02 Public Expenditures and Budget Reform - Prof. Leonor Magtolis Briones

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

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Spending “wiggle room” and fiscal space

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Budget Reforms

Increasing NG Expenditures, but… N G E xpen dit diture, 1998-20 1,400,000 1,200,000    s    o 1,000,000    s    e 800,000    P    0 600,000    0    0    ' 400,000    n    I 200,000 0

16,000 14,000 12,000 10,000    s    o    s 8,000    e    P 6,000    n    I 4,000 2,000 0

   8    9    9    0    0    0  1    0    2    0    3    0  4    0    5    0    6    0    7    0    8    9    9   1    9    2    0    2    0    2    0    2    0    2    0    2    0    2    0    2    0    2    0   1

To t al al N G E x pe pe n d it ur ure s

Per P er C a p it a

Share of productive sectors are less than debt service

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 • Limited, due to:  –  poor revenue generation;  –  misplaced/outdated misplaced/outdated fiscal incentives and passage of more revenue-eroding laws in Congress;  –  leakages in tax collection;  –  Automatic appropriation of debt service which will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

   s    o    s    e    p    d    n    a    s   u    o    h    t    n    I

  0  0  ,  0   0   0  ,  0   0   8  0   0   1 ,   0  0  ,   0  0  ,  0   0   6  0   1 ,   0  0  ,  0   0   0  ,  0   0   4  0   1 ,   0  0  ,  0   0   0  ,  0   0    2  0   1 ,   0  0   0  ,   0  0  ,  0   0   0  0   1 ,   0  0   0  ,   0  0  ,  0   0   8  0   0  0   0  ,   0   0  ,  0   0   6  0   0  0   0  ,   0  0  ,  0   0   4  0   0  0   0  ,   0   0  ,  0   0    2  0  -

P114 Bn more   n   o    i    l    l    i   r    T    1    4    5  .    1    P

P3.774 Bn less P123 Bn more

  n   o    i    l    l    i    B    4    1    9    P

Total Obligations

P166 Bn more

  n   o    i    l    l    i    B    6    9    6    P

New Appropriations

  n   o    i    l    l    i    B    9    5    6    P

Automatic Appropriations

2009 Source of basic data: NEP 2010

P51 Bn less

D e p a r tm e n t s

2010

  n   o    i    l    l    i    B    2    8    8    P

S PFs

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

SPFs 50.19 %

In ‘000 pesos

Dep't, 49.81 %

2010

SPFs 57.23 %

Dep't 42.77 %

TOTAL SPECIAL PURPOSE FUNDS (SPFs)

881,879,847

Inte Intere rest st Paym Paymen entt

340, 340,812 812,0 ,000 00

Allo Alloca cati tion onss to LG LGUs Us

290, 290,617 617,0 ,057 57

Pens Pensio ion n and and Gr Grat atui uity ty Fund Fund

79,49 79,494, 4,246 246

Misc. Misc. Perso Personne nnell Ben Benefi efits ts Fund Fund

76,496, 76,496,242 242

Tax Tax Expe Expend ndit itur uree Fund Fund

38,14 38,142, 2,000 000

Budg Bu dget etar ary y Su Supp ppor ortt to GO GOCC CC

35,93 35,933, 3,087 087

PDAF

6,940,000

AFP Modernization Program

5,000,000

Calamity Fund

2,000,000

Dep-Ed, School Bldg. Program

2,000,000

International Commitments Fund

1,595,215

E-Government Fund

1,000,000

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 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

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P140 Billion is: 

13.19 % FY 2008 GAA

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P34 Billion more than FY 207 Overall Savings

Other lump-sums and invisible budget • Intelligence funds • Motor Vehicle User Charge (MVUC) F und s

Balance as of   31 Dec 2008

Special Road Support Fund

2010 Revenue

Expenditure

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

2,473,449,000

713,025,000

198,000,000

Special Ve Vehicle Po Pollution Co Control Fu Fund

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

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,

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 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 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