Pork Barrel and Systemic Corruption (First of Two Parts)

October 24, 2013

by superadmin

IBON Features/ COMMENTARY | by Sonny Africa | The PDAF is actually just a small part of the vast government mechanism of patronage and pork barrel politics centred around the presidency.

(First of Two Parts)

The Napoles pork barrel scam is a sensational corruption scandal involving billions of pesos, prominent senators and representatives of congress, supposedly development NGOs, massive ill-gotten wealth and ostentatious lifestyles by the accused. The spontaneous outrage was enough to drive hundreds of thousands to gather in protest at Luneta on August 26. The scam has rightfully drawn attention to legislators’ gross abuse of the notorious Priority Development Assistance Fund (PDAF).

However the PDAF is actually just a small part of the vast government mechanism of patronage and pork barrel politics centred around the presidency. The persistence of presidential powers and discretion over hundreds of billions of pesos in public funds – including the PDAF which is really the president’s to dispense more than solely at legislators’ discretion – is the real issue. And even this is just one aspect of the most basic problem: the use of the enormous resources and power of the State for the private gain of government officials and big domestic and foreign business elites.

Undemocratic economics and politics

The Napoles scam triggered intense indignation because of its sensational circumstances but also because the massive corruption and extravagant living happens amid a deep social crisis and desperate circumstances for tens of millions of Filipinos.

The people are in the middle of the worst jobs and poverty crisis the country has ever seen. There are more unemployed, underemployed and poor Filipinos today than at any time in history – while a few families and corporations, including foreign companies, amass unparalleled profits and wealth. Manufacturing has declined to as small a share of the economy as in the 1950s and agriculture to its smallest ever. Millions of peasants still only nominally own land and remain under the sway of landlords and corporations. The privatization of social services is accelerating especially in public health and hospitals but also in education and housing.

This is because economic policies remain unreformed and are geared mainly to opening up the national economy to exploitation for profit by foreign capital and their local big business counterparts rather than to providing the jobs, incomes, goods and services needed by the people. Three decades after the supposed return of democracy to the country in 1986 the economy remains deeply and systematically undemocratic. There is severe poverty for the majority while a few domestic and foreign elites continue to prosper.

The problem is long-standing and not accidental. It is the inevitable result of an undemocratic political system where elites hold on to political power to preserve and promote their economic interests at the expense of the majority of Filipinos. This is done through the facade of elections as well as outright violent repression. Oligarchic, anti-nationalist and anti-people politics cannot but result in an elite-dominated, foreign-biased and exploitative economy.

This unjust political and economic arrangement – and the Aquino administration in particular – is fully supported by the United States (US) as long as it serves their imperialist agenda. The US is the Philippines’ biggest foreign investor and trading partner implying that its corporations benefit the most from the country’s raw materials, markets and labour power. At the same time the US is the sole foreign power using the country as its forward outpost for projecting military force in the region. It is also the government’s biggest provider of military aid and foreign grants aside from being a vital source of diplomatic and international legitimacy.

Undemocratic budgets

The State is the single biggest and most powerful entity in the country. The national government (NG) budget in turn is the biggest concentration of revenues and spending in the nation and hence among the most potent instruments for influencing the government and the economy. This is a strong motivation for vested interests to ensure that they control the budget.

The budget system is not transparent and has poor accountability by design. This opaqueness serves the national and local political elites who would use public resources for self-serving purposes. The budget is moreover fundamentally regressive with, for instance, the poor bearing a disproportionate tax burden while the rich and big corporations benefit disproportionately from economic services. In these ways, the prevailing lack of democracy is reflected in the budget.

The most basic rule in the use of public funds is articulated in Article VI, Section 29 of the 1987 Constitution: “No money shall be paid out of the National Treasury except in pursuance of an appropriation made by law.” The NG budget process is supposed to follow the doctrine of separation of powers and the principle of checks and balances. These seek to prevent the concentration of authority in one person or branch of government which may lead to the abuse of power or gross errors in decision-making. This is a crucial point of democratic principle against the infallibility of any one person – such as the President – or branch of government.

The prescribed budget process begins with budget preparation where the executive branch prepares the budget and submits this to Congress. The next step is budget authorization where the budget is reviewed, with public hearings, first by the House of Representative (HOR) which drafts the General Appropriations Bill (GAB) and then the Senate. The HOR and Senate reconcile their versions in the Bicameral Conference Committee and the final GAB approved by Congress is submitted to the president for signing into law as the General Appropriations Act (GAA). The GAA defines ‘appropriation’ as the authorization of payment for goods and services out of government funds under specified conditions and for specified purposes.

After this is budget execution where government departments or agencies prepare their work and financial plans according to the GAA. The Department of Budget and Management (DBM) releases funds to agencies for the implementation of programs and activities – most commonly by issuing Special Allotment Release Orders (SAROs) and then Notices of Cash Allocation (NCAs). The SARO basically authorizes the agency to incur an obligation of a particular amount while the NCA refers to the actual amount that the agency can withdraw from a government bank to cover the obligation.

Finally there is budget accountability where the departments and agencies conduct various performance reviews and financial audits on a monthly, quarterly and annual basis. The Commission on Audit (COA) plays a crucial role here as the constitutionally independent auditor of government finances providing checks and balances such as on the executive branch.

Presidential pork powers

However the prescribed budget process is subverted by various laws and practices that render the supposed Congressional power of the purse meaningless and that give the President hundreds of billions of pesos in pork barrel. The President benefits from a series of laws that give the executive vast powers at the expense of the legislature, the doctrine of separation of powers, and the principle of checks and balances.

The President uses vast lump sums funds without Congressional oversight. This is by virtue of every GAA (or NG budget) passed annually by a compliant Congress which contains hundreds of billions of pesos in lump sum funds in PDAF, Special Purpose Funds (SPF), and regular agency budgets. SPFs are appropriations for purposes not yet identified during budget preparation; the PDAF was considered part of SPFs until 2013.

The President uses unprogrammed funds (also part of SPFs) and confidential and intelligence funds (under agencies) in the NG budget without oversight. The President also declares unused or unreleased appropriations as ‘savings’ and uses these for other purposes within the executive branch. The President, through the DBM, can also delay or outright withhold the release of authorized appropriations. All these are by virtue of Executive Order (EO) No. 292 or the Revised Administrative Code (RAC) of 1987 (Book VI). Unprogrammed funds are supposedly only spent when additional revenues or foreign funds are generated.

The President also uses various off-budget items without oversight. These include the Malampaya Fund, the President’s Social Fund with a contribution from the Philippine Amusement and Gaming Corporation (PAGCOR), the Charity Fund with a contribution from the Philippine Charity Sweepstakes Office (PCSO), and Motor Vehicle Users’ Charge (MVUC) fund. These are by virtue of Presidential Decree (PD) 910 (Malampaya Fund), Republic Act (RA) 9487 (PAGCOR), RA 1169 (PCSO) and RA 8794 (MVUC).

All these funds are based on laws drawn up during the Marcos dictatorship which ensured that power especially over public resources was concentrated in the executive and in particular the president. Although drawn up during the Corazon Aquino administration and the supposed return of democracy, EO 292 draws heavily from the Marcos regime’s PD 1177. PAGCOR was established by PD 1067-A and PD 1869, PCSO by Batasang Pambansa (BP) Blg. 42 and PD 1157, and the MVUC is from an earlier road tax under BP 74.

The conventional definition of pork barrel imported from the US – i.e. of legislators deciding on projects for their constituencies – does not capture this concentration of fiscal power in the chief executive and so cannot capture the corresponding abuse of public funds. In the Philippine context, pork barrel is better understood as public funds vulnerable to use for patronage and partisan politics and, at worst, corruption because of the undue discretion of government officials over these. More to the point and given current laws and practices, pork barrel refers to the public funds that the President can dispense to legislators, agencies, local government units and beneficiaries at his discretion, for purposes that he can define unilaterally, and even with only a semblance of legality.

Understood in this way the presidential pork barrel sums to at least Php1,134.8 billion. (See Table) This includes Php975.18 billion in the NG budget consisting of: the Php25.2 billion of the PDAF (albeit distributed to agencies as part of its supposed ‘abolishment’), Php294.0 billion in SPF lump sums, Php235.3 billion in regular agency budget lump sums, Php139.9 billion in unprogrammed funds and Php280.8 billion in savings. The off-budget items combined are worth Php159.6 billion including: the Php137.3 billion Malampaya Fund; Php2.0 billion PSF (PAGCOR); Php8.1 billion Charity Fund (PCSO); Php10.7 billion MVUC; and Php1.5 billion CHED Higher Education Development Fund. These figures use the Makabayan coalition’s House Resolution No. 298 calling for the abolition of pork barrel as a starting point. (Next: Pork Barrel Abuses)

Table. Indicative Presidential pork barrel estimates (Php billion)

1) National government budget 1.   PDAF
(c/o President via legislators)
25.24 B (2014p) ‘Transferred’ to DPWH (9.65 B), DSWD (4.71 B), DOH (3.69 B), DOLE/TESDA (3.69 B), CHED (2.66 B), DepEd (1.02 B)
2.   Special Purpose Funds (SPF)
(c/o President)
293.98 B (2014p) 120.50 B – Pension and gratuity fund80.71 B – Misc Personnel Benefits Fund

46.69 B – Budgetary support to govt corps

19.70 B – Allocation to LGUs

14.00 B – Support to infrastructure

7.50 B – Calamity Fund

2.48 B – E-Govt Fund

1.00 B – DepEd/School Building Program

1.00 B – Contingent Fund

0.40 B – Feasibility Studies Fund

3.   Regular agency budgets
(c/o President/cabinet)
235.28 B (2014p) 62.60 B – DSWD/CCTs*44.63 B – DepEd/School Buildings

22.68 B – DOH/Additional PhilHealth

13.30 – DOH/Health Facilities Enhancement

12.00 – DA/Farm-to-market roads

11.70 B – DA/AgriPinoy: Rice, corn, HVC, l’stock

11.30 B – Various/Infrastructure projects

7.22 B – Various/PAMANA

6.30 B – DAR/support services & FAP px (CARP)

5.00 – CHED/Lump sum for SUCs

5.00 B – NEDA/PPP capacity-building project

5.00 B – DOTC/PPP strategic support fund

4.98 B – DPWH/ PPP strategic support fund

23.57 B – DPWH/Right of way, feasibility study/project development; DA/National irrigation projects, ACEF; DAR/Tulay ng Pangulo para sa Kaunlarang Pang-Agraryo; DSWD/Sustainable livelihood; Various intelligence funds, OVP/Implementation of priority programs and projects

4.   Unprogrammed funds
(c/o President)
139.90 B (2014p) 56.35 B – Support for infrastructure projects and social programs30.00 B – Risk Management Program

25.00 B – Debt Management Program

16.12 B – Support to FAPs

10.89 B – AFP Modernization Fund

1.00 B – General Fund Adjustments

0.50 B – People’s Survival Fund

0.04 B – Budgetary Support for GOCCs

5.   ‘Savings’
(c/o President)
280.78 178.06 B – Unobligated allotments38.12 B – Unreleased appropriations

64.60 B – ‘Overall savings’

2) Off-budget items 6.1   Malampaya Fund
(c/o President)
137.29 B (2013p) 173.00 B (collected since 2002)
6.2   President’s Social Fund – PAGCOR
(c/o President)
2.03 B (2012) 8.11 B (contributed over 2009-2013p)
6.3   – Charity Fund/PCSO
(c/o President)
8.11 B (2012) 30.07 B (contributed over 2009-2012)
6.4   Motor Vehicle Users’ Charge (MVUC)
(c/o President)
10.69 B (end-2012) 90.72 B (collected over 2001-2012)
6.5   CHED Higher Education Devt Fund
(c/o President)
1.47 B (2012)
TOTAL   1,134.77 B

Sources: Collated using data from Makabayan HR No. 298, Commission on Audit (COA), and Budget of Expenditures and Sources of Financing (BESF) 2014