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Analysis: Govt cutting lean meat, not fat By Arnold S. Tenorio, Assistant Business Editor, The Manila Times THE clamor for a reduction, if not removal, of pork-barrel funds in next year’s budget is getting louder. As anticorruption crusaders feed the frenzy, some legislators have joined the chorus while deflecting criticism toward the executive, which, they say, should also shed some of its own fat. But what has been left unsaid in the hubbub over pork is that the planned cuts will purge little fat, if at all. In its submission to Congress, Malacañang has proposed a 40-percent cut in the Priority Development Assistance Fund. From P8.327 billion this year, the PDAF alone was slashed to P6.1 billion in next year’s budget. The other major source of pork, budget officials said, involves lump-sum funds meant for the Department of Public Works and Highways. In next year’s proposed budget, the DPWH’s capital outlay amounts to P38.720 billion, slightly higher than this year’s P37.448 billion but lower than 2003’s P46.177 billion. Observers have welcomed Malacañang’s pork-cutting exercise, thinking that what’s trimmed off from lawmakers’ “allocation” would land on people’s plates in the form of more public services. Pork cut no mere juggling What the executive has failed to amplify, however, is that the 40-percent cut involves no mere juggling, but a reduction altogether of next year’s budget. Contrary to popular belief, the excised amount won’t be tucked away in some underfunded program for the benefit of the poor. It’s literally gone, budget officials admit. Even as the debate rages on the merits of a pork cut, the Department of Budget and Management rules provide that the items on which PDAF may be spent cannot be dismissed as a waste of taxpayers’ money. Gone are the days of pork-barrel allocations for building basketball courts and waiting sheds. Based on DBM’s National Budget Circular 479, the PDAF can be used only for items such as roads and bridges, flood control, water supply, postharvest facilities, piers and ports, rural electrification, irrigation, scholarships, hospitalization benefits, emergency employment and livelihood projects. A similar menu of infrastructure items prioritized by the DPWH also guides the use of lump-sum funds falling under it. Budget officials said the circular would be revised to tailor-fit the items listed under President Arroyo’s 10-point program. Discretionary funding declining Public finance experts agree that government’s discretionary spending, or that part of the budget that goes to building roads, classrooms and hospitals, has been shrinking over the years. People have to get by with shorter roads for transporting their produce, fewer schools for improving their children’s chances of finding future work, and meager facilities for ensuring their resistance to disease. Public spending since the Asian financial crisis has stagnated at around 19 percent of the national income, according to Rosario G. Manasan, senior research fellow at state-run Philippine Institute for Development Studies. This means government is spending only P19 to help the economy cough up P100 a year. Whether this would allow the economy to expand between 5.3 percent and 6.3 percent next year remains to be seen. Comparing expenditure shares of education and health alone, the Philippines trails behind some of its neighbors with only 3.2 percent and 1.5 percent, respectively, of the national income, according to the United Nations Development Report 2004. Thailand and Malaysia are doing better, allotting 5 percent and 7.9 percent for education, and 2.1 percent and 2 percent for health. Philippine capital spending is expected to account for only 2.1 percent of the national income this year and 2.5 percent next year. Debt servicing, meanwhile, would eat up a bigger 5.8 percent of the national income this year and peak at 5.9 percent next year. Indeed interest payments have grown the fastest in the public spending bill, from 3.2 percent of the national income in 1997 to 5.2 percent in 2003—and that’s the government’s obligations alone, according to Manansan. Data from the DBM show that the proposed 2005 budget of P907.6 billion is only 0.8 percent higher than that of this year. If interest payments were discounted, next year’s budget would actually be 1.8 percent smaller. In terms of expenditure share, interest payments as a sector would eat up a little more than 34 percent of next year’s budget. Social services would get only 28 percent, followed by economic services, 17.5 percent; general public services, 15.5 percent; and defense, 4.9 percent. Spare capital outlay Experts said that if cuts must be made, budget authorities should spare the capital outlay of line agencies. What could be reduced or eliminated are the subsidies for fiscally autonomous government corporations, according to Leonor M. Briones, former national treasurer and professor at the University of the Philippines National College of Public Administration and Governance. In condemning pork, crusaders bewail the sums of taxpayers’ money lost to corruption, as contractors scrimp on supplies and other expenses to make up for the kickbacks they gave to lawmakers. Experts said the issue is not the pork barrel itself, but how it is used. The point is not to lose the pork altogether, but to reform the way it’s dispensed, Briones said. Therefore, efforts such as the DBM’s shortlist of acceptable projects aimed at limiting the menu of items on which pork can be spent are a step in the right direction. But no amount of budgetary guidelines would minimize waste from pork if citizens don’t watch where their congressmen and mayors spend their pork barrel and internal revenue allocation, says Briones, one-time head of Freedom from Debt Coalition, a nongovernment watchdog. Judging from the slew of reportage on public waste, a lot of work remains to be done in the area of organizing a vigilant citizenry, she says. In this regard recent public interest in pork and public finance issues may not be enough to keep a lid on waste. Indeed Malacañang’s plan to reduce the pork has only whetted the public’s appetite for more cuts. Legislators are having their comeuppance, and the public could say it’s their just desserts. What the furor over pork has drowned out is the fact that that piece of ham belongs to the people, and officials are slicing far beyond the fat and into lean meat. SOURCE: The Manila Times, 13 September 2004