ON AUGUST 28, 2018, the Department of Budget and Management (DBM) and the House of Representatives agreed on a transitory cash-based budget system for the upcoming fiscal year. The cash-based system, which aims to limit contractual obligations and eliminate the underspending of government agencies for projects, was met with both support and resistance in Congress.

Under a cash-based budgeting system, budget appropriations shall be valid for one year and cannot be carried over into the next. Government agencies are required to complete their projects within the same fiscal year and are given an extended three-month period to disburse payments to goods and services delivered.

Budget Secretary Benjamin Diokno explained that a cash-based system makes way for more accurate reflections of disbursements, aids in tracking the government’s outputs, and promotes accountability among agencies. He added that this system may be suitable for the government’s Build, Build, Build infrastructure program as it will exert more pressure on agencies to fulfill their deliverables on time.

However, House Committee Chairman Karlo Nograles noted that this may imply budget slashes for projects of agencies that take more than a year to complete, such as health facilities and irrigation projects, to name a few.

In contrast to the cash-based system, the multi-year obligation-based budget system that was followed in 2018 operates under the premise of contractual obligations. Budget appropriations are given a two-year validity, which does not oblige government agencies to disburse their payments in the form of obligations or commitments within the same fiscal year. This means that since the three-step process of project completion can be done even after the fiscal year has passed, agencies can have a “running balance of due-and-demandable accounts payables.

Insertions to the Department of Public Works and Highways (DPWH) budget were suspected to be pork barrel allocations and amounted to Php 160 million per member of the House of Representatives, which prompted Senator Panfilo “Ping” Lacson to vow that he would fight against these in the bicameral talks expected to be held in the second week of February.

Consequently, this played a role in the delayed ratification of the General Appropriations Bill (House Bill 8169), or the law that outlines the budgetary programs of every government agency and the appropriations provided for the upcoming fiscal year. Controversy surrounding certain insertions found in the proposal further postponed the approval of the 2019 budget.

For now, the 2018 budget has been reenacted by the government because of its failure to pass the national budget of the upcoming year on time.

Worrisome implications

Crafting the General Appropriations Act for any given fiscal year involves an extensive process of preparation, appraisal, and subsequent adjustment at multiple levels. The national budget is first conceptualized by the Development Budget Coordination Committee (DBCC) and DBM. After reviewing the budget proposals of each government agency, they consolidate these into a National Expenditure Program (NEP) and a Budget of Expenditures and Sources of Financing (BESF) which is further assessed by the President and the Cabinet.

Once approved, these are submitted to Congress for committee hearings and plenary deliberations. Last year, progress stalled at this stage due to disagreements on the new cash-based budgeting system—by December, lawmakers had adjourned session without approving the proposed Php 3.757-trillion budget for 2019.

Article VI, Section 25 of the 1987 Constitution states that in such cases where the Congress fails to pass the general appropriations bill, the budget of the preceding fiscal year “shall be deemed reenacted and shall remain in force and effect until the general appropriations bill is passed by the Congress.”

It is the first time since 2010 that the clause will be invoked. During the administration of former president and current House Speaker Gloria Arroyo, the government operated under a reenacted budget thrice.

Implementing a previous year’s fiscal program interim removes the need for a government shutdown—like what happened in the United States last December, when government offices deemed non-essential were closed and workers were sent home without pay until the U.S Congress addressed contentions about their budget.

However, it is not without consequences.

“A reenacted budget means that there would be no expenditure plan to support new programs, including the delivery of public goods, services and infrastructures to foster inclusive growth,” Francisco Magno, PhD, a political science professor at De La Salle University, explained.

This includes salary hikes for government employees and uniformed personnel who need that increase in wages to compete against rising prices resulting from the Tax Reform for Acceleration and Inclusion (TRAIN) Law. Struggling households under the unconditional cash transfer program will also be affected, as they will continue receiving Php 200 per month instead of the Php 300 outlined in the 2019 budget.

A press release by the DBM in December gave estimates that as much as 600,000 jobs may be lost as a result of the reenacted budget. Figures also reflect that 200,000-400,000 individuals could be pushed into poverty.

Speaking to reporters, Finance Secretary Carlos G. Dominguez projected that the government has lost Php 46 billion in the first quarter due to the delayed 2019 budget.

Moving forward

The 2019 General Appropriations Bill is currently being scrutinized by a bicameral committee composed of the Senate and the House of Representatives. At this stage, both houses convene in order to sort out any discrepancies between their versions of the budget.

The proposal passed by the Senate on January 21 added more than Php 16 billion to the Department of Health’s budget and around Php 2 billion for the Corrections Bureau to use for the construction of prison facilities towards decongestion.

Similar to the past year, the 2019 budget reaffirms education as the core of the government’s thrust, having the largest allocation of the budget at Php 659 billion. Infrastructure also remains to be a top priority with the second largest lion’s share of the fund at Php 555.7 billion.

The Department of National Defense and the Department of Interior and Local Government (DILG) follow with the second largest share of the fund. Succeeded by the Department of Social Welfare and Development (DSWD), the Department of Health (DOH), the Department of Transportation (DoT), the Department of Agriculture (DA), the judiciary branch, and the Autonomous Region of Muslim Mindanao (ARMM).

Another amendment made by the Senate was to take out the alleged pork barrel funds amounting to Php 75 billion from the DPWH budget allocation.

“Sick and tired” of the controversy surrounding the DPWH insertion, Senate President Vicente “Tito” Sotto said he would rather opt for a year-long reenacted budget, despite the potentially damaging effect this would have on the Philippine economy.

“I hope that it will erase all doubts and allegations of pork [barrel] and other so-called insertions in the budget,” the Senate leader added.

As government leaders continue to finalize their strategies to improve government spending, it remains to be seen if they will be steadfast in their visions for Philippine progress.

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