No. 119 - 10 July 2006

Blank Check

Normally, a re-enacted budget is interpreted as a good thing; at least spending levels will be limited to the prior year's budget. It turns out that isn't the case at all. A re-enacted 2005 budget will allow President Gloria Macapagal Arroyo to realign funds, particularly from completed projects and interest savings. The Bureau of Treasury recorded a P13.6 billion savings from interest payments in 2005, while Budget Secretary Rolando Andaya Jr. says about P21 billion is now available from non-repeating or completed projects. These funds can be realigned and how they will be used remains at the discretion of the President.

This will be the third time the annual budget will be re-enacted in Arroyo’s term, counting 2001 and 2004, which were both election years. Last year’s budget was approved late in March, when the Senate approved in toto the House version. The figures below are total new appropriations approved by Congress since 2000, excluding automatic appropriations.

Click here to view Budget Slices table

The government has been operating under the 2005 budget for the past six months as a result of a bicameral conference deadlock. Senators want to cut P64 billion from the P1.053 trillion budget approved by the House, but President Arroyo has threatened to veto any cuts.

Operating under the same budget means there will be no additional funds for agencies starving for support; less spending on infrastructure projects and social services; and lesser interest payments and government borrowings.

However, six line items/agencies will benefit under a re-enacted budget because they had higher budgets in 2005: Agrarian Reform, State Universities and Colleges, Department of Trade and Industry, Office of the Press Secretary, Other Executive Offices (which includes the Presidential Commission on Good Government), and the Commission on Audit.

On the other hand, three budget line items, namely, AFP Modernization, Agrarian Reform Fund, and Compensation Adjustment Fund, might not get any support because they had no original allocations in 2005. But since the President has discretion to adjust funds, these items can still get funded.

The Senate’s largest cuts in the proposed 2006 budget were on the Pension and Gratuity Fund intended for the rationalization plan of government’s bureaucracy (P10 billion), Allocations to Local Governments composed of the Kilos Asenso and Kalayaang Barangay Programs (P6.6 billion), Department of Public Works and Highways (P4 billion), and the Department of Transportation and Communications (P2.8 billion).

The senators trimmed the budget to P1.027 trillion (minus P26.4 billion from programmed and P37.7 billion from unprogrammed appropriations) and scrapped the P3 billion Kilos Asenso Support Fund and P3.6 billion Kalayaang Barangay Program Funds because there were no specific project proposals submitted by the Office of the President.

The Kilos Asenso fund was not listed under the items of the Department of Agriculture in the proposed budget, but can be found in the lump-sum allocation for local government units. Several NGOs suspect that these funds will be used for Charter change initiative and build support for the president in the 2007 elections.