By David Cagahastian & Jovee Marie N. dela Cruz
On Monday Budget Secretary Florencio B. Abad made an announcement that had people raising their eyebrows—90 percent of the P3.002-trillion 2016 budget had been effectively released in the first working week of the year.
For Abad, the early release of the bulk of the budget is meant to address the underspending that has plagued the Aquino administration every year, and is widely blamed for the subpar performance of the economy. For some experts, however, Abad’s announcement is a mere rhetoric, misleading and even a signal that the administration’s campaign kitty is ready for use.
With 90 percent of total appropriations already deemed released as of the first week of this month, speculations are rife that government spending this year will be politically motivated—to aid the reelection of administration allies.
These speculations are further stoked by the ruling party’s intransigent refusal to abide by the Supreme Court’s definition of what constitutes savings in the government’s annual budget, as the newly enacted General Appropriations Act (GAA) provides for the “creation” of savings as early as January, which can become a huge war chest for the election at the disposal of the President, who is expected to join the campaign sorties of his chosen successor.
Even the Department of Budget and Management (DBM) admits that the release of 90 percent of the total budget at the beginning of the election year looks suspicious, although this has been so since the adoption for fiscal year 2015 of the DBM’s policy that the annual GAA is already the release document, instead of the graft-prone Special Allotment Release Order (Saro).
Suspicious indeed
“Pangit lang tingnan this year because this is an election year, but this had been done before. The budget is released at the beginning of the year through the GAA so they don’t have to go to the DBM to ask for the release of the Saro, which was the previous practice, which led to underspending, which we want to avoid,” Budget Undersecretary Richard Moya told the BusinessMirror.
Moya explained that “deemed release” to the respective government agencies does not mean that those funds could already be disbursed in full to the payee contractors, since the government would still have to comply with the allowable payments that can be paid to its payee contractors based on the percentage of completion of their projects.
“You cannot frontload all the payments, because the government has to comply with the schedule of payments based on the terms of reference, such as milestone payments on mobilization, and on percentage of completion on the projects. It doesn’t mean that if it’s released early, it would be paid early,” Moya said.
Moya said the policy of doing away with the Saro is meant to speed up the procurement process, since under the old process of releasing fund allocations to government agencies, a particular agency cannot even start with the bidding process until the Saro for that particular project had been approved.
Underspending in 2014 had been blamed for the country’s dismal 6.1-percent GDP growth that year, which was below the already downgraded target range of 6.5 percent to 7.5 percent. Despite the assurances and justification of the DBM for the use of the GAA as release document for the appropriated items in the national budget, the fears that the budget could be used for political purposes linger, especially with the new definition of what constitutes savings, as provided for in the GAA for both 2015 and 2016.
‘Unconstitutional’
Social Watch Philippines lead convener Leonor Magtolis Briones, a former national treasurer under the Estrada administration, said the redefinition of savings in the 2015 and 2016 GAA is still unconstitutional, since “savings” had already been defined by the Supreme Court (SC) in its decision striking down the Disbursement Acceleration Program (DAP) in 2014.
In the ruling against DAP, the SC interpreted the power to realign savings as given in the Constitution for certain officials to mean only to cover those amounts that can, indeed, be said to be savings as understood by laymen. The SC, in its decision, said savings cannot be declared before the end of the fiscal year.
In the pertinent constitutional provision on the use of the power to augment appropriations from savings, Section 25(5) of Article VI provides that: No law shall be passed authorizing any transfer of appropriations: however, the President, the President of the Senate, the Speaker of the House of Representatives, the Chief Justice of the SC, and the heads of constitutional commissions may, by law, be authorized to augment any item in the general appropriations law for their respective offices from savings in other items of their respective appropriations.”
But in the GAA for 2016, savings is defined in Section 73 as the following: “Savings refer to portions or any released appropriations in this Act which have not been obligated as a result of any of the following:
“a) Final discontinuance or abandonment of an ongoing program, activity or project [PAP] by the head of agency concerned due to causes not attributable to the fault or negligence of the said agency which would not render it possible for the agency to implement said PAP during the validity of the appropriations; b) Noncommencement of the PAP for which the appropriation is released; c) decreased cost resulting from improved efficiency during the implementation or until the completion by agencies of their PAPs, and; d) Difference between the approved budget for the contract and the contract award price.”
‘Savings’
Briones said this definition of savings makes it very easy for the Executive branch to generate savings even at the beginning of the year, since by January 4, the first working day of the year, some 90 percent of the total appropriations had already been deemed released to the government agencies.
This meant that the appropriations had already been released, which may be declared as savings through the simple expedient of declaring a project as unfit, which would then make that project as being deemed abandoned “due to causes not attributable to the fault or negligence of the said agency,” thus, converting the appropriations for that unfit project as savings, which can be realigned by the President to augment other items under the Executive branch.
Briones said that even in her research on the definition of savings and how realignment of funds can be done in other countries that practice separation of powers so that each branch may be able to check and balance the powers of the other branches of government, savings is defined as how a layman would define it.
“The definition of savings is that when a project is over and you have money left over. Usually it’s near the end of the year when you will see that there would definitely be some savings. But with the new definition of savings, it’s like saying that since the SC said this is illegal, then we’ll pass a law that will make this mode of creating savings as legal,” she said.
Pros and cons
But Victor A. Abola, professor and program director of the Strategic Business Economics Program at the University of Asia and the Pacific (UA&P), sees this as a good sign.
“When they say ‘released’, they mean they have the Saro already… authorized, meaning they can spend already. And I think they will spend. The fears that the government will underspend like in the earlier part of the year, in the first half, and last year, the other half, I don’t think is going to happen again, because the Liberal Party really wants to cement its political gains,” Abola said. Former Budget Secretary Benjamin E. Diokno, professor at the University of the Philippines School of Economics, said Abad’s announcement “simply means that P2.7 trillion worth of spending authority has been by released by the DBM, and some P300 billion are being held by the DBM.”
“It does not mean that agencies can now disburse the P2.7 trillion. For example, a big chunk of the P2.7 trillion is for salaries and wages. But they can be paid only for actual services, hence, for January, only 1/12 of the allocation for salaries and wages can be disbursed by national agencies.” Also on hold, Diokno said, are the likes of calamity fund and contingency fund, as well as the budget allotted for international commitment funds, or what will be paid to the international organizations, since these are still not due.
This makes the announcement misleading, Diokno said. “It’s a misnomer; it’s not because you were given the money you can already spend it.” As for the projects, he said money cannot be released without the contract. There is still the bidding procedure, evaluation and award. “Usually you will release 20 percent initially for mobilization. It doesn’t mean since you have the money, you can spend it faster; the bidding procedure is still bureaucratic.”
‘Guard the budget’
Lawmakers urged the public to guard the national budget for 2016, an election year, so the funds will not be used to raise money for the campaign.
“We have to be vigilant that the funds will not be used to raise money for the LP [Liberal Party] campaign or be used to attract politicos to transfer to LP,” Nationalist People’s Coalition Rep. Sherwin Gatchalian of Valenzuela said.
Under the 2016 GAA, the total budget allotted for government agencies and departments is P1.66 trillion, or 55 percent of the P3.002-trillion national budget.
According to the DBM, all government departments and agencies are now free to incur obligations by contracting products and services. However, they would still need to secure notices of cash allocation (NCA) from the budget department.
Party-list Rep. Jonathan de la Cruz of Abakada said the public should monitor how much and what are the priority projects of these government agencies.
“This DBM statement is ingenuous, as in the past, this was meant to cover up the agencies’ tendency to hold on to funds without the accompanying notice of cash allocation so they have reason to underspend,” he said.
“If they release and issue an NCA, this early, we should monitor what agencies are getting priority and what projects are being funded, to ensure that this will not be for quick-release soft operations, which will definitely be used for election,” de la Cruz added.
Abad said the front-loading of government funds was the result of a new policy at the DBM recognizing the GAA as already the release document, vice the old practice of requiring a Saro before actual cash may be released to a government agency.
“Together with the earlier policy adopted, which authorized departments and agencies to advance preprocurement activities that enable them to bid projects short-of-award, this policy will further accelerate the already much-improved pace of government spending. It will also ensure that most projects will be implemented before the beginning of the election ban on March 25,” Abad said. Abad added that the comprehensive release of the budget under the GAA-as-Release Document (GAARD) regime will not only promote faster implementation of programs and projects, it will also sustain the growth momentum from the fourth quarter of 2015 as procurement of infrastructure projects are fast-tracked.
Abad also said the release of 90 percent of the budget for 2016 should also allow most projects to be started before the election-spending ban on March 25, which is 45 days preceding the regular election on May 9.
According to Section 261 of the Omnibus Election Code, among the prohibited acts during the 45 days preceding a regular election are the construction of public works, delivery of materials for public works and issuance of Treasury warrant or similar devises for a future undertaking chargeable against public funds; and release, disbursement or expenditures of public funds, among others.
Not connected with elections
LP Rep. Romero Quimbo of Marikina, chairman of the House Committee on Ways and Means, said the DBM’s move is not connected with the 2016 national and local elections. “Budget utilization has perennially been an area of criticism against the government, particularly this one. In the last three years, it has even been blamed as one of the main reasons for the slowdown of growth. That’s precisely why the DBM has been striving to improve the budget release and utilization,” said Quimbo, who is also the spokesman of LP’s daang matuwid senatorial slate.
“A high release rate is very good and indicates an efficient budget department. There is no connection with the elections. It is a function of good government. It, likewise, shows that the programs in the GAA are appropriate and well-planned considering that they are implemented fast,” he added.
According to the lawmaker, “whoever criticizes the government for its quick ability to release the budget is either ignorant or clearly politically motivated.” Also, Party-list Rep. Sherwin Tugna of Citizens’ Battle Against Corruption said the early budget releases will speed up the completion of projects and programs of the government.
“This is good news because the agencies have their budgets already to execute their priority programs, for the benefit of the people. As to guarding public funds, being watchful on how public funds are spent is a continuing duty of each and every citizen, including also the COA [Commission on Audit],” he said.
(With Cai U. Ordinario)