2018News

Cuts as a result of shift to cash-based budget under 2019 confuses solons

By Bernadette D. Nicolas, July 31 2018; Business Mirror

https://businessmirror.com.ph/cuts-as-a-result-of-shift-to-cash-based-budget-under-2019-confuses-solons/

Image Credit to Philippine Star

LAWMAKERS questioned on Tuesday the “budget cuts” in the proposed 2019 national budget, including that of the Department of Health (DOH), Department of Education (DepEd) and Department of Public Works and Highways (DPWH), and said this will hurt the delivery of projects.

At the start of hearings on the proposed 2019 national budget, House Appropriations Committee Chairman Davao City Rep. Karlo Alexei B. Nograles led congressmen who expressed concern over the “slashed budgets” of key agencies. They were dismayed that the proposed 2019 cash-based national budget at P3.757 trillion was P10 billion “lower” than the current P3.767-trillion General Appropriations Act for 2018.

Nograles also noted that he was even expecting a higher budget of at least P3.9 trillion.

“Let’s address the elephant in the room. You are coming to ask a budget that’s P10 billion lower in absolute terms. All of us here are concerned with the reductions in various departments and agencies, namely, the DOH, DepEd and DPWH,” Nograles told Budget Secretary Benjamin E. Diokno, chairman of the Development Budget Coordination Committee (DBCC).

“For 2019, it is hard to explain to Filipinos that we reduced classrooms, reduced barangay health units, reduced roads since we are shifting to cash-based [budget],” he said. “All of these concerns could have been addressed if the DBCC came to us with a bigger budget.”

Nograles noted that the DOH budget decreased by P35 billion, the DepEd’s budget by P77 billion and the DPWH’s budget, by P95 billion. Meanwhile, the Department of Social Welfare and Development and Commission on Elections also received budget reductions at P5 billion.

‘Revolutionary’ shift

However, Diokno defended the “revolutionary” shift of the country to cash-based budgeting, saying that it is “misleading” to compare the proposed 2019 cash-based budget with the 2018 obligation-based budget.

On the budget reductions, especially on the DOH, DPWH and DepEd, Diokno said that the cash-based budget of agencies were based on the agency’s absorptive capacity and the readiness of their targeted programs or projects to be implemented within the fiscal year.

However, data from the briefer on the proposed 2019 national budget given by the Department of Budget and Management showed a different picture, particularly for the budgets of the DPWH and DSWD, because the DBM presented the cash-based equivalent of the 2018 budget and compared it with the 2019 National Expenditure Program (NEP).

Based on the DBM’s computations, the DPWH’s cash-based budget increased by 25.8 percent, or P113.9 billion to P555.7 billion, from P441.8 billion.

Also, the DSWD’s budget went up by 5.4 percent, or P8.9 billion to P173.3 billion, from P164.4 billion.

The proposed budget for the DOH, meanwhile, was reduced by 8 percent or 12.3 billion to P141.4 billion from P153.7 billion.

Diokno repeatedly told lawmakers that the correct, or apples-to-apples comparison, is to view the 2019 budget vis-à-vis the cash-based equivalent of the 2018 budget.

Diokno reiterated that the 2019 cash-based budget is even 13 percent higher compared to the 2018 cash-based equivalent at P3.324 trillion.

Prior to the shift, the country was practicing obligations-based budgeting. The two types differ in terms of time horizon or period of implementation and period of payment.

Under the new kind of budgeting to be followed by the government, contracts for projects, programs intended to be implemented for the fiscal year should be fully delivered, inspected and accepted by the end of the fiscal year. Payment should also be done within the fiscal year and up to a three-month Extended Payment period after the fiscal year for goods and services accepted by December 31 of the fiscal year.

On the other hand, under obligation-based budgeting system, contracts awarded within the fiscal year can be delivered even after the end of the year; and the inspection, verification and payment is done within and beyond the fiscal year.

Thus, Diokno argued, this shift is necessary so as to promote discipline among agencies. It raises the credibility of the government with its suppliers and contractors, supports the government’s expansionary policy by addressing underspending and modernizes the country’s budget system and raises it to international standards.

Cash appropriations will revert to the Treasury and will need to be re-appropriated if the agencies fail to complete the projects intended to be implemented within the fiscal year.

Other members of the DBCC, including Finance Secretary Carlos G. Dominguez III, Bangko Sentral ng Pilipinas (BSP) Governor Nestor Espenilla, BSP Deputy Governor Diwa Guinigundo, and Socioeconomic Planning Secretary Ernesto M. Pernia were also present to face the committee scrutinizing the proposed budget.

The DBCC is an interagency body that determines the overall economic targets, expenditure levels and sources of funds.

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