Business World, 18 November 2014


The brazen attempts of the Aquino III administration to redefine savings is an insult to the intelligence of senators and congressmen, and indirectly the common sense of Filipinos who elected the latter to office.

The essence of representative democracy is that the people’s representatives to Congress — the senators and congressmen — are expected to represent the will of the people. Perhaps the people want more farm-to-market roads that would ensure that agriculture produce reach the markets rather than the billion-peso convention center that would make only a few very happy.

Perhaps the Filipino masses want more small water impounding projects to boost agriculture rather than multi-billion-peso export processing zones that would only line the pockets of a few corrupt politicians.

Under existing definition, savings is realized when the project or program that was committed by the Executive Department to Congress is completed and there is an excess amount left in the budget. For example, if a 10-kilometer road with an appropriation of P100 million has been successfully completed — not contracted and awarded — at the cost of P90 million, then a P10 million savings is realized.

The Aquino-Abad definition of savings is looser. It is the “difference between the approved budget of the contract and the contract/bid price.” But how can there be savings when the project has yet to be started? What if there are change orders or project modifications along the way?

The proposed Aquino-Abad definition of savings is that the discontinuance or abandonment of a project may be done at any time during the validity of the appropriations, which could be anytime from Jan. 1 to Dec. 31, 2015. This gives the President leeway to rewrite the budget at any time during the fiscal year. The existing definition of savings refers to the final discontinuance of a project — not deferral of a project because it is not ready.

Savings is realized when a program, project or activity is not started or the agency is not able to obligate an allotment within the first semester of 2015 (or by July 1, 2015).

But doesn’t this suggest that the budget was poorly crafted? Why include in the 2015 budget a program, project or activity that is not ready for implementation? What about the commitment of department secretaries or agency heads to Congress that they will deliver a certain level of output?

The Aquino III administration’s failure to implement programs, projects and activities that have already been authorized by Congress is anomalous. From 2011 to the third quarter of 2014, it has failed to spend some P570 billion, and that already includes the unconstitutional Disbursement Acceleration Program (DAP) releases.

So, why is the President proposing such a huge budget (P2.6 trillion for 2015) and why is Congress authorizing such a bloated budget, if the agencies are unable to implement their funded programs, projects and activities?

Is this deliberate or simply poor budget planning? Is Mr. Abad deliberately creating “fat” in the budget so he can then convert it into his own discretionary fund that he can then allocate and distribute according to his whims and caprices? If so, that’s the height of fiscal irresponsibility.

That appears to be so, given the Aquino-Abad definition of savings. Under the Aquino-Abad definition “[s]avings may likewise refer to available balances of appropriations arising from unused compensation and related costs pertaining to: (i) unfilled, vacant or abolished positions; (ii) non-entitlement in allowances and benefits; and (iii) leaves of absence without pay.”

And here’s another source of abuses. In the accompanying infographic are the proposed appropriations for the Miscellaneous Personnel Benefits Fund (MPBF) and the Pension and Gratuity Fund (PGF).

Both are lump sum funds and they don’t have detailed supporting documents. Both have significant increases and could easily be converted into “savings.” The President proposed, and the House dutifully agreed, to increase MPBF allocation from P53.5 billion in 2014 to P118.1 billion in 2015. What enormous “fat”!

The President proposed, and the House dutifully agreed, to increase the PGF allocation from P120.5 billion in 2014 to P134.0 billion in 2015. Another huge “fat”!

These two funds are where the pork is hidden because Special Provision allows the use of savings out of the MPBF and PGF to augment the budgets of the Executive Branch, the Legislative Branch, the Judicial Branch and other constitutional offices.

The brutal fact is that the original special provisions allow the use of savings for the Executive Department alone. The House expanded the use of savings, but in reality its amendment is cosmetic.

Remember: Budget Secretary Butch Abad will manage the two funds. He will control the huge political largesse, and given his experience with the unconstitutional DAP, he can’t be trusted with the use of public funds.

And talking of strengthening political institutions, the new arrangement can only weaken the already diminished Congress, the Supreme Court, and other constitutional offices. Legislators, justices and other officers will grovel to and beg Mr. Abad for additional funding.

What are the members of Congress doing? Why have they deliberately and openly surrendered their power of the purse? We might as well abolish Congress.