Business World, 27 June 2015


Here’s the new tack of the underachieving Aquino III administration: don’t blame my men for the high and increasing underspending in government; blame the bad budget and procurement laws. My men are great; it’s the laws that need fixing.

Mr. Aquino used to blame Gloria Macapagal-Arroyo for all his administration’s misfortunes. But after five years in office, the administration’s “Blame GMA” line has lost traction.

Next, the Aquino administration blamed the Supreme Court for the “chilling effect” of its unanimous decision that the fiscally irresponsible Disbursement Acceleration Program (DAP) is unconstitutional. It fought viciously and hard to have the path-breaking decision reversed. Fortunately, the Supreme Court stood its ground.

The Court reiterated its ruling that the appropriate role for the Executive Department on fiscal matters is to prepare and implement the budget law as authorized by Congress, and not to spend people’s money anyway it pleases.

Now, Mr. Aquino has taken a desperate move to blame his underperformance on some existing budget and procurement laws. He blames the budget laws for the government’s serious underspending. He blames the Procurement Reform Law for the delays in the award of government projects resulting in the deterioration of the country’s public infrastructure.

He blames the Local Government Code for the need to come up with pseudo-budget reform called Bottom-Up Budgeting (BUB).

This new tack of blaming existing laws for the administration’s own failure is dangerous. It creates a convenient excuse for the administration to not be accountable for its own failings.

When a government agency fails to spend what Congress has authorized it to spend, then one way of penalizing it is by reducing its budget in the following year. But that’s unfair for the potential beneficiaries of such a budget. For example, if the budget for the improvement of the MRT was not used to properly maintain the urban transit system, then the riding public suffers. Reducing the MRT’s budget in the ensuing year will only exacerbate the problem; hence, further cuts in the budget is not the solution. The first best solution, it would appear, is to replace the head of the agency.

The same applies to the school-building program. The head of the agency responsible for the program should be accountable for moving the program. If he fails, he loses his job. The wrong solution is to reduce the budget for the school building, in which case potential student beneficiaries would be deprived of the benefits of new classrooms.

The existing budget law, the procurement reform law, and the Local Government Code of 1991 are good laws. They are not perfect, but they are much better than the ones they replaced.

Previous administrations — those of Cory Aquino, Fidel Ramos, Joseph Estrada, and Gloria Macapagal-Arroyo — have lived with them with little complaints. Now, by contrast, Mr. Aquino is blaming them for his poor performance.

The existing budget laws and rules are anchored on sound rules provided for in the Philippine Constitution. They are fiscally sound. Those who live by them do well, while those who ignore them run the risk of spending time behind bars after their term of office.

The Filipino people should be eternally grateful to the present Supreme Court for upholding the budget rules spelled out in the Constitution. The Court clarified, expounded and restated the budget rules for the benefit of those who manage the country’s finances. It set the boundaries and parameters of what present and future Presidents, Congresses, and administrators can and can’t do in managing the financial affairs of government.

On the other hand, it is not clear to the public what specific budget reform measures are being proposed by the Aquino III administration. What problems do the reforms seek to address? Why were these reforms not proposed earlier?

Changing budget rules to circumvent the Supreme Court’s unanimous decisions on the DAP and Priority Development Assistance Fund is ill advised. Changing budget rules to protect President Aquino and Budget Secretary Butch Abad from future lawsuits as authors of DAP is absolutely odious. The cruel truth is that lesser mortals (bureaucrats and local government officials) go to jail for lower misappropriated amounts. DAP, by contrast, is a P140-billion monumental mess. Someone ought to go to jail for it. Selective justice is no justice at all.

The Procurement Reform Act (PRA) is far superior to the many procurement laws before it. It received rave reviews from the World Bank, the Asian Development Bank, the US Agency for International Development, the European Union, and other development partners. It is one of the best procurement reforms in the world, they said.

So it came as no surprise that procurement reform law is so unpopular among corrupt public officials and bureaucrats. It puts a binding check on their rent-seeking ways. Substantial time, money and effort were spent to circumvent the otherwise strict rules on procurement.

So, now on their final year, Mr. Aquino and his men join those who would like to undermine the fiscally responsible rules embodied in the PRA. I don’t know exactly what they want to change. I have yet to see a clear set of proposed amendments to the law. If they are so convinced that the law is bad for good governance, why propose amendments to it just now?

As for BUB, it was first introduced in the national budget three years ago. It started small. Now it has blossomed into a P20.9-billion supplement for local government units (LGUs) this year, and we don’t know how much more it will be in 2016.

The BUB is started as a prioritized budget for poor local government units (LGUs). Now, it has morphed into a large, unfocused budgetary fund for practically all cities and municipalities. Any LGU, whether rich or poor, is now entitled to receive some form of budgetary assistance.

The BUB budget will be administered by 14 national government agencies, with the biggest bulk administered by the Department of the Interior and Local Government at P5.8 billion.

The BUB budget is a raw means of buying the loyalty of local officials. It undermines the intent of an equally good law, the Local Government Code, which was intended to develop the fiscal independence of local governments. The law provides LGUs a huge, formula-based, automatically appropriated and released fund, called the Internal Revenue Allotment (IRA). This year the IRA amounted to a humongous P424 billion!

There is no need for the BUB. With P424 billion and supplemented by the grant of local taxing powers, LGUs are free to chart their own destiny. Local authorities are expected to run their local government unit within their means.

By observing hard-budget constraint, local authorities may choose programs and projects without the intervention of Big Brothers President Aquino and Interior Secretary Mar Roxas. But with BUB, local authorities will continue to be dependent them.

The BUB is an evil ploy to buy the loyalty and support of local officials. It is not transformational; it is political.

On its final year, the present Congress needs to prioritize legislation. Why spend so much time and effort on measures that are yet to be fleshed out? Why not prioritize more important bills such as the Freedom of Information Act, which has passed the Senate but is stalled in the House?

The policy implication of this most recent tack — that is, blaming existing budget and procurement laws for the Aquino administration’s underachievement — is that it creates a convenient way of avoiding accountability. In effect, Mr. Aquino is telling the Filipino people: Don’t blame me for government failures; blame the existing laws. What a joke!