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Aug 23

The Abolition of PDAF

Philippines Free Press  May 10, 1919

The Constitution tells us that Congress exists to enact laws. In the enactment of laws, members of the House of Representatives bring the interests and concerns of specific local districts to the table; members of the Senate represent a national perspective because they are elected at large. Every year, the most important law enacted by Congress is the General Appropriations Act, or the National Budget. This is what funds the operations of the entire national government for a given fiscal year, Jan. 1 to Dec. 31.

The process begins with the President, as Chief Executive (the one tasked with administering the departments of the national government, and who implements laws enacted by Congress) submitting a proposed  budget to Congress (Art. VII, Sec. 22). According to the Constitution, Congress is obliged to act on this proposed budget: they can only subtract items from it, and not add to it (Art. VI, Sec. 25, I).

Furthermore, the budgetary process in Congress must begin with the House of Representatives (Art. VI, Sec. 24) , which has what is called the power of the purse, on the principle that as the representatives closest to the people, since they represent local districts, they are best qualified to authorize government expenditures.

Congress –both houses, first the House, then the Senate– conducts budget deliberations through its sitting committees and in plenary (or as a whole for each chamber) exercises oversight, which is why budget hearings are conducted, in which departments and agencies are quizzed about the previous year’s activities and what they plan to do for the coming year.

Once approved in committee, the proposed budget is then debated in plenary; then passed by that chamber. The process is repeated in the other chamber. If there are differences in the versions adopted by each chamber, the differences are resolved in the Bicameral Conference Committee (this is part of the internal checks and balances within Congress itself). Then, upon referral and approval by the respective chambers, the General Appropriations Act is submitted to the President for his signature.

The President, as part of the principle of checks and balances, has a unique form of veto when it comes to the national budget or laws involving tariffs or revenues. So he can disapprove specific line items in the budget, in what is called a line-item veto (Art. VI Sec. 27, 2). When it comes to other laws, a President who disapproves of a proposed law must veto the entire thing, returning it to Congress, which, if it is unable to override the veto (overriding requires 2/3 majority in each chamber), must accept that the law is killed (Art. VI Sec. 27, 1). Congress can choose to override the President’s line-item vetoes, or accept them. Once everyone –House, Senate, President– are OK with the proposed budget, then it becomes a law, known as the General Appropriations Act. And the government has funds to operate for that fiscal year.

Let me repeat: Congressmen and Senators make laws; and the most important law they enact each and every year, is the national budget.

Unlike the United States, our Constitution  also says that if for whatever reason, a General Appropriations Act isn’t passed in time for the new fiscal year, then the previous year’s budget is automatically reenacted (Art. VI, Sec. 25, 7). And this is where our discussion of the pork barrel and the changes announced by the President today, begins.

Consider the needs of your community. If it is a small 4th-Class Municipality. As an LGU, it has its own revenues, whether from business permits and other fees, and its proportional share of the revenues of the national government. But still, it can still lack the revenues to fund all  the needs of those who live there: scholarships, for example. This is where the national government can, and should, step in. This is done through national programs carried out in local areas, including services and infrastructure.

Again: all these programs, ranging from services to infrastructure, require funding. And they can only be funded by means of the national budget, which funds the fixed programs of the national agencies, and which also provides for funds that can be used for certain contingencies, such as calamities. And it is Congress –composed of the House and Senate– that authorizes the funding.

These are the operating principles of government, ideally, how things work. As they say, the devil is in the details. Which brings us back to the Constitutional provision on reenacting the budget, and how this is a good way to kick off discussions on the pork barrel.

As the President mentioned in his Statement today, in 2007, Congress managed to pass the national budget in April of that year, when it should have been enacted by December 31 of the previous year. Since there was no new budget when 2007 began, the 2006 budget was automatically reenacted to tide over the government.

Here is the first opportunity for mischief that the President, then a Senator, identified: if, say, the 2006 budget had allocated funds in a province, but by 2007 the bridge had been built, the automatically reenacted 2006 budget would still contain a provision to build a bridge that had already been built. Since it existed, the government could then declare the redundant fund as savings, which means it could then be spent on something else.

The second opportunity for mischief was pointed out by then-Senator Aquino, as the 2007 budget was nearing passage in April of that year: shouldn’t the 2007 General Appropriations Act be minus the basically fixed expenses (salaries, etc. being a prime example) that had already been paid for, by the reenacted 2006 budget, for the months January to April?

He was ignored on both counts, and so voted “No” to the budget. The amounts concerned were nothing to sneeze at: 36 billion pesos. And he had to ask, where did that money go?

As we have seen with just one example of mischief –the Napoles issue– it takes a long time to do the detective work required, to figure out where public money went, under such a chaotic system with so many opportunities for mischief. COA Chairperson Grace Tan mentioned, during her press conference last week, that the spadework on the Special COA Report released last Friday, began in 2010, with the new administration. And as the President mentioned during the Q&A after he delivered his statement today, the Napoles revelations came to light, because it had the earliest, and most solid leads –but that there’s more to be uncovered.

The President’s example about the two opportunities for mischief in reenacting a budget is, of course, different from the Napoles scam –but what they have in common, what both required, is something the President pointed out: you need a conspiracy to get away with all these scams. Normally, the Constitutional checks and balances –within Congress (between its two chambers), between the Legislative (Congress) and the Executive (the President, and the departments under him), and watchdog institutions such as COA and the Ombudsman– should work to make violating both the spirit and the letter of our laws difficult to escape. But if all conspire together, whether actively, or by turning a blind eye, or being timid, then you can get away with fiscal murder.

I won’t go into the grisly details of the Napoles scheme, but will only point out that it required not just willing accomplices but also a lot of other criminal activity, from forging documents (letters from LGUs) to creating dummy NGOs, etc. But the whole Napoles scam brings us to PDAF itself and we need to look at a little history.

In the first place, most people wonder why, if the job of Congress is to pass laws (but don’t forget oversight!) what business do representatives or senators have, in identifying projects? The simple answer is that it is part of their function as lawmakers as they determine the provisions of the national budget during their vetting of the proposals of the Executive branch for projects and programs.

In the past, projects and programs in specific parts of the country were itemized –that is, they appeared as line items– in the national budget. If you look at this excerpt from the General Appropriations Act for 1937 (here is the section on Public Works and the National Assembly, the unicameral legislature at the time: Prewar GAA for National Assembly and Public Works) programs of the government were enumerated item by item; even individual employees were enumerated.

This meant that members of Congress would all come to the table with their proposals for their localities, and these would be threshed out within Congress and with the Executive, and the final list laid out in the national budget, for implementation in that budget. But this involved a tremendous amount of discussion, and negotiations, resulting in Congressional earmarks in the budget. But as the population grew, and the size of Congress grew,and the funds involved grew, shortcuts became more and more tempting. Instead of line item appropriations, lump-sum appropriations started featuring (the difference say, between enumerating every bridge to be built in every barangay in every province in every region, and simply saying x million pesos is appropriated for bridges in Luzon).

Furthermore, if some areas have less clout for whatever reason –party affiliation, or simply less effective representation– some areas might get more than others.

Solution? PDAF, which set aside minimum lump sums for each representative and senator, to use for projects. As we’ve seen, this system has been abused because being broadly defined, and, until 2010, open-ended (that is, with a minimum quota, so to speak, for each legislator but no cap on what each could get), and furthermore, requiring the participation of the legislator not just in the determination of the budget, but in the execution of projects, it fostered collusion between legislators, friends in the private sector, and obliging bureaucrats.

So, PDAF has to go. Again: Napoles is just the best-laid-out case. There are others being investigated. You cannot wait for all the cases to be rolled out because there is now hard evidence of how obscene the scams have become.

So what is the solution? Two: first, find, prosecute, and punish those who broke the law. Second, stop the flawed system, and replace it with a new system that actually addresses the needs of the public instead of filling the pockets of officials. Any solution, just as a reminder, must conform to the Constitution and the role given to legislators and the Executive; and it is all laid out in the national budget, the most important law enacted by Congress each year, based on the proposals submitted by the President.

Which is why the President, with the Senate President and Speaker flanking him, laid out what the system will be henceforth, taking into account innovations introduced since 2010, and lessons learned from the findings of COA (which, by the way, is part of a joint task force which is investigating, and prosecuting, cases involving PDAF).

The innovations since 2010 include the Department of Budget and Management reporting, as data comes in, disbursements of the PDAF. The disbursements for 2009, for 2010, for 2011, for 2012, and for 2013 (to date) are online, searchable by legislator/party list representative. By the way, the COA itself publishes its Annual Report on Allotments, Obligations, and Disbursements of National Government Agencies. It also included making the allocations, even if lump-sum, more transparent by enumerating them in the budget (for a crash course in making sense of the budget, see Budget 101 in fact). Third, by limiting the categories under which the funds can be spent. You can explore the budget by visiting Budget ng Bayan.

Here is a handy infographic on the new system (click to enlarge):

Reform of Budget

Reform of Budget

 

The ultimate check and balance on government as a whole is public opinion. And here it follows a pattern. A good example is how, in 1945, Congress, which hadn’t even convened during the entire Japanese Occupation, paid itself back wages. The public, in disgust, voted members of Congress out of office wholesale. The result was a purge: and then the new crop, over the following two decades, hit upon staggering benefits paid out to themselves, by instituting something unheard of before World War II: the system of Congressional allowances. Yet, by the eve of martial law, public disgust had mounted to the extent that when Guadencio Antonino, campaigning on an anti-allowances platform, died on the eve of elections, the national electorate voted his widow into office.

This is what we’re seeing taking place in terms of the PDAF. What started out as an arguably improved way to ensure an equitable allocation of resources to all areas, became a giant honey trap. So now it’s been scrapped, and in a sense, having proven that too much leeway or discretion leads to wrongdoing, that discretion has been taken away from members of Congress –and bureaucrats who may be willing to oblige racketeers. Politics is like Newton’s First Law of Motion: an object is at rest unless acted upon by outside force.

Additional Reading: See Politicization of Philippine Budget System:  Institutional and Economic Analysis on “Pork-Barrel” by Kohei Noda. Most literature cites one academic paper that asserted lump-sum budgeting from 1922 Public Works Act to 1949; but a review of the 1937 budget, for example, doesn’t support this assertion: the special provisions of the section on public works makes no reference to lump-sum appropriations as authorized by Act No. 3044 s.1922 approved March 10, 1922. Pending further research this suggests the lump-sum, if it existed, was abolished as early as the 1930s, when earmarking took its place until martial law abolished Congress in 1973.

 

 

 

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