A play for the budget

“What’s the play?” In Filipino-speak, “Ano ang laro?” It means there’s a lot of double-speak, so to try to understand, one will have to analyze actions versus words and ask the question heavily laden with negative connotations — what’s the hidden game plan?
In a business corporation, the question is not asked, because vision and mission statements are clear to all, as the management team stops to ponder: where are we now and where do we want to be — in a year, in three years, and in five years? They sweat through the SWOT — analyzing strengths, weaknesses (internal forces), opportunities and threats (external forces) to maximize resources towards the achievement of goals (strategic planning) and objectives (tactical planning).
When a business plans, there is only one “play” or motive for all in the team — what’s the bottom line going to look like? And the operating budget is based on the plans and programs for the year (as well as current portion of the longer-term). It would be a veritable projected Income Statement for the yearend. The capital budget (CAPEX) would be recorded on the cash flow statement under “investing activities” since it would be a cash outlay for that accounting period.
Wish that a government had as simple a planning and budgeting template as a business corporation. Yes, there is the Department of Budget and Management (DBM) whose “mission is to lead public expenditure management to ensure the equitable, prudent, transparent and accountable allocation and use of public funds to improve the quality of life of each and every Filipino” (https://www.dbm.gov.ph). The DBM formulates the overall resource application strategy for macro-economic policy, prepares the medium-term expenditure plan and formulates the annual national budget for submission and approval of the President before presentation to the Legislature for enactment into law.
Budget Secretary Benjamin Diokno defined the macroeconomic assumptions that were the basis for next year’s budget, stressing that the government will continue to adopt an expansionary fiscal policy towards a growth target of 7% to 8% from 2018 to 2022 (bworldonline July 24). He announced the shift to “Annual Cash-Based Appropriations” wherein obligations or contracts for programs, activities, and projects entered into are limited to those that can be fully delivered by the end of the fiscal year. Thus the P3.757 trillion 2019 national budget (19.3% of projected gross domestic product) is the first-ever cash-based budget, approved “as presented” by President Rodrigo Duterte on July 23, the day of his State of the Nation Address (SONA).
“For the longest time, agencies’ budgets have followed two-year, ‘obligation-based budgeting,’ which disburses payments as obligations or commitments that may not necessarily be delivered within the same year. The problem with this setup is that agencies tend to enter into contracts before the year ends — just so they can commit to projects — even if they will not be completed within the same year. This also means that inspection, verification, and payment for the said projects are done even after the fiscal year when the contracts were awarded,” Diokno said at his media briefing (rappler.com Aug. 15). Cash-basis would give the government immediate claim for economic achievements and impact on GDP — good fiscal “photo-ops” for yearend.
But when the 2019 Budget went to the House of Representatives, members of both the majority and minority blocs opposed the cash-based budget. Committee on appropriations Chair Karlo Nograles argued that the new system, which would only allot resources for projects that could be initiated and finished within the year (compared to two years under the obligations-based form), will greatly lower capital or infrastructure spending of government agencies (CNN Philippines, Aug. 11). “The House proposal is that we increase the deficit, which, of course, is not acceptable to us,” Diokno said, adding that a bigger budget deficit may be unmanageable and posed a fiscal risk (inquirer.net, Aug. 15). “Maybe during election year, I’m speculating they (congressmen) want more projects in their districts. That’s natural if you are a congressman and you want to impress your constituents so you need more projects,” the Budget chief said (gmanewsonline, Aug. 15).
“We’re not talking of concessions … this is not a negotiation,” an obviously piqued Diokno said at a media forum. “If the House would not stand down, we are ready for a reenacted budget,” he added (Ibid.). “You know the present Speaker now, GMA (Gloria Macapagal Arroyo), on the nine and a half years that she governed, she had three reenacted budgets. If you remember that. So she is the master of the reenacted budget. No, we won’t abuse the power of the executive,” Diokno threatened (Manila Times, Aug. 15). Passing a reenacted budget means the current budget will be reused for the following year. This junks the planning efforts and allows executive discretion in the reallocation of funds, giving much room for corruption.
Senator Panfilo Lacson fueled the controversy even more by saying that there is some P130-billion pork barrel for some lawmakers hidden in the 2019 budget. He said “this could be the reason the House of Representatives is strongly opposing the proposed cash-based system for the 2019 national budget. This requires spending funds within the budget year. Lawmakers are in favor of an obligation-based budget, which can extend funding for up to two years,” versus only a one-year “commission” (CNN Philippines, Aug. 17).
Could alleged “opportunities” peculiar to each possibly be the difference why the cash-based budget is acceptable in the Senate, and not in the House of Representatives, some ask?
“We are supporting the DBM’s budget proposal,” Senate President Tito Sotto announced (CNN Philippines, Aug. 15). The usual voices in the Senate critical of Duterte are so easily supporting his budget (except for the extension period of three months-grace after the end of fiscal year to six months-grace for projects started near the end of the year and straddling the next year). Of course, to the Senators’ credit — the World Bank has endorsed the cash-based budget, in tandem with accrual reporting of financial standing, as the more realistic compliance and performance formats used in developing economies (http://www1.worldbank.org/publicsector).
But it was President Duterte’s spokesman Harry Roque who planted the thought, for whatever sympathy to be gained by his unusually detached boss, perhaps: “Let’s just say with the budget being rejected by Congress, we don’t know what ties we [will] have with the House now. We’d like to think that they continue to be close allies of the President, but apparently the change in leadership (Arroyo, presidential daughter Sara’s political ally?) has also brought in [a] different kind of relationship,” Roque said (Manila Times, Aug. 15).
Really, now. “Ano kaya ang laro? Wonder what’s the play?”
 
Amelia H. C. Ylagan is a Doctor of Business Administration from the University of the Philippines.
ahcylagan@yahoo.com