Business World, 26 September 2012

The 1987 Philippine Constitution has clearly delineated the assignment of functions in the budget process: the President prepares and proposes the budget, Congress authorizes it though it may not increase the budget as submitted by the President, and then the President implements the budget as approved by Congress. Sadly, Congress has surrendered its power of the purse, allowing the President to slowly but steadily expand executive control of the budget process.

The members of the House of Representatives have a greater role as representatives of the people. All money bills — appropriations, revenue, tariff, or any bill authorizing increase of the public debt shall originate exclusively in the House. The role of the Senate is to propose or concur with amendments with the general appropriations bill passed by the House.

In 2011 and 2012, Congress had dutifully approved both budgets with very few changes. What Congress approved, and what the President signed into law, were Republic Act 10147 (General Appropriations Act for Fiscal Year 2011) and Republic Act 10155 (General Appropriations Act for Fiscal Year 2012).

Both laws are accessible to the general public. One can see it in the Web site of the Department of Budget and Management (DBM). The budget document can be accessed through other means. It is easy to analyze and track for as long as funds are spent as appropriated. Each department or agency of the government can be held accountable for the funds authorized by Congress.

But what happens when the Department of Budget and Management (DBM) plays around with the budget. It will initially release the allotment (an authority to spend), then “retrieve” funds of what was released (on the assumption that department heads were slow in using the funds), slice, dice and repackage the retrieved funds, and then disburse them on budget items not expressly authorized by Congress.

You have to be a genius to be able to track all the changes that took place. First, a positive Special Allotment Release Order (SARO) will be released to the agencies concerned. Next, a negative SARO will be released to confiscate or retrieve spending authorities from “slow-moving” agencies. And then, a positive SARO will be issued to recipients of the DAP fund.

Unless legislators, the academe, civil society, and the general public in general have access to all these budget documents that effect all these changes the net result is opaque budgeting.

From a transparent system, we now have an intractable one. And with an administration that is quite unwilling to release information, the general public will be operating in darkness.

And because legislators, the protectors of the public purse, did not object, not even a peep, to the DAP, DBM is planning repeat the same exercise this year. Budget Secretary Abad has been quoted as saying that DBM is planning to have another DAP in the fourth quarter with funds reallocated to faster moving priority projects.

There’s something fishy here. The 1987 Constitution provides that “No money shall be paid out of the Treasury except in pursuance of an appropriation made by law.” The assumption here is that the ‘faster moving priority projects’ are already adequate funded. If it is a multi-year foreign assisted project, then its implementation can be accelerated. But this appears not to be the case.

The Executive Department cannot fund new budget items not mentioned in the general appropriations law. But then we won’t know for sure unless DBM shows some deliberate act of openness by posting in its Web site what fast moving priority projects are being accelerated and the additional amounts being programmed for the 2012 budget.

The important policy implication here is that Congress has surrendered its power of the purse to the Executive. It’s simply not doing its job. It has given up its power to authorize spending. As a result, the Executive Department has changed the budget priorities as approved by Congress with impunity.

In the United States, whose presidential system of government is similar to ours, there is a system of impoundment. Appropriations authorized by Congress have to be spent unless the Executive Department, for one reason or another, does not intend to spend the budget items as authorized. Then the President of the United States has to go back to Congress with a request to impound the appropriations. The request may or may not be granted. Congressional power of the purse is preserved.

What can our legislators do? First, pass a budget impoundment act. This is to make the President and the Executive more serious about budgeting. If the budget is prepared well there is less need for changes during budget execution.

The President cannot make a habit of requesting large budgets for some departments and then, in the middle of the year, slice and dice the budget as authorized by Congress, repackage it and spend it the way he wants it.

Second, in its review of the 2013 proposed budget, Congress should look for reasons for underspending in the past two years. Was it case of over-budgeting, or failure by DBM to release the funds on time, or failure of heads of agencies to implement authorized programs and projects, or all of the above?

The following departments underspent heavily in the past: DPWH, DAR, DA, DSWD, Department of Environment and Natural Resources (DENR), and DoH. Two and a half years is too long for department heads to learn what works and what doesn’t work in government.

Reducing the appropriations of key departments, already authorized by Congress, such as the social services and infrastructure, is not the solution. It will only harm potential beneficiaries.

Realignment of funds results to more delays in the disbursement of funds, unless of course when funds are parked in select government financial institutions or government corporations. But that only would gives an illusion that funds are being spent.

And because the realignment is done in the dark, outside of public discussion, there is the real risk that the quality of spending might deteriorate.

Third, Congress should demand greater openness and better reporting system from DBM and the line agencies. The congressional power of the purse does not end with the approval of the annual budget. Congressional oversight on the budget is a continuing one.

By law, every agency of the government is required to submit to Congress a quarterly report of its financial performance and progress in meeting its mandates. But these reports should be studied and analyzed rather than stowed away in the archives.

Congress should demand better and more disaggregated reports from DBM. For example, the budget expense class “Infrastructure and other capital outlays” is too broad to allow careful budget review.

Investment in public infrastructure plays a key role in the development process. It should be broken down into at least three categories: public infrastructure, other capital outlays, and military hardware. Each category of spending would affect growth differently.

Disbursements for hard infrastructure such as, for example, for roads, bridges, irrigation systems, would help more in expanding the productive capacity of the economy than disbursements for “other capital outlays” which include spending for cars, tables, furniture, office buildings. Investment in military hardware has been shown to has limited or no contribution to economic growth.

Such disaggregation will improve transparency, public accountability, and the people’s understanding of where their taxes go.