Press Release
November 15, 2011

By: Senator Franklin M. Drilon

Mr. President, distinguished colleagues:

I rise to sponsor a most important piece of legislation that the Congress of the Philippines is constitutionally-mandated, through its power of the purse, to enact every single year.

I speak of no less than the General Appropriations Act. More than a motley assortment of figures, the national budget is a financial blueprint that lays out the foundation of our country's economic growth.

On July 26, 2011, President Benigno S. Aquino III submitted a National Expenditure Program to Congress, the first budget that is fully-prepared under his administration.

The President proposed an obligation budget of 1.816 trillion pesos for 2012, higher by 10.4 percent over the 2011 budget, representing 16.5 percent of the country's GDP. Net of debt servicing and Internal Revenue Allotment, the 2012 budget is higher by 20.8 percent over the equivalent portion of the 2011 national budget.

On October 11, 2011, the House of Representatives passed, without major amendments, the President's 2012 national budget as contained in HB No. 5023, or the General Appropriations Bill.

Ladies and Gentlemen of this august Chamber: As Chairman of the Committee on Finance, it is my humble submission that the President's 2012 national budget deserves our full support. We therefore seek its immediate enactment.

Economic Winds of Change

Two months ago, our nation's economic managers, the Development Budget Coordination Committee (DBCC), laid down the macroeconomic assumptions that gave flesh to our national budget for Fiscal Year 2012.

The economic indicators presented were alarming, Mr. President. For the first semester of 2011, our economy grew by a lackluster 4.0 percent compared to a robust 8.7 percent growth in the same period last year. In particular, our second quarter growth was 3.4 percent, which according to the NSCB, is less than half of the 8.9 percent growth in the same quarter of last year. The same was true for the first quarter of this year, when our economy grew by only 4.6 percent, barely half of our 8.4 percent GDP growth rate last year.

And what were the contributory factors to our weak economic performance this year compared to last year?

Mr. President, external factors - the confluence of world events beyond our control - all put undue pressure on our domestic economy. In particular, the domestic economy is now reeling under the adverse effects of the European debt crisis, political unrests in the Middle East and North Africa region, the natural and man-made disasters in Japan, and the ensuing weak global economy. We see lower growth for the US economy engendered by their fiscal problems and Standard & Poor's downgrade of their credit rating to AA+ from the previous Triple A. Added to that is the fiscal under spending of the government which, as admitted by our economic managers themselves, unfortunately dragged down our economic growth in the first semester of 2011.

To give the DBCC time to assess the impact to our domestic economy of the dramatic global changes around us as well as the government's fiscal underspending, Mr. President, we had a third DBCC briefing last October 12, 2011.

The revised real GDP growth for 2011, at 4.5-5.5 percent, is now expected to be lower than the 5.0-6.0 percent growth assumption that was approved by the DBCC in July 2011. This is attributed to the weaker than expected performance of our economy in the first half of 2011 as a result of the external global shocks as well as domestic issues, particularly the fiscal under spending of our government.

No changes were made by the DBCC in the projections for inflation, foreign exchange rates, and Dubai crude oil for this year and the coming year. However, the assumptions for the domestic and foreign interest rates, imports and exports growth for 2011 and 2012 were lowered on account of the weak external environment.

"Results-Focused Budget"

Dubbed as a "Results-Focused Budget," the 2012 national budget reflects the five priorities of the Aquino Government's "Social Contract with the Filipino People" as defined in Executive Order No 43 dated May 13, 2011. These priorities are:

A. Governance that is transparent, accountable and participatory.

B. Empowerment of the poor and vulnerable, and poverty reduction.

C. Economic growth that is sustainable, inclusive and rapid.

D. Peace that is lasting and just, and strengthening the rule of law.

E. Integrity of the environment and climate change adaptation and mitigation.

How does the 2012 budget support these five pillars of the Aquino Administration?

A. Transparent, Accountable and Participatory Governance

The Aquino Administration defines good governance as one that thrives in Daylight. Thus, consistent with the principle, "Daylight in Governance", several provisions were adopted to foster transparency, accountability and participation in the budget.

First, lump-sum funds were fleshed out, with the allocation directed and released to the smallest implementing units. Consistent with this principle, your committee has proposed that the operating budget of the Bureau of Fire Protection's district, city and municipal fire stations, based on the number of firemen, equipment maintained, etc., shall be distributed within five days from receipt of such allocation by the Bureau's regional offices. Similarly, the MOOE of the PNP's Support Units shall be distributed to the said operating units based on an established criteria. Recall that lump sum budgeting has encouraged political intervention and allowed anomalies in the use of public funds--such as the fertilizer fund scam--to flourish.

Second, the generation and use, or abuse, of "savings", which made possible anomalous practices such as the "conversions" and the "pabaon" systems in the AFP, is sought to be checked. Under this budget, personal services were all funded based only on filled positions to prevent abuse in the use of savings from unfilled positions. Thus, P23.4 billion was added to the Miscellaneous Personnel Benefits Fund or MPBF to cover the unfilled positions in the DILG, DepEd, DOH, DND, SUCs, TESDA, AFP, PNP and the Constitutional offices, with their release subject to the submission of appropriate documentary requirements.

As expected, the use of the MBPF to cover the budget for the over 67,132 unfilled positions in the bureaucracy has generated strong objections, particularly from the Judiciary and the other Constitutional offices which asserted their constitutionally -guaranteed fiscal autonomy. To put this issue in context, the Judiciary generates over 1.985 billion pesos annually in "savings" for over 5,539 unfilled positions; the COA generates over 1.8 billion pesos in " savings" for 6,482 unfilled positions; the COMELEC, 162.3 million pesos for 547 unfilled positions; the CSC, 122 million pesos for 269 vacancies; and the Ombudsman, 567.7 million pesos for 1,062 vacancies. Under the principle of fiscal autonomy, these funds are automatically released to these constitutional agencies and can be realigned by the heads of these bodies for purposes other than payment of salaries. The House of Representatives cut the MBPF by 5.025 billion pesos allocated to the unfilled and new positions in the constitutional agencies and added the corresponding amounts to the budgets of these offices. Thus, the budget of Congress was increased by 281.7 million; the Judiciary's budget was increased by 2.039 billion pesos; COA's budget was increased by 1.851 billion; Ombudsman, 567.7 million; COMELEC, 162.3 million; and CSC, 122.8 million pesos.

Moreover, the House of Representatives enacted a Special Provision, which reads as follows:

"Funding Requirements For The Filling Of Unfilled Positions. The amount appropriated under [P/A/P] shall be used exclusively to fund the personal services requirements in filling unfilled positions: Provided, that any unutilized funds at the end of the fiscal year shall revert back to the National Treasury in accordance with Section 28, Chapter 4, Book VI of E.O. No. 292, S. 1987, in relation to Section 60 of the general provisions of this Act: Provided, further, that the [state agency] shall submit to the Office of the President and Congress a report on the utilization of funds on a quarterly basis."

Your Committee adopted the House version with a slight amendment that would authorize the use of savings from unfilled positions in the Judiciary and other Constitutional Offices for the construction of the Manila Hall of Justice and the maintenance of other halls of justice in the country, and the buildings housing the Sandiganbayan, the Court of Tax Appeals and the Court of Appeals, Civil Service Commission, Commission on Audit, Commission on Elections, and the Ombudsman.

Your Committee is alarmed at the corruption committed with impunity in the Regional Government of the ARMM. For example, in COA's Special Audit Report No. 2010-05 for ARMM-DPWH, payments to suppliers and contractors amounting to 1.123 billion pesos were considered spurious. In another instance, deficiencies amounting to 363.4 million pesos were discovered in the implementation of projects worth 422.7 million pesos. These and many more findings of the extent of corruption in the regional government of the ARMM compels your committee to: (1) provide that all disbursements be subject to pre-audit by COA in view of inadequate internal control; and (2) cut 96.943 million and 4 million pesos in discretionary expenses in the Office of the Governor and Vice Governor, respectively.

Likewise, we cut 37.532 million pesos for feasibility studies in the budget of the Southern Philippines Development Authority, or SPDA, which has totally failed in its mandate as an economic office for Mindanao notwithstanding its existence for several years.

On the use of Confidential and Intelligence Funds, your Committee has proposed an amendment that will require all agencies, including GOCCs with such allocation, to submit to the President, the Senate and the House of Representatives a quarterly report on the use of such funds. We oppose the House amendment which would effectively allow LGUs to allocate funds for confidential and intelligence activities.

Finally, to instill fiscal discipline in the operation of GOCCs, your committee allocated 100 million pesos as the initial operating expenses of the Governance Commission for GOCCs, or GCG, created under the GOCC Governance Act of 2011.

B. Empowerment of the poor and vulnerable, and poverty reduction

The 2012 budget is again decidedly biased for the poor.

For one, the Social Services sector continues to receive the lion's share of 31.7 percent of the budget, equivalent to 575.8 billion pesos, an increase of 10.4 percent over the current 521.4 billion pesos.

The centerpiece program of this Administration's poverty reduction agenda -- the Pantawid Pamilyang Pilipino Program (4Ps), or the Conditional Cash Transfer Program -- is being expanded to benefit 3 million households by January 2012, with a proposed budget of 39 billion pesos. This represents an increase of 700,000 households from the current 2.3 million. Your Committee recommends that this Chamber support this program, given the inroads accomplished this year. It is worthy to note that there will also be an increased use of the National Household Targeting System (NHTS), a tool for government to locate and help the truly poor. Allow me also to mention, at this point, your committee's amendment of the Special Provision on the Conditional Cash Transfer of the DSWD, which effectively transferred 800 million pesos in administrative cost to Cash Grants to benefit 61,538 additional indigents.

In support of this Administration's poverty reduction program, your Committee proposes the amendment of the special provision that requires the amendment of the Philhealth Charter as a condition before 5.2 million of the poorest households, identified under the National Household Targeting System, can be enrolled in the National Health Insurance Program. By deleting such condition, this amendment proposed by your committee will authorize the release, without the need of amending the Philhealth charter, of 12 billion pesos from the national budget to pay for the premiums of 5.2 million indigent households at 2,400 pesos per household per annum, which is presently co-financed by local government units. In view of the substantial increase, your committee proposed that the administrative cost should not exceed 5 percent of the premium contribution. Further, all government health care providers shall be automatically considered as Philhealth-accredited effective April 1, 2012, in view of the absence of Philhealth-accredited public health institutions in a number of provinces, depriving covered PhilHealth members of medical care. Mr. President, since the appropriation of 12 billion pesos will now allow the enrollment of the 5.2 million poorest households, we now challenge LGUs to work at subsidizing the second to the lowest quintile of our population based on the NHTS.

Of the 1.5 billion pesos allocation in the DILG budget for first and second level water projects in waterless municipalities, your committee proposes to transfer 750 million pesos to the LWUA for third level potable water projects.

The Lower House realigned 161 million pesos in the DepEd to add 300 pesos to each public school teacher's chalk allowance. Your Committee supports this amendment.

C. Economic Growth that is Rapid, Inclusive and Sustainable.

To support a rapid, inclusive and sustained economic growth, the proposed national budget invested in economic services that support drivers of growth, such as the significant increase in the spending for infrastructure services for irrigation systems and farm-to-market roads that will spur agribusiness and the roads to tourism destination. To support this agenda, the Economic Sector will receive 438.9 billion pesos, or 24.2 percent of the 2012 national budget. This is 21.3 percent higher than the sector's 2011 allocation, and has the second biggest share of the 2012 national budget. This year's expenditure program calls for a larger infrastructure budget of 182.2 billion pesos, or 25.7 percent higher than this year. This will include funding for public-private partnerships amounting to P20.6 billion.

To sustain the national projected disbursements of 1.855 trillion pesos in 2012, revenues must be increased by 11.1 percent to 1.569 trillion pesos from its current year's target of 1.411 trillion.

Next year's national budget is designed to narrow our fiscal deficit to 286 billion pesos or 2.6 percent of our GDP in 2012. It remains on track with this government's medium-term goal to achieve a fiscal deficit of 2 percent of GDP by 2013.

As part of fiscal consolidation, the debt burden on the national budget has been reduced by 3 percentage points, from 22.6 percent or 372.1 billion pesos in 2011, to 19.6 percent, or 356.1 billion pesos in 2012.

Your committee supports the Aquino administration's program of achieving self-sufficiency in rice by 2013. Thus, your Committee recommends that this Chamber restore the 811 million pesos in irrigation projects which was cut and deleted by the House of Representatives under the budget of the Department of Agriculture.

D. Just and lasting peace, and the rule of law

President Aquino, in his budget message, recognized that the state of our country's national security, justice and peace poses a big challenge to our economic and social development. Thus, the budget allocates about 196.8 billion pesos, or about 8.1 percent more than the current appropriation, to support government's efforts in attaining peace and promoting the rule of law. As a strategy to end the long standing conflict with the various rebel groups, the budget provides for a PAMANA program, an inter-agency project to build peaceful communities in 1,921 conflict-affected barangays in 171 municipalities in 34 provinces. The Payapa at Masaganang Pamayanan, or PAMANA program, has a budget of 1.9 billion pesos, which your Committee supports, with the amendment that it will be identified as a single fund for better monitoring, to be implemented by the DILG, the DSWD, and DAR. We also deleted any provision for administrative cost as the program will be implemented by the existing bureaucracy, in the amount of 138.3 million. The Office of the Presidential Adviser on the Peace Process will monitor the implementation of the PAMANA program.

To protect our national territory and boundaries, 107.8 billion pesos is allocated for the Department of National Defense. Of serious concern to your committee is the fiscal burden on the DND/AFP budget as a result of retirement benefits provided under special laws. Under the 2012 budget, 34 billion pesos, or 32 percent of the DND budget, is provided as pension to our veterans. Compare this to a grossly inadequate budget of only 5 billion pesos for AFP's modernization program for 2012. And, unless reforms are implemented, we have to provide in 2016 a budget for the pension of our veterans bigger than the regular salary of our soldiers in the active service. We call on the Aquino Administration to address this problem.

The Lower House transferred 100 million pesos from the President's Intelligence Funds to the AFP. Your Committee supports this amendment.

The DOJ has a budget of 9.7 billion pesos for 2012, 14.8 percent higher than this year. The House of Representatives increased the DOJ budget by 200 million for the JUSIP program and 100 million for a DOJ building. Your Committee does not endorse the House amendments, and further recommends a cut of 33 million pesos budgeted for an NJIS program, which is already being undertaken by the NBI, and the creation of an Office for Cybercrime, which has no enabling statute. However, your committee recommends that the DOJ prosecutors be allowed the use of income derived from filing fees paid by the parties in cases pending in the DOJ.

E. Environment and Climate Change Mitigation and Adaptation

As President Aquino strongly emphasized in his budget message, the 2012 budget must ensure the integrity of our environment, for the poor are the worst victims of climate change. Thus, the budget funds critical climate change adaptation and mitigation activities with 36.2 billion pesos, or 18.2 percent more than the 2011 allocation. Your committee, Mr. President, fully supports this budgetary request of the President.

Mr. President, after conducting 45 or so budget hearings, including technical working group meetings over a two-month period, your Committee on Finance is fully convinced that this budget deserves the support of this Chamber.

As proposed by your committee, Programmed Appropriations amount to P1,092,371,425,000.00 while Unprogrammed Funds total P152,821,845,000.00.

All in all, Total New Appropriations amount to P1,245,193,270,000.00, the same level as the House-approved General Appropriations Bill.

When to Say NO

The great communicator, former president of the United States, Ronald Reagan, once said, "Balancing your budget is like protecting your virtue. You have to learn when to say NO." Mr. President, with this proposed national budget, we say "NO" to budgeting methods that do not foster transparency and accountability.

We say "No" to debilitating poverty that slowly saps the life out of the truly poor and vulnerable through better targeting systems.

We say "No" to unbridled graft and corruption that consigns our people to perpetual backwardness and underdevelopment.

And we say "YES!"

"YES" to sustained and equitable economic growth.

"YES" to a budget that would empower every Juan to eventually reap its benefits.

"YES" to a budget that is truly biased for the poor.

Thank you and good day.

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