An alternative budget for 2007

AMONG the most important and crucial pieces of legislation that Congress must pass every year is the General Appropriations Act (GAA). More commonly known as the national budget, the GAA embodies the real thrusts and priorities of the government, and is considered the most powerful instrument for alleviating the plight of the people.

For 2007, the Arroyo administration’s proposed budget is anchored on the theme “Focusing on the Imperatives of Growth” primarily geared towards financing the creation of so-called “super regions” as outlined in Arroyo’s state of the nation address in July:

• North Luzon Quadrangle (as agribusiness center in the North)
• Metro Luzon Urban Beltway (as a globally competitive urban, industrial and services center)
• Central Philippines (as tourism center)
• Mindanao (as agribusiness center in the South)
• Cyber Corridor (to boost telecommunications, technology and education in the “super regions”)

Last month, the House of Representatives approved the proposed 2007 national budget amounting to P1.126-trillion. Speaker Jose de Venecia hailed the approval of the country’s first trillion-peso budget as “a prelude to our march towards a balanced budget” by 2010, the time frame set by the Arroyo administration under the Philippine Medium-Term Development Plan.

Both Malacañang and the House leadership claim the budget will reduce the national deficit and finance most of the financial requirements of the government’s social and economic reforms.

With the official transmittal of the General Appropriations bill from the Lower House last week, the initiative to pass its own budget version has now shifted to the Senate. So too are lobbying efforts for the passage of an alternative budget.

Unknown to the public, an alternative budget proposal has been crafted by legislators in collaboration with civil society organizations in response to the proposed 2007 budget, which they have criticized, like the unenacted 2006 proposed budget before it, for not being responsive to the social development needs of the country.

This basic critique of the 2007 budget’s focus on growth alone without balancing it with equity and social development has ushered in a pioneering process to analyze the budget. Involved in the initiative were the House minority and a few congressmen from the majority in partnership with 22 civil society organizations led by University of the Philippines Prof. Leonor Magtolis Briones, former national treasurer under the Estrada administration.

Seeing that social development is not given the level of funding required even for the Millennium Development Goals (MDGs), the NGO-Legislators’ joint committee also endeavored to come up with concrete and reasonable alternatives using the country’s MDG commitments as framework. (For a progress report on the country’s attainment of its MDG targets, click here.)

“We are optimistic that our alternative budget proposal will face a better chance of being accepted and incorporated in the 2007 budget by the Senate,” said Briones, who is also convenor of Social Watch Philippines. Some senators, she said, have expressed willingness to support the realignment of P22.7 billion of the P1.126-trillion budget to augment appropriations for MDG-related activities under the critical sectors of education, health, agriculture, and environment.

A major finding of the initiative is that interest payments for debt service remains the single biggest item at P328.7 billion followed by internal revenue allotments, the second largest item in the budget totaling P197.4 billion. This contradicts what the House has proudly declared about social services receiving the largest allocation — P329 billion — in its approved version of the national budget, with education getting the bulk at P132.9 billion. Even Malacañang’s proclamation that the allocation of P63 billion for debt service — down from P124.9 billion in 2005 — is the lowest in six years conflicts with the House’s own approved figures for interest payments.

The issue involving the automatic appropriation for the IRA, a new feature of the 2007 budget, the group also says, only serves to diminish Congress’s “power of the purse” already limited by the automatic appropriation for interest payments that eat up a third of the budget.

The alternative budget, titled “Imperatives of Real and Equitable Growth: An Alternative Proposal for Financing the Millennium Development Goals in the 2007 Budget,” reduces certain lump-sum appropriations, replacing them with line items for MDG-related goals.

By lump-sum expenditures, these mean those under the exclusive and non-transparent control of the President that are found in the 2007 budget — Special Purpose Funds (SPFs) accounting for 60 percent of the budget. Funds of this nature that are especially vulnerable to Presidential discretion, the group says, are the National Unification Fund, Calamity Fund, Contingent Fund, E-Government Fund, and the P67-billion worth Unprogrammed Funds totaling around P70 billion for next year.

* across the board reduction of intelligence funds has been done during the time of Pres. Estrada

Due to time constraints, the proponents confined their proposals to only six areas — budget policy, education, health, agriculture, environment, and debt.

The alternative budget is proposing an additional P22.7 billion for MDG-related activities for key social services, funding for which is proposed to be taken from half the allocation for Intelligence and Confidential Funds, portions of the Unprogrammed Funds and unreasonably large lump-sum appropriations in the amount of P36 billion, usage of which have been found to be prone to corruption and abuse.

Key features of the budget include the following:

Education

• P6.2-billion increase in the budget of the Department of Education for the creation of teaching positions, school buildings, alternative learning system, teachers’ training, school’s maintenance and other operating expenses (MOOE) and health and nutrition program, among others additional P441 million for scholarships under the Commission on Higher Education

• Additional P983 million for the budget of state universities and colleges to restore their MOOE and Personal Services (PS) to their 2002 level

Health

• P8.5-billion increase in the budget of the Department of Health to fund primary health care, child and maternal survival, disease prevention and control, and reproductive health

Agriculture

• Increasing the Department of Agriculture’s budget to P7.03 billion to augment funding for farm-to-market roads, irrigation repair and rehabilitation, water resources planning and management, soil conservation, maintenance of water impounding systems, conservation and protection of fisheries and aquatic resources

Environment

• Increasing the budget of the Department of Environment and Natural Resources to P15.9 billion to fund the implementation of environmental laws as the Clean Air Act, Clean Water Act, and Solid Waste Management Act

• Increased budget includes funding for coastal clean up, mangrove reforestation, coral reef rehabilitation, community-based forestry program, as well as P4 billion for 432 municipalities, more than half of whose households are without access to clean water and sanitation

Download the contents of the proposed alternative budget:

• Cover
• Table of Contents
• List of Tables
• Executive Summary
• Macroeconomic Assumptions and Sources of Funding
• Alternative Budget for Education
• Alternative Budget for Health
• Alternative Budget for Agriculture
• Alternative Budget for Environment
• An Overview of the Debt Situation under Arroyo

On the debt problem, the legislators and NGOs noted how government’s debt dependency has resulted not only in the country’s increased debt stock but also in its resort to a dangerous debt management strategy akin to a Ponzi Game of borrowing to pay off debts.

While this dependency has yet to manifest as a currency or debt crisis, they point out that the alarming situation is evident in the country’s inability not only to meet the MDGs but also to reduce poverty; provide decent work, good infrastructure and essential social services; undertake thorough, comprehensive and genuine agrarian reform; and develop a vibrant domestic economy.

Saying that the country’s debt policy requires serious study and reconsideration, the NGO-Legislators joint committee has recommended the following measures:

• Continuous implementation of the policy of low interest rate and stable exchange rate to reduce the debt service

• Ensuring close coordination between fiscal and monetary bodies for harmonious policy direction

• Regular reporting of the Bangko Sentral ng Pilipinas and the Department of Finance to Congress on the status of the debt particularly on new loans obtained

• Submission and presentation by the Department of Budget and Management of the complete proposed budget

• Assessment of future indebtedness by reviewing government’s growing contingent liabilities particularly the executive’s policy on providing sovereign guarantees even for private enterprises

The group also proposed that the following provisions be included in the 2007 budget law:

• By virtue of Section 24, Article VI of the Philippine Constitution, all new loans or debts that will be incurred by the National Government, including domestic and foreign debts that will be assumed by the National Government, shall first be approved by the House of Representatives.

• No amount in the General Appropriations Act that are intended to fund programs, projects or activities on education and health can be subject to impoundment by any of the instrumentalities of the Executive Branch, unless the President so requests in writing and is granted permission by both Houses of Congress.

• No appropriations under the 2007 GAA shall be used to pay for the unsecuritized portion of the Marcos and Bataan Nuclear Power Plant debts, instead all payments shall be made in escrow until the court cases are finally resolved.

The NGO-Legislators committee was composed of the following House members:

• Francis G. Escudero, House Minority Leader
• Alan Peter S. Cayetano
• Teofisto L. Guingona III
• Lorenzo R. Tanada III
• Mario Joyo Aguja
• Ana Theresia ‘Risa’ Hontiveros-Baraquel
• Teodoro A. Casiño
• Nereus O. Acosta
• Rolex T. Suplico
• Emmanuel Joel J. Villanueva

and civil society organizations:

• Social Watch Philippines
• Civil Society Network for Education Reforms (E-Net)
• Action for Economic Reforms (AER)
• Global Call to Action Against Poverty (GCAP)
• Medical Action Group (MAG)
• WomanHealth Philippines
• Rice Watch and Action Network (RWAN)
• Philippine Rural Reconstruction Movement (PRRM)
• Freedom from Debt Coalition (FDC)
• Public Services Labor Independent Confederation (PSLink)
• South East Asia Regional Initiatives for Community Empowerment (SEARICE)
• Kaisampalad
• Alliance of Concerned Teachers (ACT)
• Tambuyog
• Youth Against Debt (YAD)