Budgetary indigestion

When you think of it, Congress, which enacts laws, is really only expected to pass one law every year: the General Appropriations Act, or the national budget. This is why when Congress fails to do so, it’s a big deal. Not only does it throw government expenditures into chaos, it represents an abdication of a basic responsibility specifically assigned to Congress, with the House of Representatives’ power of the purse to originate a budget on the principle that it is composed of direct representatives of the public, and the Senate to keep a national perspective and thus a kind of cooperative and adversarial oversight over the House (resulting in disagreements being threshed out in the so-called “Third Chamber,” the joint committee composed of members of both chambers).

A former government official knowledgeable about the budgetary process pointed out something little-known about government budgets. One often hears the phrase “absorptive capacity” thrown around, which is a technical way of describing how government is basically unable to digest large amounts of money in an efficient way. There are many reasons for this, but the former official summarized the main ones as being the bureaucracy’s problems in “project preparation…, but also to procurement, coordination and R[ight] O[f] W[ay] issues.”

Also, “The other source of delay is the huge carry-over obligations and implementation of projects from past years (The World Bank estimates this to be about P3 trillion), which crowd out the current budget.” Which means that “every year, disbursement levels may be high, but not of current budget but of carry-over budgets from underspending from previous years.” So consider what the House proposes as next year’s budget, P4.1 trillion: Before even getting to spending that, there’s practically an equal amount from previous budgets that still have to be digested by the bureaucracy.

Big servings, small mouths, slow peristalsis in the governmental small and large intestines: That, in a nutshell, means government spends much of a current year digesting mouthfuls from previous years’ menus while the current year’s menu sits waiting to be eaten.

But a governmental budgetary item, like food, has a fixed shelf life (usually a year); it has to be declared fit for budgetary consumption by a special measure, otherwise it disappears once expired.

The other day, something interesting happened in the Senate, only briefly reported. Sen. Juan Edgardo Angara informed his colleagues that the Supreme Court has handed down a decision (though the full text hadn’t been released) that a joint resolution of Congress cannot amend a law. Because of this, the previous practice of Congress passing a joint resolution to extend the validity of the annual budget beyond the calendar year for which it was enacted, until a new budget is passed, has to change (a joint resolution with the force of law is easier, and faster, for Congress to pass, compared to an actual law).

Angara, then, wanted to propose legislation to extend the validity of the 2019 General Appropriations Act beyond the calendar year. Not because he felt that with the looming Christmas recess, Congress was running out of time to enact the 2020 General Appropriations Act. He said he expected the Senate to be able to finish the job before year’s end. But it seems the government stands to lose (as of Sept. 30 this year) P261 billion, which would lapse at the end of the current calendar year. He gave the example of some departments that would have to wait until 2021 for items whose budgets would lapse at the end of 2019, if they will only be authorized again in the 2020 budget.

Then again, Congress being what it is, it’s entirely possible that reading between Angara’s lines is a prudent plan to at least keep government chugging along, if Congress again only enacts next year’s budget sometime early next year.

The same former official summarized why this abundance of prudence seems necessary by describing what led to the problems with the 2019 budget, which had such a negative economic effect: The President, “for all his (misplaced) tough words and posturings— has not been aggressive in pushing his budget in Congress and in cracking the whip on the bureaucracy. Under our setup, you cannot leave your economic team (who are politics-averse) and your bureaucracy to the whims of the politicians.”

The result has been what we’ve seen unfolding in items hardly read by the public: the administration’s economic team trimming down the lists of projects it once trumpeted— excised because government can’t do them.