Charter must spell out regions’ financial responsibilities — DoF

THE DEPARTMENT of Finance (DoF) wants the draft federal constitution to compel federated regions to practice fiscal discipline, and clearly identify spending responsibilities between the central government and regional authorities.
The department has estimated that a federal government would incur a budget deficit of 6.7% of gross domestic product (GDP), which is equivalent to about P1.2 trillion.
“Focusing on the fiscal provisions only, we said it already there should be clarity with respect to who pays for what… there’s an enumeration of powers exclusively belonging to federated regions,” Finance Undersecretary Bayani H. Agabin told reporters yesterday.
The department would like a statement “to the effect if these powers belong to you, then you have to be able to spend for that. Then it will be good to have a statement there that everyone should follow fiscal discipline. We don’t want federal regions to be borrowing unnecessarily. Like what’s happening in the [United] States, some states will be going bankrupt,” he added.
“When you have a constitution, you have to balance it between being too specific and providing enough leeway so you are able to adjust to present-day realities. I think there are some principles that are quite universal. Some regions talk of fiscal gaps. Then we would like to see statements to address these gaps,” he added.
Finance Undersecretary Gil S. Beltran meanwhile said that the draft constitution has pre-determined the revenue sources, without knowing what they will finance.
He said that the 50% revenue share of federated governments would amount to P744.9 billion, along with P251.1 billion in capital transfers and the 3% equalization fund worth P131 billion.
“That’s additional P1.2 trillion deficit if we follow what we think they are talking about. If we devolve expenditures, it would be possible to balance it out,” Mr. Beltran said while noting that they “don’t know” which expenditure responsibilities will be devolved. “That’s the question mark.”
Mr. Beltran also noted that it does not include the 5% block grant for the Bangsamoro Autonomous Region, as well a similar grant for the Cordillera Administrative Region being proposed, which would cost P100 billion each.
Mr. Beltran noted that keeping the fiscal deficit at the 3% level deemed prudent for spending would mean cutting the federal government’s expenditure program by P560 billion, which is about 70% of its infrastructure program.
Mr. Agabin noted that the draft constitution only provides for the federal government’s exclusive power over “inter-regional infrastructure and public utilities. “But some of our ‘Build, Build, Build’ projects are not inter-regional.”
A 6.7% fiscal deficit would be the highest in history, according to Mr. Beltran. Finance Secretary Carlos G. Dominguez III has said that this will push up interest rates and downgrade the country’s current investment-grade credit ratings.
Sought for comment, Consultative Committee spokesperson Conrado I. Generoso said in a mobile phone message yesterday that the spending responsibilities are “clearly defined in the assignment of powers.”
Mr. Generoso noted for instance spending delineations in matters like national security, foreign affairs, foreign trade, customs, immigration, fiscal and monetary policy, among others.
“The federal government and the regional governments shall ensure that taxation shall be uniform, equitable, and progressive. No double taxation shall be allowed,” Mr. Generoso said noting that the draft constitution also provides for the “Federal Intergovernmental Commission (FIGC).”
“DoF and DBM (Department of Budget and Management) are members of the FIGC. Among its powers are to ascertain the effectiveness and efficiency of the fiscal administration and management of the regional governments; to assess the sufficiency of the regional governments in raising funds to determine and reduce causes of financial imbalance,” said Mr. Generoso.
“These provisions ensure that the regional governments shall exercise fiscal prudence. Also, since fiscal and monetary policy are exclusive to the federal government, all regional governments will have to comply with federal fiscal and monetary policy,” he added.
Mr. Agabin also said that it was unfair for the Consultative Committee tasked with drafting a new constitution to say that the DoF did not study the proposal and also called for the firing of key officials for allegedly opposing federalism, as they “only saw a copy of the draft a day before it was presented to the President.”
“There was no opportunity for us to give our comments. But curiously, if they wanted to engage us, the fiscal foundations only cover barely two pages out of the 102 pages. It could have been easy for us to give our comments based on that,” he said. — Elijah Joseph C. Tubayan