Staggering price tag

How much will the proposed shift to federalism cost? Estimates by experts vary, but they all agree on one thing: It will be huge.

The creation of a federal government will cost some P55 billion that would have “to come from the pockets of taxpayers,” Dr. Rosario Manasan of the Philippine Institute for Development Studies told a recent Senate hearing on the issue. The amount would go to the salaries of regional governors and vice governors, additional senators per region, additional members of the judiciary and their staff, as well as the operating expenses for the gargantuan new bureaucracy that would result from the creation of 16 plus two federal states.

Under the federalism model proposed by the consultative committee convened by President Duterte, the Senate would have two senators per federal unit, or 36 senators from the current 24. The House of Representatives would expand from the current 250 members to 400.

Among the pluses advocates have cited for this shift in government is that regions would be given more “power of the purse” and greater control over projects they can implement, with each federated state enjoying “a more autonomous and responsive fiscal system.” The federal model, its proponents argue, will narrow the long-standing inequalities across regions of the country, especially the dominance of “imperial Manila” or “imperial Luzon.”

But experts have rung alarm bells over the cost of such a radical overhaul of government, led by the country’s chief economic manager himself,
Socioeconomic Planning Secretary Ernesto Pernia, who warned that federalism could disrupt the Duterte administration’s infrastructure projects and “wreak havoc” on the country’s economy.

Presidential spokesperson Harry Roque belatedly tried to finesse the crisscrossing messaging from the Palace with a bald statement insisting that the shift “would have no adverse effect on the Philippine economy.”

Another person apparently aghast at the projected price tag is Marcos-era finance chief and former prime minister Cesar Virata. Federalism advocates, he said, “should consider that the cost of having a duplicate government” may reach more than P800 billion.

And, while federal states may have more in terms of revenue collections, only the National Capital Region, Calabarzon, Central Luzon and Central Visayas have the capacity to sustain their operations, Virata noted. The other federal regions will continue to be dependent on the national government.

Former chief justice Hilario Davide Jr., a framer of the 1987 Constitution, debunked the argument that federalism would give provinces a more equitable revenue stream from the national government by pointing out that a recent Supreme Court ruling had actually made moot the need to decentralize fiscal resources. The Court’s decision that the “just share” of LGUs’ internal revenue allotment must come from all national taxes—among them collections from import duties and other levies by the Bureau of Customs, and not only from national internal revenue taxes such as those collected by the Bureau of Internal Revenue—should help remedy the supposed problem of LGUs ending up with a pittance of the national budget.

Bernardo Villegas, long dubbed the “prophet of boom” for his consistently upbeat views on the Philippine economy, is gravely downbeat about the federal project, describing it as “a disaster… (considering) the duplication of all expenses at all levels.”

The staggering billions mentioned are only the projected expenses for the inevitable expansion of government. The campaign to win over a skeptical public—62 percent of Filipinos are against the shift, while 69 percent have “little or no knowledge” about federalism, according to surveys—entails additional cost. The Duterte administration said it will set aside P90 million for a nationwide awareness caravan to get more Filipinos aboard the
federalism train.

Is it all worth it—to dangerously deplete the treasury to fund the pipe dream of a viable federal Philippines?