Are budgets really lacking?

When a spate of break-ins and robberies occurred in our neighborhood a few years ago, our neighborhood association asked our barangay officials for increased night patrols by our barangay tanods. They reportedly told our neighborhood leaders off, saying they had no budget for increased patrols. If we wanted more patrols, they said then, we residents would have to raise money to fund the snacks and other expenses of the tanods. Not too long after that, I learned that during the barangay general assembly meeting, the same officials had proudly reported substantial savings in the barangay’s annual budget. For the life of me, how then could they have claimed to have no budget for more patrols?

The story is far from unique to our barangay.  How many times have we heard barangay officials lament that there just isn’t enough budget to do this or do that, to respond to various pressing needs, be they basic social services or vital local infrastructure? And this is not unique to local governments either. The same cop-out tends to be the excuse when national government agencies at various levels are called upon to do more to respond to urgent needs of the populace. Through the years, “not enough budget” has become the mantra of many an agency caught wanting on delivering its mandated services to the Filipino public.

While heading the National Economic and Development Authority in the 1990s, I remember receiving a staff report saying that key government departments would typically have spent only around 70-75 percent of their annual budget as of end-November. They would then go on a mad rush to spend the remainder in the final month of the fiscal year as quickly as they could, lest they be caught with significant savings that would undermine their ability to ask for higher budgets from the Department of Budget and Management later on. December is thus marked by a frenzy of budget realignments.

And guess what the most common expenses the unused budgets are realigned to? Hint: What items are easiest to disburse very quickly? The answer: all sorts of employee allowances and bonuses—productivity bonuses, anniversary bonuses, performance incentive allowances, hazard pay, and other creative allowances and bonuses that the agencies can come up with—to be able to spend the money fast. I heard later that some agencies would deliberately slow down spending on prior budgeted items to be able to make way for such savings that could be easily realigned for employee benefits in December. Does this still happen now? I frankly don’t know; I’ve been out of government for well over a decade now (with no particular desire to return, I hasten to add). But it certainly isn’t far-fetched to think it still does.

Local government units, on the other hand, do not have the same impetus to go on a mad spending rush at the last month of the year. For one thing, savings posted in the previous year have no effect on the level of their following year’s internal revenue allotment, which is their allocated share of the 40 percent of internal revenues mandated by law to be given to LGUs. This is set by fixed allocation and distribution formulas. Nor can LGUs readily realign budget savings for more personnel benefits, as the Local Government Code puts a cap on how much they could spend on staff compensation. This is meant to curtail the tendency of some local officials to turn the LGU into an employment agency for relatives and favored constituents (not that it has stopped them from doing so). One might expect, then, that LGUs shouldn’t be incurring significant surpluses at the end of the year. After all, we commonly hear local officials constantly complain of insufficient budgets for needed services, as I said above. So if the national government has perennially been in deficit, we could expect local governments to be even more cash-strapped, right?

Well, not quite. Data from the Bureau of Local Government Finance (BLGF) show that like my own barangay, the bulk of LGUs in this country perennially reports surpluses. In 2010, provinces posted a collective surplus of P15 billion, while cities saved P23.5 billion and municipalities P16 billion, for a total of P54.5 billion!  (The BLGF website does not have the corresponding data for barangays, but you can bet there are more surpluses coming from there as well.) I first discovered this fact—which is a persistent trend through the years—when a research team I led did a provincial report card on the Millennium Development Goals or MDGs (on poverty reduction) for the United Nations Children’s Fund several years ago. The study sought explanations why certain LGUs were more successful than others in making progress on the MDGs.

We found that the LGUs that allocated more budgets to human welfare and social development (i.e., health, education, nutrition, population management, employment, housing, community development and other social services) made more rapid progress in meeting the MDGs. But the worst performers, who did not put enough money in the above, turned out to have substantial surpluses. It was not because they lacked the money, then; it seems they just didn’t know enough to put their money on the right things. I haven’t even begun to talk of misuse of the budget. And it seems to me that too many local executives have the misplaced notion that posting savings is a mark of good governance.

If Budget Secretary Butch Abad has been faulted for being too stingy with the government budget, I could see where he is coming from. He is, after all, not just secretary of the budget. He is also secretary of management.

* * *

E-mail: [email protected]