• Why is spending so difficult?

    3
    Ben D. Kritz

    Ben D. Kritz

    THE Department of Budget and Management (DBM) over the weekend released a report on government spending performance in 2015, a disclosure that was a bit surprising.

    The information in it was not, of course; everyone knew that government spending last year fell far short of its goal.

    The timing of the Aquino Administration’s disclosure of it—complete with rather stark figures to back up the confession—seemed more than a little strange, however, coming as it does just weeks before the election.

    One cannot imagine that Mar Roxas, whose entire campaign schtick is to tell everyone he intends to do everything according to the Aquino blueprint, feels he is being helped at all by the government drawing public attention to its failures.

    It’s likely that Roxas and his operators in Malacañang don’t see it that way, of course, since the format in which the spending details were presented in typical fashion tried to accentuate the positive; in this case, the several new budget performance measures that are being put in place to improve efficiency, the subtext being the country should elect Mr. Roxas to ensure that those “reforms” continue.

    The Aquino Administration has had six tries at creating a budget program and carrying it out, and five of those have failed – for 2015, government spending fell P328.3 billion or 12.8 percent short of the budget target. The only subtext any stakeholder is going to hear in a description of “reforms,” is that the management is no closer now to having a clue about being able to manage spending efficiently than it was five years ago.

    The process to which the ‘daang matuwid’ methodology, whatever it’s actually supposed to be, has been unsuccessfully applied is not rocket science. The government proposes a budget. The Legislature, after making a few changes to it, approves the budget, which makes it a law. The government then requests the Treasury to provide the funds according to the specifications in the now legally-binding budget plan. The agencies receiving the funds then spend the funds to carry out their programs and projects. Because not spending money as directed by the budget is technically a violation of the law, the budget provides instructions for what to do if the plan cannot for some reason be followed.

    The whole process really is that simple, but this government has simply never been able to come to grips with it. Following the rules for the handling of unused funds didn’t work. DAP was a creatively idiotic interpretation of those rules, and that didn’t work, either. Going back to following the rules after the Supreme Court told them to stop the DAP and not do it again has not resulted in any noticeable improvement, as the 2015 figures show. The lost economic opportunity is not just the P328 billion not applied to projects, programs, and other bureaucratic functions, it also includes all the second- and third-hand consumption and investment that would have followed as a result.

    This Administration — as well as its predecessors, to be fair — has constantly argued that it must have spending flexibility, the kind the existing provisions that allow for a certain level of discretionary reallocation provide, as opposed to what is probably a more sensible alternative, requiring the creation of a supplementary budget. Yet given the flexibility, the government has consistently failed to perform. If missing the spending target happens in the first year of a new government, the problem very well may be a bad system that needs fixed with more or new rules. Five years in, it’s obvious the problem is not the system but the operator.

    Selling a continuation of that is obviously not working for Mar Roxas, even though several business groups and at least one of the big three ratings firms have suggested they would still prefer that to the fiscal wild card represented by someone like Rod Duterte. What they would prefer even more is a government spending program that actually works, so that less of the budget goes to waste: A program that is simpler and allows a lot less discretion in mid-process, which in turn compels the government to develop a more precise, forward-looking budget at the outset. The candidate who can sell that—as well as convince us he or she is capable of pulling it off—is probably the one the country should elect.

    ben.kritz@manilatimes.net

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    3 Comments

    1. In a budgeting perspective, it would have been easier to manage if the government have several long-term mega-projects that would act as sort of an annual sinking fund (sinking here does not connote as some loss due to corruption, but rather as annual expense cost). This way, DBM don’t have to produce,create & manipulate a very detailed but complicated annual budgeting programs for the smallest barangay up to national level. And how will DBM monitor and track those mega-projects? Simple, really, all DBM have to do is strictly impose that each project to have a programme or project management office (preferably independent organization/companies with specialized program/project management consultancy practices typically employed by global conglomerates) that will manage or as 3rd party/independent checker/verifier during projects’ whole life: conception and initiation, planning, execution, performance/monitoring, project close-out, perhaps even asset management.
      And what would be those long-term mega-projects? Go creative:
      1.) Long-haul cargo & passenger regional rail.
      2.) City-rails (not just on Metro Manila, but also on major cities outside Imperial Manila)
      3.) Mega-bridges linking major islands/provinces with substantial economic activities (eg. Cebu-Negros-Panay, Batangas-Mindoro).
      4.) Nation-wide climate-change-related risk reduction and mitigation projects (eg. flood control & management on major rivers and flood plains; coastal defence projects)
      ..etc.

    2. Red tapes in all the government branches and the complicated procedures in dealing with any government office are one of the reasons we cannot really move on as a nation.