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1Congressional PoliCy and Budget researCh dePartment

2019 Budget Briefer

Tracing The changes in allocaTions Under The 2019 cash-Based BUdgeT*

The President has submitted to Congress a cash-based budget of P3,757 billion for the fiscal year (FY) 2019. This is about P10 billion lower compared with the obligation-based budget of P3,767 billion this year (2018). According to the Department of Budget and Management (DBM), it is not entirely appropriate to compare the 2019 levels with the previous years—as it is like comparing “apples and oranges”. While this paper presents variances, the intention is to be able to identify the agencies and expense class that particularly increased despite the shift to a cash-based budgeting system.

Cash-Based Budgeting

The past few years have, in fact, paved the way for the shift to an annual cash-based appropriation. As early as FY 2013, the General Provision on “Availability of Appropriations” states that all appropriations shall be available for release and obligation until the end of the fiscal year. Subsequently, Joint Resolution No. 01 extended the validity of appropriations under the Calamity Fund and Quick Response Fund, including realignments sourced from savings and the unobligated allotments and unreleased appropriations for Maintenance and Other Operating Expenses (MOOE) and Capital Outlays (CO) for FY 2013. Such JR was passed after the country was affected by several natural and man-made disasters and calamities.

In FYs 2014-2015, the President placed on conditional implementation the extended validity of appropriations for MOOE and CO to two years, and encouraged the agencies to obligate all appropriations within the year. Similarly, the two-year validity of the 2017 appropriations was placed on conditional implementation, and the President directed all agency heads to ensure obligation of all PAPs not later than 31 December of the same year. Meanwhile, the 2018 General Appropriations Act (GAA) provides for a one-year validity of appropriations.

It may be noted though that under an obligation-based budget, the one-year validity of appropriations only requires the agency to be able to contract out within the FY the projects/

* This paper was prepared by Pamela Diaz-Manalo with the research assistance of Arlene Lopez-Tuazon, and the overall guidance of Director General Romulo E.M. Miral, Jr., PhD. The views, perspectives, and interpretations in this Budget Briefer do not necessarily reflect the positions of the House of Representatives as an institution or its individual members. A copy of this publication will be made available at the CPBRD’s website: cpbrd.congress.gov.ph.

House of RepresentativesSeptember 2018 No. 2018-04

Congressional Policy and Budget Research DepartmentHouse of Representatives

2 Tracing The changes in allocaTions Under The 2019 cash-Based BUdgeT

TaBle 1Top 10 deparTmenTs wiTh Bigger allocaTions, 2019

(amoUnTs in Billion pesos)

programs for which appropriations have been made. This essentially commits the government to pay at a future date (even beyond the FY) once the procured goods and services are actually delivered by the suppliers or contractors.

On the other hand, the cash-based budget pushes the reform further by requiring agencies not only to obligate or incur commitments for procured goods and services, but to ensure that these are delivered or implemented, inspected, and ideally settled with the suppliers/contractors within the fiscal year. An Extended Payment Period (EPP) though has been set to accommodate settlements within the next three (3) months following the end of the FY, provided goods/services for which the payments will be made have already been delivered or implemented.

Agencies with Higher Allocations

Under a cash-based budgeting system where agencies are required to bid out, implement and pay for their respective programs, activities and projects (PAPs) within the fiscal year, the agency budgets are generally expected to be lower coming from an obligation-based budget. To meet the requirements of cash-based budgeting as pointed out earlier, only implementation-ready programs and projects are likely to be included in the proposed agency budget. However, a comparison of the 2018 level (obligation-based) and the 2019 proposed cash-based level shows that there are agencies with budget allocations that actually increased. Table 1 presents the top 10 departments with higher allocations in 2019 despite the shift to cash-based budget.

Source of basic data: BESF 2019

Particulars 2018 2019 Increase/(Decrease)

Obligation-Based

Cash-Based Amount %

DILG 172.4 225.6 53.3 30.9

DND 150.0 183.4 33.4 22.3

DOTr 68.1 76.1 8.0 11.7

DFA 20.5 27.5 7.0 34.4

The Judiciary 35.4 37.3 2.0 5.6

DOLE 11.5 13.4 1.9 16.4

DOJ 19.7 21.4 1.7 8.6

DBM 2.2 3.6 1.5 66.5

OP 6.1 6.8 0.8 12.4

OEO 77.5 78.2 0.6 0.8

In nominal terms, the Department of Interior and Local Government (DILG) and the Department of National Defense (DND) posted the highest increments even with the shift to a cash-based budget system. The proposed allocation for DILG in 2019 amounts to P225.6 billion, which is P53.3 billion more than its 2018 obligation-based budget of P172.4 billion. All DILG units/



agencies posted increases for 2019, but the budget growth can be traced primarily to the Philippine National Police (PNP). A total of P172.6 billion has been set aside for the PNP in 2019. This is P40 billion higher than its current year’s budget of P132.6 billion.

Increments to the following DILG agencies are also notable considering the size of their respective budgets are a lot smaller than the PNP: (1) Bureau of Fire Protection (up by P7.2 billion from P15.8 billion), (2) Bureau of Jail Management and Penology (up by P4.3 billion from P14.5 billion), and (3) Office of the Secretary (up by P1.3 billion from P5.7 billion).

Meanwhile, the DND is expected to receive in 2019 a net increment of P33.4 billion or a total budget of P183.4 billion. Allocations for the three Major Commands will be higher in 2019 as follows: (1) Philippine Army (from P64 billion to P89 billion), (2) Philippine Navy (from P21.3 billion to P27.8 billion), and (3) Philippine Air Force (from P19.8 billion to 24.6 billion). On the other hand, General Headquarters, Armed Forces of the Philippines (AFP) and AFP-Wide Service Support Units (GHQ/AFPWSSUs) will get a budget (P36.4 billion) that is lower by almost P2.7 billion than in 2018.

A closer look at the breakdown of the department budgets by agency would show that the increase, such as in the case of the Department of Transportation (DOTr), Department of Foreign Affairs (DFA), Department of Labor and Employment (DOLE) and the Department of Budget and Management (DBM), can be traced to the Office of the Secretary (OSEC). Except for DOLE, the budgets of the OSEC for the other three departments have increments higher than the overall net increment for their respective departments. Although the net increment for DOTr (as a department) is only P8 billion, the DOTr-OSEC allocation of P63.1 billion in 2019 will be P10.6 billion higher than in 2018. Similarly, the increase (P7.1 billion) in the DFA-OSEC to P27.4 billion is higher than the net increment of P7 billion for the entire DFA. Meanwhile, the DBM-OSEC will have a budget of P3.6 billion—that is almost double its 2018 allocation of P1.9 billion.

The Department of Justice (DOJ) as a department has been allocated P21.4 billion in 2019. This is P1.7 billion higher than in 2018, with the Public Attorney’s Office (PAO) accounting for P1.1 billion of such increment. The PAO budget will increase from P3.2 billion in 2018 to P4.3 billion in 2019. In the case of the Judiciary, the increase of P2 billion in its 2019 budget (P37.3 billion) will primarily go to the Supreme Court and the Lower Courts whose budget will increase by P1.9 billion to a total of P33.4 billion.

Overall, Other Executive Offices (OEO) which include 38 agencies will grow minimally by P628 million from P77.5 billion in 2018. It is notable, however, that the budget for Technical Education and Skills Development Authority (TESDA) under OEO in 2019 (P14.8 billion) is P7.1 billion higher or almost twice the 2018 level of P7.7 billion. On the other hand, significant reductions have been noted on the allocation for the Office of the Presidential Adviser on the Peace Process (OPAPP) whose budget declined from P5.9 billion in 2018 to only P689 million in 2019. Allocation for the Philippine Drug Enforcement Agency (PDEA) amounting to P2 billion is also lower by


some P683 million. The Commission on Higher Education (CHED) under the OEO accounts for P50.4 billion or 64.5% of the total OEO budget of P78.2 billion. The CHED budget is slightly lower by P91 million in 2019.

Total Special Purpose Funds (SPFs) is also higher in 2019 under a cash-based budget. Increases have been traced to the following items:

Budgetary Support to Government Corporations (BSGC), particularly to Land Bank of the Philippines (LBP), Philippine Health Insurance Corporation (PHIC), and the Bases Conversion and Development Authority (BCDA).

Allocations to Local Government Units (ALGU), particularly due to the Internal Revenue Allotment (IRA), Special Shares of LGUs in the Proceeds of National Taxes, and the Local Government Support Fund (LGSF).

Debt Service for Interest Payment

Pension and Gratuity Fund (PGF)

National Disaster Risk Reduction and Management Fund (NDRRMF)

There are three types of budgetary support to GOCCs, namely: subsidies, equities and net lending. While the BESF defines subsidies as the amounts used to cover operational expenses not supported by corporate revenues or to cover corporate deficits and losses, the Corporate Governance Commission (CGC) has reported that the bulk of the subsidy is for the implementation of national programs (instead of operational subsidies). The PHIC has consistently been the top recipient

TaBle 2special pUrpose FUnds wiTh Bigger allocaTions in 2019



Obligation-Based

Cash-Based Amount %

Budgetary Support to Government Corps 197.6 201.6 4.0 2.0 of which:

Land Bank of the Philippines 25.6 36.5 10.9 42.4

Philippine Health Insurance Corporation 60.6 67.4 6.7 11.1

Bases Conversion and Dev’t Authority 6.9 17.2 10.3 150.1

Allocations to Local Government Units 581.2 640.6 59.5 10.2 of which:

Internal Revenue Allotment 522.7 575.5 52.8 10.1 Special Shares of LGUs in the

Proceeds of National Taxes 23.1 27.3 4.2 18.2

Local Government Support Fund 31.4 34.3 2.9 9.1

Debt Service Fund-Interest Payment 354.0 399.6 45.6 12.9

National Disaster Risk Reduction and Management Fund 19.6 20.0 0.4 2.0

Pension and Gratuity Fund 122.3 156.0 33.7 27.6



of budgetary support from NG. From P60.6 billion in 2018, budgetary support to PHIC for the implementation of universal health care insurance in 2019 will amount to P67.4 billion. This is to ensure the health insurance coverage of indigent individuals/families, senior citizens, and other targeted beneficiaries.

Budgetary support to the Land Bank of the Philippines (LBP) in 2018 amounts to P25.6 billion. Next year, the LBP will receive an even higher subsidy of P36.5 billion to support the intensified unconditional cash transfer program. This is primarily to mitigate effects of price increases on the bottom 50% of the poorest households due to the implementation of the comprehensive tax reform program (TRAIN 1). From a monthly allowance of P200, cash transfer to poor and qualified beneficiaries is going to be higher at P300.

Meanwhile, the Bases Conversion and Development Authority (BCDA) will have a budget of P17.2 billion, which is about P10.3 billion more than its current year’s budget. Special Provision (NEP 2019) for the BCDA provides that an amount of P16.9 billion shall be appropriated for the implementation of the Infrastructure Development Program of the BCDA.

Allocations to Local Government Units (ALGU) for 2019 is set to be higher at P640.6 billion compared to the 2018 level of P581.2 billion. Of the total P59.5 billion increment for ALGU, P52.8 billion is due to higher Internal Revenue Allotment (IRA). Part of the national budget that automatically goes to local government units (LGUs) is the IRA or the mandated share of LGUs in the national internal revenue taxes based on the collection of the third preceding fiscal year (per Section 284, RA 7160).

A recent Supreme Court decision has decided in favor of the Mandanas petition that the computation of the IRA should include both the Bureau of Internal Revenue (BIR) and Bureau of Customs (not only BIR as practiced). The SC decision, in fact, entitles the LGUs to a higher base for the computation of the 40% share or IRA, citing that Section 6, Article X of the 1987 Constitution textually commands the allocation to the LGUs of a just share in the national taxes (as opposed to national internal revenue taxes as stipulated in RA 7160). If implemented, this will naturally increase the expenditure level especially that the IRA is automatically appropriated. A Supplemental Budget may have to be passed to cover the IRA differential in 2019.

Aside from the IRA, special shares of LGUs from proceeds of national taxes are also expected to be higher at P27.3 billion (or by P4.2 billion). Meanwhile, allocation for the Local Government Support Fund (LGSF) in 2019 is set at P34.3 billion—which is P2.9 billion more than this year’s level of P31.4 billion.

The national government projects a higher spending of P399.6 billion for interest payments in 2019. This is P45.6 billion higher than the current year’s level of P354 billion. The National Disaster Risk Reduction and Management Fund (NDRRMF, formerly the Calamity Fund) is only going to be slightly higher by some P400 million compared to this year’s P19.6 billion allocation.


TaBle 3expendiTUre program By expense class, 2016-2019

Particulars

Levels, in Billion Pesos Percent Share to Total (%)

Obligation-Based Cash-Based Obligation-Based Cash-

Based

2016 2017 2018 2019 2016 2017 2018 2019

Personal Services 758.2 833.7 1,060.5 1,185.0 28.3 25.1 28.2 31.5

Maintenance & Other Operating Exp. 1,013.2 1,296.0 1,342.4 1,394.9 37.8 39.1 35.6 37.1

Financial Expenses 306.1 312.5 355.7 401.0 11.4 9.4 9.4 10.7

Capital Outlays 590.1 873.1 991.6 761.6 22.0 26.3 26.3 20.3

Net Lending 15.3 - 16.8 14.5 0.6 - 0.4 0.4

TOTAL 2,682.8 3,315.3 3,767.0 3,757.0 100.0 100.0 100.0 100.0


Biggest increment in 2019 goes to PS which will increase by P124.5 billion to about P1,185.0 billion. MOOE and FinEx will, likewise, increase to P1,394.9 billion (by P52.6 billion) and to P401.0 billion (by P45.3 billion), respectively. The net reduction of P10 billion in the total expenditure program for 2019 can be particularly traced to a significantly lower CO—i.e., P230 billion less than the 2018 obligation level of P991.6 billion.

All expense classes (except CO) will have higher budget shares in 2019 under a cash-based budget compared with their corresponding shares in 2018. CO’s budget share is going to be 20.3% which

1 The following laws provide for the indexation of MUP pensions to the prevailing base pay of those in active service: Presidential Decree No. 1638, as amended (AFP Military Personnel Retirement and Separation Decree of 1979), RA 8551 (PNP Reform and Reorganization Act of 1998), RA 5976 (Coast Survey Officers Retirement and Separation Act of 1969), RA 9993 (Philippine Coast Guard Law of 2009), and RA 9263 (BFP and BJMP Professionalization Act of 2004).

Part of the SPF is the allocation of P156 billion for the Pension and Gratuity Fund (PGF). Next year’s allocation for PGF is P33.7 billion higher than the 2018 budget of P122.3 billion. Joint Resolution No. 1, s. 2018 which effectively increased the base pay of military and uniformed personnel (MUPs) has suspended the indexation1 of pension of retired MUPs. The temporary suspension will be lifted starting 2019 or upon effectivity of a pension reform law, whichever comes earlier. Proposed bills on pension reform for MUPs are still pending at the committee level at both Houses of Congress. If not passed by year-end, NG will have to pay about P33.9 billion in 2019 for pension arrearages incurred this year (2018) as a result of JR No. 1, s. 2018.

Allocation by Expense Class

Table 3 shows that NG expenditures under an obligation-based budget have steadily increased to P3,767 billion in 2018. Similarly, all general expense classes (PS, MOOE, CO, FinEx and net lending) grew annually in 2016-2018. However, the 2019 cash-based budget of P3,757 billion is lower by P10 billion. Nominally, despite the shift to cash-based appropriations in 2019, allocations for PS, MOOE and FinEx will increase in 2019, but CO and net lending will be lower next year.


TaBle 4Top 10 deparTmenTs/spF wiTh BUdgeT increases in personal services, 2016-2019


Particulars

Obligation-Based Cash-Based

Increase/(Decrease)

Actual Adjusted Amount Percent (%)

2016 2017 2018 2019 16-17 17-18 18-19 16-17 17-18 18-19

DILG 139.0 154.0 138.5 188.7 14.9 (15.5) 50.2 10.7 (10.0) 36.2

PGF - - 119.5 155.5 - 119.5 36.0 - - 30.2

DND 123.8 127.4 83.7 115.4 3.6 (43.7) 31.7 2.9 (34.3) 37.9

DepEd 294.4 327.0 380.3 404.6 32.6 53.3 24.3 11.1 16.3 6.4

SUCs 33.3 38.3 41.3 48.7 5.0 3.0 7.4 15.0 7.8 17.9

DOH 24.5 30.8 36.3 40.9 6.3 5.5 4.6 25.8 17.9 12.6

DOTr 7.5 8.2 7.1 11.1 0.7 (1.1) 4.1 9.1 (13.9) 57.9

The Judiciary 21.1 24.7 26.2 29.8 3.7 1.5 3.6 17.5 5.9 13.7

DOJ 12.6 14.2 13.9 16.5 1.6 (0.3) 2.6 12.9 (2.2) 19.0

OEO 6.9 7.8 7.8 8.7 0.9 (0.0) 0.9 13.4 (0.1) 11.5


Departments identified to have significant budgetary increments for PS are by the nature of their functions with relatively bigger staff complement and consequently higher spending for salaries, compensation and other benefits. Table 4 shows that highest increments in PS can be traced to the DILG, DND, and Department of Education (DepEd). The PS budget for DILG in 2019 (cash-based) amounts to P188.7 billion, which is P50.2 billion (36.2%) higher compared with the 2018 obligation-based level. Similarly, the DND gets a higher allocation of P115.4 billion for PS in 2019, which is P31.7 billion more than in 2018.

Meanwhile, the proposed budget to cover DepEd’s PS requirement in 2019 amounts to P404.6 billion. This is about P24.3 billion higher than its PS budget of P380.3 billion in 2018. It may be noted that the increase in PS can also be traced to additional funding for the Pensions and Gratuity Fund (PGF). For 2019, total PS under PGF amounts to P155.5 billion which is P36 billion higher than in 2018. About 86.8% (P135.0 billion) will cover payments for the pension of retired MUPs that are annually appropriated, and automatically indexed to salary rates of those in active service. Note that an amount of P500 million under PGF has been set aside for MOOE, particularly for the payment of monetization of leave credits.

is 6 percentage points lower than its budget share in 2018—and even lower compared with its 2016 share to total expenditure. On the other hand, the PS share of 31.5% is the highest since 2016 even though nominally it has also been increasing.

Expenditures for PS are mandatory, and are expected to increase with the implementation of the 4th tranche of the Salary Standardization Law (SSL 4), creation of new positions (e.g., for teaching positions and military/uniformed personnel – MUPs), and the automatic indexation of MUP pensions to increases in base pay of those in active service (unless a Pension Reform Law for MUPs will be passed before the moratorium on the indexation shall be lifted on 1 January 2019).


TaBle 6deparTmenTs wiTh BUdgeT increases in capiTal oUTlays



Obligation-Based Cash-Based Amount %

DOTr 46.7 51.7 5.0 10.8

DILG 9.6 10.9 1.3 14.1

DND 29.2 30.2 1.0 3.3

DOE 0.3 0.6 0.4 122.0

DFA 2.2 2.4 0.2 9.7

OP 0.4 0.5 0.1 38.2

COMELEC 0.2 0.3 0.1 72.7

PCOO 0.0 0.1 0.0 125.2

DOLE 0.4 0.4 0.0 5.4


Total allocation for capital outlay (CO) in 2019 amounts to P761.6 billion. Although this is P230 billion lower than the current year’s level of P991.6 billion, there are departments with CO

TaBle 5Top 10 deparTmenTs wiTh BUdgeT increases in mooe




DFA 10.6 17.0 6.4 59.9

OEO 61.6 67.9 6.2 10.1

DILG 24.3 26.0 1.7 7.2

DBM 1.0 2.5 1.5 160.0

DOF 5.9 7.3 1.4 22.9

DOLE 6.1 7.3 1.2 19.5

DepED 77.6 78.7 1.0 1.3

DND 37.1 37.9 0.7 2.0

DOST 13.2 13.8 0.6 4.4

OP 4.7 5.2 0.5 11.1


Overall, the programmed spending for MOOE is higher in 2019 despite the shift to a cash-based budget. Total MOOE in 2019 amounts to P1.39 trillion—i.e., about P52.6 billion higher than the obligation-based budget of P1.34 trillion in 2018. Table 5 presents the top 10 departments with budget increases in MOOE. The DFA and the OEO post the biggest increments for MOOE at P6.4 billion and P6.2 billion, respectively. DFA’s allocation for MOOE in 2019 is P17 billion while that of the OEO amounts to P67.9 billion. Despite a nominally smaller increment of P1.5 billion for DBM’s MOOE, it represents the highest growth considering the budget size—i.e., it grew from P1 billion in 2018 to P2.5 billion in 2019.


TaBle 7Top 10 deparTmenTs wiTh BUdgeT cUTs in capiTal oUTlays




DPWH 623.7 531.9 (91.9) (14.7)

DepEd 122.7 45.5 (77.2) (62.9)

DOH 31.3 0.9 (30.4) (97.0)

SUCs 14.2 6.4 (7.8) (55.2)

OEO 8.2 1.7 (6.5) (79.7)

DOF 6.3 3.1 (3.2) (50.5)

DOST 4.5 2.1 (2.4) (53.0)

DSWD 2.0 0.1 (1.9) (97.3)

Congress 1.8 - (1.8) (100.0)

The Judiciary 3.4 1.7 (1.7) (50.0)


On the other hand, Table 7 shows the top 10 departments with lower CO allocations in 2019. Notably, significant reductions in CO of the Department of Public Works and Highways (DPWH), DepEd and Department of Health (DOH) have been observed. While the DOTr enjoys some increment under the cash-based budget (see Table 6), the DPWH who is the lead agency in the implementation of infrastructure projects will have a budget (P531.9 billion) that is lower by P91.9 billion than in 2018.

The DepEd and the DOH, which are primary agencies in charge of providing basic social services through schools and health facilities, also have lower CO allocations in 2019. Capital outlay allocation for DepEd in 2019 amounts to P45.5 billion, which is P77.2 billion lower than the current year’s level of P122.7 billion. Similarly, cash-based CO for the DOH in 2019 is significantly lower at P948 million compared with its P31.1 billion appropriation in 2018.

TaBle 8deparTmenTs/spF wiTh BUdgeT increases in Finex

(amoUnTs in million pesos)



DOF 822.2 849.4 27.2 3.3

DTI 1.2 2.4 1.2 99.7

DOTr 7.6 7.9 0.3 3.5

Debt Service Fund 354,010.0 399,571.0 45,561.0 12.9



allocations that are higher than 2018. Nominally, the biggest increment in CO can be traced to the DOTr whose budget will increase to about P51.7 billion (or by P5 billion) in 2019. Meanwhile, CO for the DILG and DND will be up by P1.3 billion and P1 billion, respectively.


Table 8 identifies the departments/SPF with increases in Financial Expenses (FinEx)2 in 2019. Debt service for interest payment is programmed at P399.6 billion, which is about P45.6 billion (12.9%) higher than the 2018 level of P354.0 billion. Among the departments, the Department of Finance (DOF) which includes the treasury functions of NG posts the highest increment in FinEx at P27.2 billion—thus, increasing its allocation for 2019 to P849.4 billion. FinEx for Department of Trade and Industry (DTI) will double to P2.4 billion in 2019 while that of DOTr will increase minimally by P300 million to about P7.9 billion.

Budget Variances

This section presents three different comparisons of the budgets of select departments for 2018 and 2019. Budget Variance 1 compares the approved expenditure program (GAA + automatic appropriations) with the cash-based equivalent reported by the DBM for 2018. The cash-based equivalent of the 2018 obligation-based budget was derived from the Monthly Disbursement Program (MDP) submitted by the agencies (net of payments for accounts payable from prior years’ obligations).

2 FinEx is an expense category which refers to the management supervision/trusteeship fees, interest expenses, guarantee fees, bank charges, commitment fees and other financial charges incurred in owning or borrowing as asset property.

TaBle 9expendiTUre program oF selecT deparTmenTs

2018 gaa + aUTomaTic appropriaTions vs 2018 cash eqUivalenT


1/ DBM-approved, net of Prior Year’s Payments and Accounts Payable. Agency Specific Budget excludes allocations from Special Purpose Funds.2/ Cash-Based Equivalent for DPWH includes projected Current Year Accounts Payable to be paid in 2019Source of basic data: 2018 GAA and BESF, and Briefer on the FY 2019 Proposed National Budget, DBM

Department 2018 Difference

GAA+Automatic Appro

Cash-Based Equivalent 1/ Amount %

DPWH 2/ 650.9 441.8 (209.0) (32.1)

DepEd 580.6 470.1 (110.6) (19.0)

DOTr 68.1 40.2 (28.0) (41.0)

DND 150.0 136.5 (13.5) (9.0)

DOH 109.8 99.6 (10.2) (9.3)

ARMM 34.2 24.4 (9.8) (28.5)

DA 55.7 50.7 (5.0) (9.0)

DSWD 141.9 139.9 (2.0) (1.4)

DILG 172.4 172.4 (0.0) (0.0)

Judiciary 35.4 35.4 0.0 0.0

Total Department 1,998.9 1,610.9 (388.1) (19.4)


Budget Variance 2 compares the cash-based equivalent for 2018 with the proposed cash-based budget for 2019. Table 10 shows an increase of P289.1 billion or 17.9% on a cash-to-cash comparison of the overall NG budget levels. Such comparison shows that the DOH gets the biggest cut in 2019—i.e., by one-fourth of its cash-based equivalent in 2018. The DOH cash-based budget for 2019 will be lower by P25.5 billion or 25.6%. Meanwhile, the Department of Social and Welfare Developoment (DSWD) and Department of Agriculture (DA) cash-based budgets will be reduced by P3.1 billion and P0.9 billion, respectively. On the other hand, the biggest increase in 2019 can be traced to DPWH, DepEd, DILG, DND and DOTr.

Budget Variance 3 compares the 2018 approved budget (GAA+automatic appropriations) with the proposed 2019 cash-based appropriations (NEP+automatic appropriations). Table 11 shows relatively bigger reductions in the budgets of the DPWH, DepED and the DOH. The DPWH

TaBle 10expendiTUre program oF selecT deparTmenTs

2018 cash eqUivalenT vs 2019 cash-Based BUdgeT (amoUnTs in Billion pesos)

1/ DBM-approved, net of Prior Year’s Payments and Accounts Payable. Agency Specific Budget excludes allocations from Special Purpose Funds.2/ Cash-Based Equivalent for DPWH includes projected Current Year Accounts Payable to be paid in 2019Source of basic data: BESF 2019 and Briefer on the FY 2019 Proposed National Budget, DBM

Department 2018 2019 Difference

Cash-Based Equivalent 1/ Cash-Based Amount %

DPWH 2/ 441.8 555.7 113.8 25.8

DepEd 470.1 528.8 58.7 12.5

DOTr 40.2 76.1 35.9 89.4

DND 136.5 183.4 46.9 34.4

DOH 99.6 74.1 (25.5) (25.6)

ARMM 24.4 32.3 7.9 32.2

DA 50.7 49.8 (0.9) (1.7)

DSWD 139.9 136.8 (3.1) (2.2)

DILG 172.4 225.6 53.3 30.9

Judiciary 35.4 37.3 2.0 5.6

Total Department 1,610.9 1,899.9 289.1 17.9

Significant differences between the 2018 approved levels and the 2018 cash-based equivalent have been observed in the following departments: DPWH, DepEd, DOTr, DND, DOH and Autonomous Region in Muslim Mindanao (ARMM). In the case of the DPWH, the difference between its approved budget and cash-based equivalent in 2018 amounts to P209 billion. This essentially means that with an approved budget of P650.9 billion, only about two-thirds (32.1%) are projected to be spent or contracted out during the year. Meanwhile, the DOTr’s cash-based equivalent is only about 60% of its total approved budget for 2018. The DepEd, with an approved budget of P580.6 billion, is projected to spend only close to 80% within the year.


sUmmary

The National Budget is presented for the first time in 2019 on an annual cash-basis. Under the cash-based budgeting system, all government programs and projects that are budgeted for the fiscal year (FY) should be implemented, delivered, and settled within the same fiscal year (with an Extended Payment Period of three months). The shift to annual cash-based budget requires, on the part of national government agencies (NGAs), careful planning and proper identification of programs/projects that can be readily implemented given the one-year validity of the appropriations.

By expense class, the 2019 proposed cash-based levels for Personal Services (PS), Maintenance and Other Operating Expenses (MOOE), and Financial Expense (FE) are higher than the 2018 obligation-based level. On the other hand, total planned spending for 2019 is lower for capital outlay (CO).

The cash-based budget system is expected to put a stop to the “confusing pile up of undelivered obligations” under the current obligation-based budget, where contracts awarded within the fiscal

budget for 2019 (cash-based) is set at P555.7 billion which is P95.2 billion lower than its 2018 level. Meanwhile, the DepEd and DOH budgets will be lower by P51.8 billion and P35.7 billion, respectively.

On the other hand, the biggest increments despite the shift to cash-based budget can be traced to the DILG and the DND. The 2019 cash-based allocation of P225.6 billion for the DILG is about P53.3 billion or 30.9% higher than the current year’s obligation based level. Meanwhile, the DND cash-based allocation of P183.4 billion is going to be P33.4 billion higher than in 2018.

TaBle 112018 gaa + aUTomaTic appropriaTions vs 2019 cash-Based BUdgeT

oF selecT deparTmenTs, (amoUnTs in Billion pesos)

Source of basic data: GAA 2018 and BESF 2018-2019

Department 2018 2019 Difference

GAA+Automatic Appro

NEP+Automatic Appro Amount %

DPWH 650.9 555.7 (95.2) (14.6) DepEd 580.6 528.8 (51.8) (8.9) DOTr 68.1 76.1 8.0 11.7 DND 150.0 183.4 33.4 22.3 DOH 109.8 74.1 (35.7) (32.6) ARMM 34.2 32.3 (1.9) (5.5) DA 55.7 49.8 (5.9) (10.5) DSWD 141.9 136.8 (5.1) (3.6) DILG 172.4 225.6 53.3 30.9 Judiciary 35.4 37.3 2.0 5.6

Total Department 1,998.9 1,899.9 (99.0) (5.0)


year can be delivered and settled even after the end of the year. Based on the 2017 SAODB3, the NGAs were able to obligate about 94% of the total allotments under the GAA-as-Release Document policy. However, only about 66% of the total obligations have been paid for—indicating slow delivery and implementation.

Although the cash-based budget may not be directly comparable with the obligation-based budget, the difference of only P10 billion between the 2018 (obligation-based) and 2019 (cash-based) levels indicates that NG actually intends to spend more given the shorter period of one year for agencies to implement and settle the payments with the suppliers/contractors. However, unless NG addresses the issues affecting its absorptive capacity, a shorter period for implementation (and payment of obligations) can potentially result in vital, but slow-moving, projects not being completed or implemented at all.

It is important to address the bottlenecks that cause delays in the implementation of programs/projects and the subsequent payments for delivered goods and services. Infrastructure projects should be properly phased to ensure that activities budgeted for the year can be implemented—otherwise, unused funds at the end of the year will revert to the Treasury and form part of the General Fund for future appropriation. Perennial problems of Right-of-Way (ROW) that have stalled many public works projects should be seriously dealt with to ensure projects/activities budgeted for the year are implemented and fully funded.

3 Statement of Allotment, Obligations, Disbursements and Balances (SAODB) is published by the DBM on its website to reflect the obligation and disbursement rates of agencies.


reFerences

Department of Budget and Management. Budget of Expenditures and Sources of Financing (BESF), FYs 2018-2019.

__________. Reforming the Philippine Budgeting System. A Modern and Open Cash-Based Budget for Disciplined, Accountable, and Faster Service Delivery.

__________. National Expenditure Program (NEP) for FY 2019.

__________. General Appropriations Act (GAA) for FY 2018

Joint Resolution No. 01, s. 2018, Authorizing the Increase in Base Pay of Military and Uniformed Personnel in the Government and Suspension of Indexation of Pension to Base Pay.

Joint Resolution No. 01, s. 2013, Extending the validity of the 2013 Appropriations (until December 31, 2014). Passed by Congress on December 9, 2013 and approved by the President on December 26, 2013.

Supreme Court (2018, July 3). Mandanas, et al. v. Ochoa, et al. G.R. No. 199802.


Congressional Policy and Budget Research Department3/F Main Building, House of Representatives

Batasan Hills, Quezon City, Metro Manila, PhilippinesTel. No. (DL) 931-60-32 (Fax) 931-65-19

http://cpbrd.congress.gov.ph

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