Public Expenditures and Budget Reform

UP National College of Public Administration and Governance And Lead Convenor, Social Watch Philippines Debt and deficits: Opportunities and risks for a new administration UP Academic Congress Malcolm Hall, UP College of Law February 01, 2010

Prof. Leonor Magtolis Briones

Outline
  

National Government Spending Pattern Spending “wiggle room” and fiscal space Budget Reforms

Increasing NG Expenditures, but…
NG Expenditure, 1998-2008
1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0
19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08

16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0

In '000 Pesos

Total NG Expenditures
Source: Basic Data from DBM

Per Capita

In Pesos

Share of productive sectors are less than debt service

Source: Basic Data from DBM

Source: Basic Data from DBM

Source: Basic Data from DBM

Critical spending for social development is decreasing in real terms

Source: Basic Data from DBM

Source: Basic Data from DBM

Source: Basic Data from DBM

Next administration should
• Prioritize critical requirements for social development in light of
– Poor progress in meeting Millennium Development Goals (MDGs) by 2015 – Immediate and lingering social impact of economic slowdown

• Lessen debt burden by improving revenue generation and plug leakages in tax administration • Cut wastage due to corruption and frivolous spending of discretionary funds

What is the spending “wiggle room” for the succeeding administration?
• Limited, due to:
– poor revenue generation; – misplaced/outdated fiscal incentives and passage of more revenue-eroding laws in Congress; – leakages in tax collection; – Automatic appropriation of debt service which will likely increase further due to staggering deficit in FY 2009

• … but budget reforms can expand fiscal space by redirecting funds that are highly discretionary and prone to abuse
– – – – Special Purpose Funds “Overall Savings” “Invisible budget” Rationalizing support to GOCCs including SUCs

Comparison of 2009 GAA and 2010 Proposed Budget
1, 1, 1, 1, 1, 00 20 40 60 80 0, 0, 0, 0, 0, 00 00 00 00 00 00 0, 0, 0, 0, 0, 0, 00 00 00 00 00 00 0 0 0 0 0 0

P114 Bn more
P1.541 Trillion

In thousand pesos

P3.774 Bn less
P914 Billion

P166 Bn more
P882 Billion SPFs

P123 Bn more
P696 Billion

P51 Bn less
P659 Billion Departments

20 0,

-

00 0, 00 0

40 0,

00 0, 00 0

60 0,

00 0, 00 0

80 0,

Total Obligations

New Appropriations

Automatic Appropriations

2009
Source of basic data: NEP 2010

2010

Special Purpose Funds
• Many lump-sum appropriations in the SPF are highly discretionary, some with vague or even no special provisions making it prone to frivolous utilization; • Considering the large amounts (more than half the budget) and its discretionary nature, SPF can effectively:
• Distort sectoral and regional budget priorities approved by Congress; • Weakens the ability of Departments and agencies to strategically program spending for their respective services

• The performance-based budgeting is not applicable to SPFs which constitute half of the budget.

% SHARE OF SPECIAL PURPOSE FUNDS vs. DEPARTMENTS PER ADMINISTRATION

2009
TOTAL SPECIAL PURPOSE FUNDS (SPFs) Interest Payment
SPFs 50.19 % Dep't, 49.81 %

In ‘000 pesos 881,879,847 340,812,000 290,617,057 79,494,246 76,496,242 38,142,000 35,933,087 6,940,000 5,000,000 2,000,000 2,000,000 1,595,215 1,000,000 1,000,000 800,000 50,000

Allocations to LGUs Pension and Gratuity Fund Misc. Personnel Benefits Fund Tax Expenditure Fund Budgetary Support to GOCC PDAF AFP Modernization Program Calamity Fund Dep-Ed, School Bldg. Program International Commitments Fund E-Government Fund General Fund Adjustments Contingent Fund National Unification Fund

2010

SPFs 57.23 %

Dep't 42.77 %

Negative Fiscal Politics: Discretionary Funds – Political Funds?
 Internal Revenue Allotment for 2009 Budget is P249.988 Billion. IRA formula is set by law BUT over and above that, other allocations are being provided in the budget under the control of the President. Examples: • Kilos Asenso Support Fund = P1 billion • Kalayaan Brgy. Program Fund = P1 billion • Financial subsidy to LGUs = P4.168 billion • MMDA = P1.8 billion

“Overall Savings”, Impoundment and Presidential Discretion Overall Savings, FY 2008
Pooled Savings (“Transferred From”) Realignments (Transferred To”) Net Overall Savings P 178.728 Billion P 38.059 Billion P 140 Billion

P140 Billion is:
13.19 % FY 2008 GAA P34 Billion more than FY 207 Overall Savings

Other lump-sums and invisible budget
• Intelligence funds • Motor Vehicle User Charge (MVUC)
Funds Balance as of 31 Dec 2008 1,571,180,000 789,266,000 211,700,000 2,473,449,000 2010 Revenue 7,605,600,000 475,350,000 713,025,000 713,025,000 Expenditure 7,329,826,000 399,000,000 599,000,000 198,000,000

Special Road Support Fund Special Local Road Fund Special Road Safety Fund Special Vehicle Pollution Control Fund

• Other remittances from other government corporations that do not pass through the annual budget deliberations:
– PAGCOR – PCSO

Call for Budget Reforms
• There are systemic issues in the budget process which should be addressed to curb abuses and misuse of public resources; • There is a need to strengthen oversight function of the legislature to curtail wastage in government spending. • Social Watch Philippines and the Alternative Budget Initiative (ABI)* is pushing for legislative budget reforms – already started early last year with the public hearing conducted by the Senate Committee on Finance on the impoundment control bills.
*ABI is a network composed of CSOs and partner-legislators lobbying alternative budgets (on health, education, agriculture and environment), advocating participatory budgeting and lobbying for budget reforms.

Budget Reform Measures
• • • • • • • • • HB 5580 Impoundment Control Act; HB 5706 National Budget Fund Classification Act; HB 5707 Budgeting Guidelines for Re-enacted Budget HB 5723 An Act Defining Unprogrammed Funds HB 5724 An Act Mandating that the Bicameral Meeting on the National Budget be conducted in an Open and Transparent Manner; HB 5725 An Act Mandating Transparency in Fund Releases; HR 912 Open and Transparent Bicam; HB 5716 National Budget Savings Act; HB 5256 People’s Participation in Budget Deliberation Act