Public Expenditures and Budget

Reform

Prof. Leonor Magtolis Briones

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
 Outline


National Government Spending Pattern

Spending “wiggle room” and fiscal space

Budget Reforms
 Increasing NG Expenditures, but…
NG Expenditure, 1998-2008

1,400,000 16,000
1,200,000 14,000
1,000,000 12,000
In '000 Pesos

10,000

In Pesos
800,000
8,000
600,000
6,000
400,000 4,000
200,000 2,000
0 0
98
99
00
01
02
03
04
05
06
07
08
19
19
20
20
20
20
20
20
20
20
20
Total NG Expenditures Per Capita

Source: Basic Data from DBM

 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– misplaced/outdated fiscal incentives and passage of more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
0
00
0,
P114 Bn more
00
0,
80

0
1,

00
0,

P1.541 Trillion
00
0,
60

0
1,

00
0,
00
0,
40

0
1,

00
In thousand pesos

P3.774 Bn less P166 Bn more

0,
00
0,
20

0
1,

P123 Bn more
00

P51 Bn less

P914 Billion
0,

P882 Billion
00
0,
00

0
1,

00
0,

P696 Billion
00

P659 Billion
0,
80

0
00
0,
00
0,
60

0
00
0,
00
0,
40

0
00
0,
00
0,
20

Total New Automatic Departments SPFs

Obligations Appropriations Appropriations

2009 2010
Source of basic data: NEP 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 In ‘000 pesos
TOTAL SPECIAL PURPOSE FUNDS 881,879,847
(SPFs)
Interest Payment 340,812,000
SPFs Dep't, Allocations to LGUs 290,617,057
50.19 49.81
% % Pension and Gratuity Fund 79,494,246
Misc. Personnel Benefits Fund 76,496,242
Tax Expenditure Fund 38,142,000
Budgetary Support to GOCC 35,933,087
PDAF 6,940,000
2010
AFP Modernization Program 5,000,000
Calamity Fund 2,000,000
Dep-Ed, School Bldg. Program 2,000,000
Dep't
International Commitments Fund 1,595,215
42.77
SPFs E-Government Fund 1,000,000
%
57.23
% General Fund Adjustments 1,000,000
Contingent Fund 800,000
National Unification Fund 50,000
 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”) P 178.728 Billion

Realignments (Transferred To”) P 38.059 Billion

Net Overall Savings 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 2010
31 Dec 2008 Revenue Expenditure

Special Road Support Fund 1,571,180,000 7,605,600,000 7,329,826,000

Special Local Road Fund 789,266,000 475,350,000 399,000,000
Special Road Safety Fund 211,700,000 713,025,000 599,000,000
Special Vehicle Pollution Control Fund 2,473,449,000 713,025,000 198,000,000

• 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