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Public Expenditures and Budget Reform
Prof. Leonor Magtolis BrionesUP National College of Public Administration and Governance
AndLead Convenor, Social Watch Philippines
Debt and deficits: Opportunities and risks for a new administration
UP Academic CongressMalcolm Hall, UP College of Law
February 01, 2010
Outline
National Government Spending Pattern Spending “wiggle room” and fiscal space Budget Reforms
NG Expenditure, 1998-2008
0200,000400,000600,000800,000
1,000,0001,200,0001,400,000
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
In '0
00 P
esos
02,0004,0006,0008,00010,00012,00014,00016,000
In P
eso
s
Total NG Expenditures Per Capita
Source: Basic Data from DBM
Increasing NG Expenditures, but…
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
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• Limited, due to:– poor revenue generation;– misplaced/outdated fiscal incentives and passage of more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
P51 Bn less P123 Bn more
P114 Bn more
P3.774 Bn less P166 Bn more
P88
2 B
illio
n
P65
9 B
illio
n
P69
6 B
illio
n
P91
4 B
illio
n
P1.
541
Tril
lion
- 2
00,0
00,0
00 4
00,0
00,0
00 6
00,0
00,0
00 8
00,0
00,0
00
1,0
00,0
00,0
00
1,2
00,0
00,0
00
1,4
00,0
00,0
00
1,6
00,0
00,0
00
1,8
00,0
00,0
00
TotalObligations
NewAppropriations
AutomaticAppropriations
Departments SPFs
In t
ho
usa
nd
pes
os
2009 2010
Comparison of 2009 GAA and 2010 Proposed Budget
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
SPFs 50.19
%
Dep't, 49.81
%
2010
SPFs 57.23
%
Dep't 42.77
%
In ‘000 pesos
TOTAL SPECIAL PURPOSE FUNDS (SPFs)
881,879,847
Interest Payment 340,812,000
Allocations to LGUs 290,617,057
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
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
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
Negative Fiscal Politics:Discretionary Funds – Political Funds?
“Overall Savings”, Impoundment and Presidential Discretion
Overall Savings, FY 2008Pooled 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)
• Other remittances from other government corporations that do not pass through the annual budget deliberations:– PAGCOR– PCSO
Funds Balance as of31 Dec 2008
2010
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
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