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Reform does not Follow a Straight Line


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Reform does not Follow a Straight Line

  1. 1. Reform Does Not Follow a Straight Line Secretary Joel Rocamora, National Anti-Poverty Commission November 6, 2013 (Note: Below is a slightly edited version of a speech made by Secretary Rocamora at the National Conference on the State of the Reform Agenda of the Aquino Administration, at the Hyatt Hotel last November 5, 2013. The conference was organized by the Ateneo School of Government and Friedrich Ebert Stiftung.) A quantum leap in reform is happening. It is happening because the Aquino administration made a decision to take a politically risky step to go after powerful politicians in the Senate and House after they were exposed in the Napoles scam. This step is supported by public opinion. But if you listen to some media commentators, they make it sound as if the administration is resisting reform. From being the main fighter against corruption, PNoy is being made to look like the “king of pork”. The power of legislators to “fetch” resources from the national government is one of the pillars of our now more than a century old political system. The dependence of local on national politicians, the backbone of patronage, is built on the ability of legislators to deliver projects and other resources. Pork barrel (PDAF) provides these resources. Legislators, until now, had absolute discretion on the allocation of PDAF. It is this absolute discretion which has been taken away from legislators by the administration. This is what the President means when he says PDAF is gone. Critics who say pork remains in the budget focus on the fact that legislators can still propose projects to the departments. What they do not realize or do not want to admit is that legislators now have to follow the normal budget process within the department, to the DBM and the legislative budget process itself. Since it is the department which will implement the projects, legislators cannot pick the NGOs and LGUs, a key step in deriving as much “pork” as possible from the barrel. Legislators, under this system have much less power than before. In the 2014 budget passed by the House, there are still allocations per district in the budgets of departments where the P25 billion PDAF fund was transferred. The allocations for “hard” and “soft” projects is considerably less than before. This maintains a degree of parity across districts from the larger, more powerful ones in Luzon to the smaller ones in faraway Mindanao. What would make these allocations less “pork-like” is if the mayors in the district can also propose specific projects out of these allocations. Thieves Strike Back The President’s powerful speech October 30 restores some order to the cacophony of voices on the issue of “pork”. The issue is stealing. Powerful politicians who face charges of stealing billions from pork barrel funds are striking back. They have succeeded in muddling the issue. As Pnoy put it: “If you can’t explain it, muddle
  2. 2. it; if you can’t deodorize it, make everyone else stink; if you can’t look good, make everyone look bad. You have heard what they are saying: that we are all the same.” One of the advantages of corrupt politicians is the corruptibility of our media. If you want to know which journalists have been bought, look at how the reports and columns of some read alike down to the last period and comma. The bigger problem is that even honest journalists such as Conrad De Quiros and Jarius Bondoc have bought the “we are all the same” line of the thieves and targeting the President’s “pork”. Because they are respected by the middle class, some of those who are serious about fighting corruption are now directing their fire at the president and key cabinet secretaries such as Butch Abad. Does the President in fact have “pork”? If you define “pork” as discretion over the disbursement of government funds, yes, the President has a lot of “pork”. But we have to be careful about where this discretion lies, and whether it makes sense to take this power away. Commentators such as Liling Briones call all Special Purpose Funds (SPF) presidential pork. But the President does not have discretion over the allocation of the largest SPF’s including Internal Revenue Allotments (IRA) for local governments which are allocated according to a formula and debt service payments which are determined by prevailing interest rates. Briones, who was national treasurer under Erap, knows this and should stop using this cheap propaganda trick. There are also funds for contingencies such as earthquakes and typhoons and local military encounters. While there are contingency funds in the budgets of national agencies such as DSWD and local governments, these funds are not enough to pay for relief and rehabilitation for massive natural disasters such as just happened in Bohol. You can’t go to Congress for funds to pay for military operations in places such as Zamboanga. As Pnoy pointed out in his speech, it would take at least four months to secure supplementary budgets from Congress. What requires more careful assessment is the Disbursement Acceleration Program. The DAP has been the focus of attack by those accused of stealing PDAF funds. There are, in fact, serious legal and other issues which are being taken up in the Supreme Court and by other commentators. I wish Ben Diokno had put his skills as an economist to better use instead of playing propagandist and attacking every single allocation of the DAP with a big brush. Since he has consistently attacked the Aquino administration, one might ask what steps he took to curb patronage and fiscal irresponsibility when he was DBM secretary in the corrupt Estrada administration. Disbursement Acceleration Program (DAP) Unlike the GMA administration, this government did not deliberately generate savings in order to create “pork” funds. Savings in 2011 and 2012 came out of considerably higher revenue, and substantial savings from expenditures as a result of anti-corruption measures. The largest came from the DPWH, historically the source of massive “leakage” and from removing the source of “pabaon” in the AFP and the PNP. Because the bureaucracy was uncertain about the anti-corruption thrust of the administration, there was a tendency to under spend.
  3. 3. Middle class reformers ask why these savings could not have reverted to the treasury or been used to cut government borrowing and/or prepay public debt. While this position makes sense from the vantage point of personal finances, it does not make good fiscal management sense. At a time when investment, domestic and foreign, is still way below regional standards, public expenditure is required to ramp up growth. High growth rates under the Aquino administration are the result of increased confidence in government buttressed by massive increases in infrastructure investment. The DAP was conceptualized in September 2011 and introduced in October 2011, in the context of the prevailing under spending in government disbursements for the first eight months of 2011 that dampened the country's economic growth. Before the DAP was introduced in October 2011, national government disbursements from January to September shrank by 7 percent year on year and was below program by 16 percent. Because of DAP and other measures, public spending in the fourth quarter of 2011 grew year-on-year by a whopping 32.5 percent and was above program by 11.8 percent. Then-NEDA Director-General Cayetano Paderanga explained the impact of DAP: “The most notable is the rapid acceleration in public construction expenditure, which grew by 49.4% in the fourth quarter, a marked reversal from the contractions in the previous three quarters. This was largely due to the government’s Disbursement Acceleration Program as well as the continuous speeding up of the implementation of various government programs and projects. The acceleration in public expenditure led to a 5.8% increase in government final consumption expenditure…” According to the World Bank, Pnoy points out, DAP contributed 1.3 percentage points to our GDP growth in the fourth quarter of 2011. For 2011-2012, a total of P142.23 Billion was released for programs and projects identified through the DAP, of which P83.53 Billion is for 2011 and 58.70 Billion is for 2012. In 2011, the amount was used to provide additional funds for programs/projects such as healthcare, public works, housing and resettlement, and agriculture, among others. While in 2012, these were used to augment tourism road infrastructure, school infrastructure, rehabilitation and extension of light rail transit systems, and sitio electrification, among others. In 2013, about P15.13 Billion has been approved for the hiring of policemen, additional funds for the modernization of PNP, the redevelopment of Roxas Boulevard, and funding for the Typhoon Pablo rehabilitation projects for Compostela Valley and Davao Oriental. For all of the hullabaloo about DAP, no one has charged that any of that money was stolen. The strongest legal challenge to DAP is the reallocation of funds to programs without specific allocations in the national budget. Its political vulnerability, providing legislators with additional allocations accounting for some 9 percent of DAP disbursements, is actually legally defensible since PDAF had specific line items in the 2011-2013 budgets. The Supreme Court still has to rule on the legality of both DAP and PDAF. Politically, these issues can be understood only in the context of the reform process. This is a process that cannot be locked into the moral certainties of middle class reformers. Reality Bites
  4. 4. Matuwid na daan is a moral imperative that continues to guide the Aquino administration. It is a commitment by the president and his cabinet to abide by the strictest standards of honesty, and to work assiduously against corruption. No accusation of corruption against members of the cabinet has been made to stick. Bobo Syjuco still has to explain from which hat he pulled his more than P800 million Batanes pork figure. But matuwid na daan cannot explain the reform process. Because reform happens within an existing, long standing political system, reform cannot be made to follow a straight line. Reform advocates who question the President’s considerable discretionary power over public finances should answer why they would trust the legislature more. It is precisely corruption in the legislature in the use of PDAF which jump started this pork reform process. Most of the reforms in public finance have come from the executive, on the revenue side, from the BIR and the Department of Finance, on the expenditure side, the DBM. Some of these reforms can be done by the Executive, others require the cooperation of the two houses of the legislature. The first step taken by this administration in its first budget submission in 2011, was the removal of CIA’s, the insertion of allocations in departmental budgets by the more powerful legislators. This was done by overestimating debt service payments and transferring these amounts to fund budget insertions. In the GMA administration, CIA’s were way larger than PDAF. In 2008, P25.9 billion; in 2009, P50.1 billion were transferred. The Aquino administration ended this practice thru the simple expedient of removing debt service payments which are automatic appropriations, from the budget submitted by DBM to the legislature. Another major reform, passing the budget on time, was a joint endeavor of the executive and the legislative branches. During the Arroyo years, from 2001 to 2010, budgets were not passed on time and had to be reenacted. The use of reenacted budgets enabled GMA to spend beyond the ceiling of the new GAA by an amount estimated at P557.71 billion for the whole ten year period. The new administration could have availed of this source of discretionary funds. Instead the DBM succeeded in submitting proposed budgets as early as July, giving the legislature ample time to pass the budgets before the end of the year. No budget has been reenacted under the Aquino administration. There are many more reforms than can be covered in this short paper. The Aquino administration has worked hard at tightening government structures and processes to minimize leakage. But precisely because it has to work with two other co-equal branches of government, good governance reforms cannot be rushed. Interbranch relations involves accommodation. Pnoy cannot “abolish” pork barrel on his own. Only the legislature, most importantly the Lower House, can do that. The Supreme Court, which has provided legal cover for pork, can change its mind and declare it unconstitutional. Changing the mind set of bureaucrats is even more difficult. The P70 million PDAF allocation of each congress person is small compared to what they can get from the budgets of DPWH and other infrastructure budgets for their districts. The 2014 allocation for Siquijor, a single district island province is P451 million; in the first
  5. 5. district of Bohol, P790 million; in the second district of Cebu, P684 million. It is out of these massive amounts that “SOP”, the euphemism for the congress person’s take, is taken. This is the “system”, one supported not by laws or executive rules but by the culture of patronage where DPWH bureaucrats expect the congress person to be the one to pick a district engineer who then is beholden to the congress person. The record is there for anyone who wants to make the effort to check the facts. The Aquino administration has been successful not in increasing the scope of its discretion over government funds, but in significantly decreasing discretion. Even the amounts available for DAP is decreasing rapidly as the absorptive capacity of the bureaucracy expands. This does not mean that we can let up on campaigns against pork and corruption. Moral exhortation and high pitch demands provide the motive force. But in the end it is detailed, evidence-based work that is most effective. #