Press Release
August 9, 2011

After DBCC briefing

Drilon: First on the intel funds: as a result of the various exposes in the Senate about the abuses in intel funds, the proposed 2012 budget will now limit the provision for intel funds to military and law enforcement agencies. While there is an increase in the intel funds from the current year to next year--current total intel funds government-wide is P1,141,658,000; 2012 intel fund is P1,329,034,000. There is an increase but a number of agencies no longer would have appropriation for intel funds and these are: OSG, PCGG, PAO, NSC, NTC, Comelec, OPAPP, Judiciary. These agencies which used to have intel funds in their budget would no longer be entitled to any intel fund consistent with the policy that intel funds should be limited to those involved in intel gathering for security and law enforcement purposes. There is however an increase of intel fund in the OP, from P400 million to P600 million; DoJ for the witness protection program, from P166.4 million to P172.9 million; AFP, from P124.4 million to P136.3 million. Those are the substantial increases in the intel funds in the national budget.

If you recall, the Blue Ribbon committee investigated the issue of the conversion in AFP, which was principally sourced out of the budget for unfilled positions. Looking at the entire government structure, there are 66,957 unfilled items which are funded in the current year. Therefore, this a source of conversion not only in the military but also in other agencies which would come in the form of bonuses and other emoluments in addition to the basic pay. What happens is that a position which is unfilled but is funded will be considered as savings on the basis of which it is realigned to other items. The most abusive was the case of the AFP where there was a lot of conversion to other purposes, resulting in funds for pabaon. The total amount that is allocated in the current GAA is in the vicinity of P23 billion. What has the budget done? The President's budget would now place this P23 billion into what is known as miscellaneous personnel benefit fund and it will be released upon the agency request to fill up a particular position. In other words this will not be automatically released. It will be released only when there is an actual hiring to be done so that the practice of converting this budget into savings and converting it into some other item in the budget would no longer be possible... that will be eliminated. That is part of transparency and policy of daylight in governance.

The next item is underspending. We have noted that because of the underspending on the part of the government, it had adverse effects on the gross domestic product and the unemployment and under employment data. When the government underspends, the economy generates less jobs because of lack of infrastructure spending, for example. For 2011, the government has a disbursement program authorized under the GAA in the amount of P1.711 trillion, of which only P698 billion has been disbursed for the 1st semester. That is why the budget deficit is only P17.5 billion. For the 2nd semester, for the government to be able to spend in accordance with the authorization and therefore reach the programmed level of P300 billion in deficit, the government, by admission of Sec. Abad, would have to spend P1.12 trillion in the next 6 months... a very difficult task. Of course there are mandatory requirements which would be the salary, IRA, interest payments, net lending, tax expenditure which would only be roughly P613 other words, out of the authorized disbursement program for the 2nd half, including the unspent portion in the 1st half which totals P1.12 trillion, only P613 billion would be mandatory... leaving a balance of P399 billion for non-mandatory items such as infrastructure, capital outlays and MOOE. This is important because the government would have to do more spending particularly in infrastructure given the expected downturn in the US economy which will affect our exports. So we must be able to generate domestic economc activity through public spending on infrastructure particularly so that we can generate jobs within our economy.

The 3rd item is the discussion on the flagship program of the government, PPP. For the current year, the GAA provided for PPP projects a total of P12.5 billion�P5 billion for DPWH, P5 billion for DOTC and P2.5 billion for DA. As admitted by the DBCC, none of the P12.5 billion has been obligated and therefore, the PPP has not taken off for the last 6 months. They have to accelerate the execution of these PPP projects in the next 6 months because next year, there is another P22 billion for PPP projects. Senators expressed pessimism as to whether or not these PPP projects can be executed in the manner that it was conceived. If we are to judge the 1st 2 quarters of the year, apparently much-vaunted PPP projects practically have not taken from the ground. Having said that, there are some innovations that the committee noted and which should be encouraged insofar as PPP for next year is concerned, and even in the current year. For example, in the 2012 budget, there is a PPP allocation of P3 billion for DoH. The DBCC explained that it will be used a government's share in the rehabilitation of 14 regional hospitals, in partnership with the private sector. The regional hospitals are really in a very sorry state, if I may call it. They really need a lot of funding, many are in a state of disrepair. The theme song, as they would joke around insofar as government hospitals are concerned, is Monalisa: you lie there and you die there. What the PPP program will do is to enter into partnerships with the private sector, rehabilitate these hospitals and enter into operation and maintenance agreements with the private sector. In other words you allow the private sector to rehabilitate a portion of the hospital and then allow them to operate it and collect fees. The caution, however, is that the indigents' need must be addressed. Presently, these public hospitals would have space for indigents that should continue and should not in any way be diminished so that the services to the poor will be continued. Of course the ultimate solution is the universal coverage of PhilHealth. We need about P15 billion there.

The other PPP project that to me sounds exciting and should be pursued is the proposed PPP in school buildings. Right now, I understand that there is P10.3 billion in school funds. This can form as some sort of a guarantee fund which can jumpstart the construction of thousands of school buildings, with the contractors being assured of the payment as it will be deposited in government financial institutions. The private contractors will be paid for advancing money in the school building program. That's why there is so much delay in the implementation of the school building program is that the contractors are reluctant to enter into contracts with the government because of the additional costs incurred by the delays in the payment. With this fund that will be deposited in GFIs which will be the source of the payment to the private constractors, there is an assurance of payment and availability of fund.

As we said yesterday, in another 60 days or even before that, the committee will meet with the DBCC in order to have a better assessment of the effect on the budget assumptions of the downgrading by S&P of the credit rating of the US. Before the committee submits a report to the chamber we will have an extensive review again of the assumptions. We do not discount the possibility of the budget being revised if in fact the DBCC, after its assessment, will find it necessary to revise the assumptions under the budget.

Q: How did DBCC members explain the slow implementation of PPP?

For one, there were certain reforms in the DPWH which Sec. Singson imposed. They changed the process of obligating the funds that has resulted in delays in the disbursement. That is very evident in DPWH because the P20 billion lump sum appropriation for locally-funded projects, only less than P500 million was actually disbursed. Although the report is that for the month of July, they had obligated an additional P64 billion in infra projects. They are saying that out of the P116 billion allotment for infra, P64 billion was obligated as of July.

Q: What's holding up PPP?

Well, revision of certain projects... like in the DoTC, for example, the new secretary requested for an opportunity to review the PPP projects under the DoTC.

Q: Bakit tumaas ang intel fund ng OP?

Hindi pa namin napag-uusapan yan. When the OP budget comes before us we will go into detail.

Q: Do you think the government is being too careful or suspicious in the previous administration kaya mabagal?

No. They are instituting reforms. There's nothing to do with suspicion. It's just that Sec. Singson, for example, is instituting reforms in order that the realignments and corruption in the bidding can be addressed.

Q: Ilan ang school building backlog natin?

30,000 on the basis of double shifts and I think about 50 students per classroom.

Q: Yung OVP hindi kasama sa may intel fund sa 2012. Bakit po?

That's correct but the arrangement is if the OVP would need intel funds, he can always submit a proposal to the President. The vice-president is not involved in intel gathering, and that's the principle, basically. If you are not involved in national security or intelligence gathering, there is no rationale for intel funds.

Q: Pero nung 2011, meron siyang intel fund?

P6 million. This is the appropriation, I do not know how much was released.

Q: Traditionally saan ginagamit ng OP ang intel funds?

PAOCTF is one area and there are some international agencies where we are represented involving intel gathering under the OP.

Q: Meron bang threat kasi biglang ang laki nang itinaas ng OP intel fund?

There is no such thing. The President submitted this... There is an increase of P200 million... much of that goes to PAOCTF.

Q: Bakit hindi kasama ang Pagcor at PCSO sa intel fund cut?

Because Pagcor and PCSO are not part of the national budget. The boards of these GOCCs would craft their own budget but I specifically raised questions about that on the Budget secretary and the newly formed GOCC Governance Council is supposed to review all the budgets of the GOCCs which are authorized by their boards, not by Congress.

Q: In the mean time that a review is being conducted by the GCG, Pagcor and PCSO can continue to spend intel funds?

That's the situation, yes.

Q: Pag hindi na spend yung unspent funds within the year, saan mapupunta yon?

The budget is just an authorization. Saan mapunta? Firstly, this is just an authorization. It is a misconception to say 'kung hindi mo magastos ang budget saan napupunta ang pera?' May deficit pa tayo eh. We are operating on a deficit budget and therefore the fund is not necessarily there. We have not yet achieved a balanced budget. Your question would be valid when we have a balanced budget wherein revenue and expenses would be the same, so that if you do not spend the budget you have actual cash. Not in our particular case because we have a deficit budget.

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