PhilHealth’s cash sweep is just the tip of the iceberg

At the recent Senate hearing conducted by the Committee on Health and Demography, Department of Finance (DoF) Secretary Ralph Recto once again justified the transfer of PhilHealth and other Government-Owned or -Controlled Corporation (GOCC) funds as a measure that will enable the Marcos administration to ramp up its revenue and growth targets for the year. He added that the “Unprogrammed Appropriations” is neither a discretionary nor confidential fund, and that the excess GOCC funds will only be used to finance priority programs and projects listed under UA — no more, no less.

The cash sweep of unused GOCC funds to finance the Unprogrammed Appropriations has been explicitly framed by the Marcos administration as fiscal prudence. The end justifies the means. The underlying message is that taxpayers should trust the Marcos administration and its allies in Congress to have the best interest of Filipinos in mind. Let the DoF carry out its mandate. They are, after all, just following a directive of Congress. The planned transfer of the P90-billion PhilHealth funds and other GOCC funds to the National Treasury is legal. The tax-paying public should not bother too much about the technicalities of the Unprogrammed Appropriations.

Much has already been said about PhilHealth’s P90-billion fund transfer. In the last few weeks, health reform advocates have boldly opposed the implementation of DoF Memorandum Circular No. 003-2024. The PhilHealth fund transfer is just the tip of the iceberg in relation to the larger issue of fiscal transparency and accountability under the current administration.

How exactly did the directive to sweep the cash of GOCCs come about? What does it have to do with the Unprogrammed Appropriations? How did the government end up with P731.4 billion in Unprogrammed Appropriations? Who called the shots?

The national budget tells a different story than what the current administration would like us to believe. The Bicameral Conference Committee or Bicam (or what’s come to be known as “the third house”) that finalized the 2024 General Appropriations Act is at the center of this fiscal controversy. While guns are pointed at the DoF for implementing the special provision of the Unprogrammed Appropriations, the Bicam Chairs seem to have gone scot-free, unnamed, and unscathed even as health advocates have filed a case in the Supreme Court. The Bicam is primarily accountable for the authorizing of the sweep of GOCC funds. What was the motivation?

Contrary to DoF’s narrative, the goal is not to maximize the government’s fiscal space nor to accelerate growth via government spending. If that was the case, then the Bicam should have kept a majority of the “unprogrammed” items under the Programmed Appropriations. The national budget consists of three types of appropriations: a.) programmed appropriations which have guaranteed cash cover, b.) unprogrammed appropriations which are stand-by authority to spend, and c.) automatic appropriations for which are provided funds for specific purposes authorized by other laws.

The funding for strategic, big-ticket, and priority programs and projects of government is typically lodged in the Programmed Appropriations precisely because they are factored in the fiscal program. Budget priorities need guaranteed cash cover in order to be implemented. There is no wisdom in putting priority programs and projects under the Unprogrammed Appropriations. By its very nature, Unprogrammed Appropriations are just stand-by appropriations, which can only be tapped if there are new or excess revenues. This is consistent with the constitutional requirement for passing a supplemental budget and has historically been quite difficult to activate. The Bicam, however, found a way to circumvent that by adding unutilized GOCC funds as a source of financing for the bloated Unprogrammed Appropriations.

The bloated “Unprogrammed Appropriations” is a consequence of accommodating pork in the programmed appropriations. Here’s what the Bicam did in the last stretch of budget legislation: The Bicam members deprioritized many programs, activities, and projects by removing them from the programmed appropriations and transferring them into the Unprogrammed Appropriations. These included hundreds of billions of funds for COVID-19 benefits of healthcare workers, the Department of Transportation’s rail program, basic and tertiary education, social protection, military pension, compensation for Marawi siege victims, the prior year’s Local Government Unit (LGU) shares, payment of right-of-way, and many other programs.

So why did the Bicam move priority projects into the Unprogrammed Appropriations? It is to accommodate “pork” in the 2024 national budget and use the Unprogrammed Appropriations as a way to conceal the pork’s magnitude. This is a practice that the Bicam has perfected since the enactment of the 2022 national budget. With hundreds of billions freed up in the programmed appropriations, the Bicam then inserted partisan and pet projects of congressional allies into the programmed appropriations.

The majority of these patronage-driven projects were inserted in the Department of Public Works and Highways (DPWH) budget under two major programs: the Convergence Program which contains local infrastructure projects, and the Flood Control Program. The Flood Control Program grew by a whopping P29 billion, from P215 billion in the proposed version to P245 billion in the enacted version.

With “pork” accommodated in the programmed appropriations, the Bicam had to find a way to finance the Unprogrammed Appropriations, which ballooned from P282 billion to P731 billion. P731 billion worth of Unprogrammed Appropriations would be very difficult to finance from new or excess revenues and/or foreign loans. With elections around the corner, the Bicam knows it could not leave the priority programs and projects of the administration, now placed under the Unprogrammed Appropriations, unfunded.

Thus, it included unutilized GOCC funds as an additional source of financing by way of the special provision of the Unprogrammed Appropriations in the 2024 national budget. This is not the first time the Bicam did this. Rep. Edcel Lagman had already previously alleged that this was a premeditated move by the House Committee on Appropriations Chair Zaldy Co by recommending House Bill No. 915, “An Act Providing Additional Criterion for the Availment of Unprogrammed Appropriations, amending for the Purpose the 2023 General Appropriations Act.” The bill amending the 2023 national budget was railroaded by the House of Representatives in the midst of the deliberations for the 2024 national budget.

Aside from identifying GOCC funds as an additional source of financing, the Bicam inserted a clause in the special provision of the 2024 Unprogrammed Appropriations that reads: “Notwithstanding the foregoing, the order or priority may be MODIFIED to support the funding or urgent or implement-ready projects which are: 1.) based on commitments to international/multilateral organizations or 2.) in furtherance of (i) the Philippine Development Plan, (ii) the Medium-Term Fiscal Framework and (iii) the 8-Point Socio-Economic Agenda and (iv) those that may be identified as key budget priorities.” By expanding the sources of financing to include GOCC funds and its purposes, the “Unprogrammed Appropriations” have morphed into a discretionary fund — like the President’s Contingent Fund.

Secretary Recto’s assertion that the Unprogrammed Appropriations can only fund specific programs and projects listed under it is blatantly wrong and misleading. While there is indeed a list of projects, the special provision does not preclude the Executive branch from using it like a discretionary fund for as long as there is available cash from the GOCCs. The amendments to the Unprogrammed Appropriations ensured that the national budget would favor not only the Speaker and his allies in Congress but also the President.

The whole scheme would probably have gone unnoticed had the Bicam swept less controversial GOCC funds instead of PhilHealth’s initial P20 billion. The public would remain in the dark about the lengths that the Bicam is willing to go to satisfy greed, an act Congress already previously authorized by amending the 2023 national budget.

But no matter how many times Secretary Recto or anyone from the current administration insists that the transfer of GOCC funds is a fiscally prudent measure, remember that this was all a consequence of the excesses of the Bicam. Let us not be deceived. That is not fiscal discipline.

Zy-Za Nadine Suzara is an independent public budget analyst and lead convenor of the People’s Budget Coalition. She previously served in the Department of Budget and Management.