Politics and the national budget (Part III)

Why is there no clear policy on earmarking? Earmarks are provisions of law or orders which specifies the appropriation of approved funds. There were several attempts in the past to employ some earmarking but most, if not all, failed at the proposal stage. Some are still pending at the committee levels in the respective chambers.

Recently talked about are taxation on text messaging and the road user’s tax. Taxation on text messaging has been a popular suggestion given that there are millions of messages sent everyday. Assuming that there are one million text messages sent per day (which is in my opinion a very conservative assumption), with 10 centavos worth of tax per message will yield to 100,000 pesos of collection per day. In a year, we can generate an approximate of 36.5 million pesos which can be automatically appropriated to education, as proposed.

The same principle is being suggested in terms of the road user’s tax. The collection from car registrations of about 7.5 centavos should be rechanneled and translated to more productive and useful services. Why not use the fund for the rehabilitation of major highways and roads? This will be separate from the annual appropriation for public works.

But there are oppositions to these various suggestions. Why? One big factor is the clash of interests. When a person is taxed, what could have been used for personal expenses will be diverted to paying of tax. This idea makes additional taxation a burden rather than a means to ameliorate the existing condition. Politicians who are vying for re-election would always sympathize with the concerns of his constituency, and thus, it is less likely that these “additional burdens” will be enacted.

However, the taxes are already incorporated. The reapportionment is not the burden of the consumer but of the provider as in the case of taxation on text messaging. There goes another clash. Politicians wouldn’t want to also burden these corporations as they could be potential sponsors come next elections.

Finally, the last clash would be with the opposition on the policy itself by some interest groups. As we are in a democracy, interest groups are permitted to voice out their views on issues affecting them. In this case, there are groups which are opposing tax on text messages. Further, they claim that education should be funded by the state and not by the mobile phone users. Politicians who want to be popular in these groups would support the claims. The issue dies and so as the proposal.

Earmarking could be good as it is good. However, when politicians try to make a compromise between the policy and the people, they usually turn out to be populist and do what is popular than what is, in my opinion, right.

Why do we use line-item budgeting? Line-item and single-year budgeting are siblings, both causing problems in our country. If single-year budget makes extortion possible, line-item budget yields dependency.

How? Line-item budget is a budget which specifies the items for appropriation. Identified are the specific projects, for example construction of a building for this purpose in this place. But the disbursement of funds is not automatic. Projects may be specified and identified but the last say on the release of fund will come from the executive department, no less than the President.

The dependency is between the local government and the President. In order to get the appropriations, one must satisfy the President; that is, he must be an ally. Notice that some of the districts with congressmen who voted against to impeach the President have no fund. Same goes with the senators in the opposition. It is funny, however, that these senators are the crafters of the budget and yet they receive nothing.

The president’s discretionary fund, PDF, or pork barrel as most would know, by its nomenclature, is dependent on the discretion of the president. So friends may get more, enemies not even a centavo on their name (or district). And the pool of money under PDF grows whenever the budget is re-enacted.

The major downside of line-item budgeting is that when a budget is re-enacted, some of the projects in the previous budget are finished. The amount appropriated for the finished projects is diverted to the PDF. It means more funds for the President to manage, and more friends for the administration.

[to be continued…]

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Politics and the national budget (Part III)

6 thoughts on “Politics and the national budget (Part III)

  1. Gorgeous says:

    it all boils down to our legislators who makes the laws as hazy as possible to be able to go around it…kakainis..pero its our politics…
    wish ko lang na sana maraming robert go sa congress…and sana si robert go ay di mabago pagdating nya sa congress πŸ™‚

  2. Ricky says:

    Hi Robert, Ang haba ng article mo on budgeting, pointing out the weakness of or problem created by the existing system.

    As far as I know, hindi naman talaga maalis ang line item budgeting. It’s part of the two-directional approach in national budgeting, top-down and bottom-up. Even organizations use line item budgeting. The Philippines (DBM) theoretically says it practices zero-based budgeting (ZBB).

    Any of the existing budgeting systems has a weakness or two. Any system’s failure, however, is not brought about by that system but by the people who use it. Ang budgeting system/structure/institution natin ay isa lamang modelo ng kung paano tayo magtrabaho, mag-prioritize at tingnan kung ano ang reality ng ating pamamahala. Sa totoo lang, nawawala ang LIB na iyan kapag may gustong gawin ang Presidente pero wala sa budget.

    Ang budget ay plano. Ang unique lang sa budget e naka-express ang plano in monetary terms. Ibig sabihin nito, maraming bagay ang nawawala sa picture dahil sa naging pera ang picture ng pagpaplano.

    At talaga namang magkaiba ang budgeting sa accounting. Ang budgeting sa simula. Ang accounting, during and after a process (auditing).

    Budgeting will also always be a political process. Why? Because it depends on who defines what “development” is. It is a reality. Kahit nga sa UP nangyayari iyan, di ba?

    Ang problema sa government at budgeting, isa ang pinaplano, iba ang nangyayari. Iba ang nagpo-propose, iba ang nag-aapprove, iba ang nag-eevaluate ng pinag-gastusan. Ang check and balance, hindi totoong nangyayari dahil parehong nasa executive ang planner (DBM at NEDA, DOF at implementing agencies) at evaluator (COA), pero hindi naman iniintindi ang bunga ng evaluation reports.

    The budget is inflexible – Hindi ako maka-agree dito dahil lumobo ng lumobo ang budget ng gobyerno–inflexible ba ito? Bukod pa doon, may standing budget ang bansa at may contingency din ito. Tapos may pork barrel pa…. Sino ang gustong may pork barrel… members ng congress. (of course, may sariling baboy si GMA in the names of contingency and intelligence funds, among others). Siguro may sinabi si Professor Magno na hindi ko alam. After all, communication major ako.

    Single-year budget – Tama…. Nung nag-OJT ako sa DBM, isa ito sa mga proposals na nakita ko, na ginagawa ng ibang bansa (like UK, if I am not mistaken). But this may actually restrict your ability to respond to changes. The MTDP (Medium term Development Plan) should be enough. Ang important naman e iyong REAL and SOCIAL objectives. Kung may maganda ngang plano (at budget) pero ang nag-iiimplement gahaman, wala rin.

    No clear policy on earmarking – sabi nga ng nauna… “our legislators who makes the laws as hazy as possible to be able to go around it.” Pero bukod pa doon, nung ginawa ang fund source, iba siguro ang situation. It’s not only that the earmarking needs to be implemented more strictly, but there is a need for a more socially relevant and effective development planning.

    Yun lang naman ay isang simple kong pagkakaintindi sa tinatawag na planning, programming and budgeting system (PPBS) ng gobyerno.

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