15 March 2009
Debt & Public Finance
When Mrs. Gloria Macapagal Arroyo signed into law the P 1.41 trillion 2009 National Government Budget last week after being delayed by almost three months, it exposed not only the government’s penchant for missing important deadlines and targets but also and more importantly, underscored certain ambiguities in the budget process susceptible to abuse, corruption and profit extraction.
We in the Freedom from Debt Coalition (FDC) believe that more than the issue of tardiness and missed deadlines, the late signing of this year’s budget, a practice which had been repeatedly done in the past, is a clear testament of the government’s manipulative scheme to exploit the budget process’ loopholes through forced delays and the exercise of unregulated presidential powers over the budget in order to acquire more funds without a clear mandate.Calibrated Delay and Line Veto
Forced and/or calibrated delay of a new budget measure results in an unnecessary interlude between the lapsing of a previous budget law and the ratification of a new one. Thus, during the “manufactured interval” the government is operating effectively on a reenacted budget which is subject to realignment by the executive. When such practice of reenacting budgets often during the first quarter of the fiscal year is combined with the power of the president to line veto the budget, it results in the accumulation of more funds outside of what is provided by a certain appropriations bill.
By simply exercising her power to line veto, Mrs. Arroyo, after delaying the budget for the first three months of a fiscal year, can change the duration of the budget’s effectivity from the month of January to when the budget is actually signed before it lapses into law or after the publication of the budget law in the Official Gazette.Self-mandated
As a result, not only is Malacañang free to realign a reenacted budget for the three months, it is also able to give itself “mandate” to spend a budget meant for a whole year but will only be spent on the remaining three quarters of the year. Simply put, on top of the full budget, there are additional monies guised as “excess funds” as provided by the reenactment of the budget for the first three months.
Proof of this, in the P1.126 trillion 2007 budget which was signed by Mrs. Arroyo in March 22, 2007, a total of P195.31 billion was released in excess of what was actually originally requested as provided by the 2007 Budget. In the 2008 Budget, Mrs. Arroyo line-vetoed provisions of the budget pertaining to the duration of the appropriations bill effectively revising the start of the effectivity of the budget which should have been from January 1 to March 11, 2008, when the budget was signed.
The same thing can be said of the recently signed 2009 Budget. When Congress ratified this year’s budget, it included a P 50.6 billion economic stimulus fund extracted largely from debt cuts to supposedly help the budget effectively respond to the crisis. Mrs. Arroyo citing the pre-eminence of the automatic debt servicing law reportedly vetoed the debt cuts. Yet, the realignment, which produced the stimulus fund, was not vetoed thus, increasing the budget by P 50 billion more. This does not include the over-release of funds this year as we operated on a reenacted budget for the first three months.
While in principle budget reallocation and additional spending is not bad, as increased state spending is needed especially in times of crisis, this is however contingent to the question of where did and/or where will the money go. However, given the government’s track record, the over-release of funds as a result of exploiting the weakness of the budget process permutated only the pork barrel funds of legislators, election-motivated infrastructure spending, cost overruns and wastage.
Also, the over-release of funds over and above the original budget evokes the constitutionality of such practice. It could have stomped on the spirit of the constitution which mandates that a specific appropriations bill cannot be augmented beyond what is proposed in the budget measure.Weakness of budget process
Moreover, such over-release which would lead to over-spending will point us back to the problem of debt. In order to finance the over-release of funds over and above the projected revenues and budget plan, the government will once again rely on more borrowings, which in turn will result in more debts to pay. Furthermore, it will also increase the deficit as the government is spending way above its original mandate.
Truly, if there is one thing the late signing of the 2009 budget will tell us, the weakness of our budget process, its democratic deficiency and the exercise of fiscal dictatorship by the incumbent president have opened a Pandora-like box which unleashed a tempest of corrupt practices, profit extraction, unnecessary borrowings and illegitimate debt creation.Calls
As such, the practice of calibrated reenactment/delay of the budget, the over-release of funds and the use of unregulated presidential powers over the budget such as line veto must stop. We recommend the following medium and long-term measures to be implemented so as to democratize the budget process and liberate us from unnecessary borrowings and illegitimate debt-creation. We call for the:
a. Legislation of parameters for line-veto and reenactment, pending a more favorable condition for a constitutional amendment striking out these two presidential powers (Article VI, Section 27.2 and Section 25.7, respectively). Specifically, the Congress should put a stop at the presidential practice of vetoing the date of effectivity of the budget and changing the duration of the fiscal mandate for the current year.
b. Overhauling of the Revised Administrative Code of 1987 as instituted by Executive Order 292, which includes the removal of the automatic appropriations for debt service (Section 31.B.) and the presidential powers of impoundment (Section 38) and realignment of savings (Section 39). This will curb the future incidence of unnecessary and undue deficit spending (which results to more debts), specifically that which goes beyond the fiscal mandate granted by the Congress to the president.
However, this is a challenge we address neither to the irredeemable Arroyo government nor to its incorrigible cronies who benefit from such a set-up. Rather, this early, we address it to the aspiring leaders of this country this 2010 who we expect to help develop a new and better public finance architecture.
In the final analysis, unless the entire budget system is overhauled and replaced with one that is impervious to abuse and fiscal dictatorship, we can never have a truly fair and accountable budget for the people. -30-