumb and Kieran Murray)