Business World, 2 October 2013


When the Disbursement Acceleration Program (DAP) was announced in October 2011, it was represented as a fiscal stimulus plan. A few days later, I wrote that the DAP as fiscal stimulus was a misnomer. I was one of the few who raised questions on the propriety of what I consider to be a “budget within the budget.” Reprinted below are my notes then, which I consider to be valid until now.

“The government needs to spend to support a wobbly economy — and it should have done that from day one. But in the rush to make up for months of skimping on public spending, the quality of expenditure should not be sacrificed. It is also important to respect that the existing balance of power in the budget process has to be observed — the President proposes, Congress approves, and the Executive Department implements the budget. The Executive Department cannot slice and dice the national budget, change approved budget priorities, come up with a “new” spending package, without getting congressional concurrence.

“What President Aquino’s announced the other day was not ‘fiscal stimulus.’ It’s more like a ‘disbursement acceleration plan’ as Department of Budget and Management (DBM) authorities call it. Mr. Aquino’s wordsmith did him a disservice by letting him call the P72-billion ($1.7 billion) spending plan an ‘economic stimulus package.’ With 10 weeks to go before the end of the year and with the poor selection of projects, the spending package will not help perk up the economy this year.

“Fiscal stimulus are government measures, normally involving higher spending or lower taxes, aimed at giving a positive jolt to economic activity. But President Aquino was careful in explaining that the new spending will be financed by ‘savings’ in the past, partly arising from serious underspending. It is in this sense that I call the P72-billion plan ‘catch-up plan with a twist’ — the twist being replacing slow-moving and discontinued projects and items of expenditures with new ones.

“But the more I look at the details of the stimulus package, the more I’m convinced that it won’t accomplish its desired objective. With 10 weeks to go before the end of the year, and the slow-moving bureaucracy, I expect that, at best, only one-tenth of the proposed outlay will be spent this year, the rest will be spent next year.

“Consider the following:

“1. The stimulus was poorly conceived and done in a rush. Some P72.1 billion have been identified as [the] funding source, but only about P50 billion of new spending items have been identified, some even in broad terms. What happened to the P22 billion? Are they yet to be identified? Or have they been identified but kept in the dark (this is out of character for an administration that is committed to daylight)?

“2. A significant chunk of the economic stimulus package is in the nature of imports, thus perking up other economies, but not the Philippine economy. These include the purchase of additional train cars for MRT (Metro Rail Transit) (P4.5 billion), the rehabilitation of LRT (Light Rail Transit) 1 and 2, (Philippine Atmospheric, Geophysical and Astronomical Services Administration) PAGASA’s radar system (P425 million), the equipment for the various specialty hospitals (Heart Center, Children’s Hospital and Lung Center).

“3. A sizable part of the economic stimulus package is in the nature of political accommodation, not pump-priming. Examples:

“• P750-million assistance to Quezon Province. This will not stimulate the economy since the amount will be paid to the National Power Corp.;

“• P6.5-billion support to local governments: when will they learn to govern with greater autonomy if they can run to the Central government for assistance every time they are faced with a problem. Local government units, after 20 years of decentralization, should be made to face a hard budget constraint;

“• P8.6-billion financial support to the Autonomous Region of Muslim Mindanao. The amount is unspecified;

“• P1.8-billion financial support for the Cordillera People’s Liberation Army and the MNLF; amount is unspecified;

“4. A large amount is in the nature of financial engineering, not job creation. Examples:

“• P400-million infusion as government equity to the Home Guarantee Corp;

“• P1.5 billion for the National Health Insurance (NHI) for the premium subsidies for indigents. NHI is awash with cash.

“5. Some proposed new projects are not urgent and are of doubtful value. Such items should be submitted to Congress for approval through the regular budget process. For example:

“• P625 million for the conduct of a survey of farmers and fisherfolks to be administered by the Department of Budget and Management (DBM), the National Statistics Office, Department of Agriculture and the Department of Agrarian Reform. The contribution of this sector to the economy is less than 20%. The information needed may be derived from existing surveys (the Family Income and Expenditures Survey which is done every three years and the regular quarterly labor survey). What’s the role of DBM is this survey?

“• P1.1 billion for human resource development for BPOs (business process outsourcing). Why is the government subsidizing such a lucrative industry? I think the money is better spent in science high schools all over the country to improve the science aptitude of Filipino students.

“Public spending is not like a faucet that, when opened, discharges water instantaneously. It has to be planned (sometimes on a multi-year basis), budgeted, programmed, executed, monitored and disbursed in an orderly way, observing all the time existing prudential rules and regulations.

“For example, the P6.5-billion assistance to depressed local government units (LGUs) won’t show up as part of the national income accounts until after it had gone through a process. First, the list of LGU beneficiaries has to be prepared. Second, DBM has to release the appropriations (Special Allotment Release Order or SARO) and the cash to each beneficiary LGU. Third, once the SARO is received and the cash deposited to the account of the LGU, the local chief executive (LCE — governor, city mayor or municipal mayor) has to prepare a request for supplemental budget for submission to the local council. Fourth, the local council acts — approve, approve with amendments, disapprove — on the request. Fifth, the LCE has to approve, line-item veto, or disapprove, the budget resolution. Sixth, the supplemental budget has to be submitted to DBM or its regional offices for review. Finally, after review, funds may finally be disbursed. It’s a tedious process and it can’t be done in a few weeks.

“Now on congressional power of the purse. The Constitution allows changes in the budget, during its execution, within each branch of government: the Executive Department, Congress, the Supreme Court and other constitutional offices.

“Under a totalitarian regime, what President Aquino and his men have done is perfectly acceptable. But under a constitutional regime, where there is a perfectly functioning Congress, such massive rearranging of the budget should be sanctioned. Coming up with an entirely new spending package worth P72 billion, roughly 7% of the total budget (net of interest payments), by slicing and dicing the past and present budgets, without prior consultation and authorization from Congress casts serious doubts on whether the government is serious about strengthening existing political institutions.

“The balance of power in the budget process is clearly enshrined in the 1987 Constitution — the President proposes, Congress authorizes, and the Executive Department implements the budget as approved by Congress.

“Legislators, as keepers of the power of the purse, should have been consulted in the design of the P72-billion new spending package. With a benevolent President, this practice could be tolerable. But with a tyrant, it could be calamitous.

“In order to avoid this open disregard of the congressional power of the purse, it’s time to revisit the proposal for the automatic release of the budget as approved by Congress with the accompanying process of impoundment. Paging, Senator TG Guingona.”