Chapter-6_Government-Expenditure.pptx. J

GOVERNMENT
EXPENDITURE
CHAPTER 6

Table of
Contents
1
2
3
PATTERNS AND TREND OF
EXPENDITURES
EXPENDITURES BY
FUNTION
ECONOMIC SERVICE
4
5
SOCIAL SERVICE
DEFENSE SERVICES

Table of
Contents
6
7
8
GENERAL PUBLIC SERVICE
DEBT BURDEN
GOALS OF GOVERNMENT
EXPENDITURES

Government Expenditures exert a decisive impact
on the entire company. In countries where economic
planning has gained a foothold, government spending
is one single factor that would significantly influence
their rise, stagnation, or decay, In the ultimate
analysis because of its far-reaching importance in the
nation’s economy, public spending can be
metamorphosed into an instrument for either progress
or retrogression.
INTRODUCTION

Evaluation of the expenditure program in terms of the following
fiscal goals:
• To promote a desirable
level of employment
level of output
level of income and its
“proper” distribution
level of prices

What is Expenditure?
Expenditures are obligations that
the government incurs that must be
paid during or after the year when
they were incurred. The term
“expenditure” is more generic
than “expense” in that the latter
refers to items of expenditure that
are current.

What is meant by
Expense Class?
Expense Class refers to
the classification of
expenditures by the nature
or type of obligation.

PATTERNS AND
TREND
EXPENDITURES

Wagner's law on government
expenditures - accounts for
accelerated government spending. In
effect, these expenditures are all
directed to the harnessing and
exploitation of available resources for
speedy growth.

• The Growth in population;
• Inflation (or the increase in the prices of
goods and services purchased by the
government), and
• The increasing demand for economic and
social development projects.
Major Factor’s affecting the
increasing expenditure trend are:

1.Personal services, like salaries and wages, social
security contributions, overtime pay;
2.Maintenance and other operating expenditures, such as
traveling expenses, supplies and material, water,
illumination and power services, rent;
3.Interest Payments;
4.Allotments to Local Government Units;
5.Subsidies to government-owned and controlled
corporations.
Major Current Operating
Expenditures of the
National Government

1.Limit the growth of current operating expenditures
with provision for inflation adjustments;
2.Encourage cost reduction measures in operation,
particularly overhead expense items;
3.provide adequate maintenance finds for infrastructure
facilities; and
4.Control the growth of spending for personal services
within the level that can be sustained by available
resources.
The Government’s Policy
Regarding Current
Operating Expenditures

The capital outlays of the national government are appropriations spent for
the purchase of goods and services, the benefits of which extend beyond the
fiscal year and which add to the assets of government, including investments in
the capital stock of government-owned or controlled corporations and their
subsidiaries. The capital outlays of the national government may be broadly
classified as follows: infrastructure outlays, equity contributions to government
corporations, capital transfers to local government units, and other capital
outlays. Capital expenditures, particularly those classified as capital goods or
durable goods to be used for non-military and productive purposes, such as
construction of roads and bridges, dams, power and irrigation works, schools
and hospitals, are generally desirable because of their high multiplier effect on
the economy, i.e., they stimulate the growth and expansion of economic
activities of the private sector and facilitate the integration of industries.
The Capital Outlays of the
National Government

Infrastructure expenditures refer to the disbursement of funds
for the construction of various basic public works of the country,
such as roads, ports, airports, water supply, irrigation, and other
capital investments, the benefits of which extend to the general
public. In the national budget, infrastructure expenditures
generally refer to the capital outlays of the Department of Public
Works and Highways and the Department of Transportation and
Communication, the School Building Program of the Department
of Education, Culture and Sports, and the national irrigation
projects of the Department of Agriculture.
Infrastructure
Expenditures

The other capital outlays of the government consist of
land acquisition of vehicles, aircraft, water vehicles,
equipment, furniture, fixtures.
What Constitute the other
Capital Outlays of the
Government?

Capital transfers to local government units (LGUs)
pertain to the portion of the Internal Revenue Allotment
(IRA) which accrue to LGUs equivalent to not less than
twenty percent (20%) of their IRA allocations,
earmarked for development projects such as the
construction/improvement, repair and maintenance of
local roads, concrete barangay roads/multi-purpose
pavements, and the rehabilitation and improvement of
communal irrigation projects/systems.
Capital Transfer to Local
Government Units (LGUs)

Equity contributions to government corporations refer
to the national government investments in the
authorized capital stock of government-owned or
controlled corporations
The Equity Contributions to
Government Corporations

Interest payments represent the cost of borrowed funds
which form part and parcel of the cost of the items
financed by the loan. Interest payments are, therefore,
considered as the real expense item in the budget.
Interest Payments

The National Government Budget is allocated
according to the following major sectors: social
services, defense, general public services, and
debt burden.
The National Government
Budget Sectoral Allocated

1.communications, roads and transportation
facilities;
2.agriculture, agrarian reform and natural
resources;
3.water resources development and flood control;
4.trade industry;
5.power and energy; and
6.tourism.
Provision for Economic
Services include those for:

Agriculture and Natural
Resources

Despite the government's avowed objective and determination to
"conserve and develop the patrimony of the nation" the natural
resources of the country are still basically untapped, such that the
majority of the people remain poor. The reforestation program of the
government is beset with problems posed by the "kaingin" system
and indiscriminate logging, and the gap between reforestation and
deforestation seems to be widening. The Economic Research Journal
of the University of the East editorialized in one of its issues thus:
"The conservation of our natural resources is a critical issue of
development and survival. On it depends the present and future
growth of the national economy. Thus, the challenge to our people
and to the national leadership is to adopt policies and measures that
will ensure the conservation of our natural resources for the present
and future generation. "
Forest Resources

The Philippines has one of the world's richest fishing
grounds, with some 2,000 fish species. Despite this almost
unlimited wealth the country suffers from a perennial fish
shortage. According to a special report the annual fish
production of the country trails behind its domestic
consumption requirements. Since 1962, the Philippine
government has undertaken a deep- sea fisheries program to
expand production to the level of the country's consumption
requirements and possibly for export. The project also
emphasizes technical assistance, marketing, refrigeration,
canning, artificial spawning, and doing away with dynamite
fishing.
FISHERIES

1.DA
2.DAR
3.Philippine Crop Insurance Corporation
4.Agricultural Credit Policy Council
5.Support to Farmers and Fisherfolk
6.Farm-to-Market Roads
7.Rice Competitiveness Enhancement Fund
8.National and Communal Irrigation Systems
9.Financial Subsidy to Rice Farmers
10.National Rice Program
Additional instances of the budgets
that the agriculture sector allocates:

• Public Works Expenditure
• Railroad Transportation

The allocation of government funds for construction,
maintenance, and infrastructure projects, is pivotal
for societal development. It drives economic growth
by creating jobs and fostering investment, while also
promoting inclusive development. Infrastructure
projects improve connectivity, regional progress, and
overall quality of life, while social investments
enhance education, healthcare, and community
welfare.
Public Work
Expenditure

Another vital artery of the nation's economy. This
holds true whether in times of peace or during
war and other periods of emergency. The railroad
is a "reversible coat" which transports not only
goods and people but also troops and military
supplies and hardware.
Railroad
Transportation

1.Network Development Program
2.Asset Preservation Program
3.Bridge Program
4.Subsidy for Mass Transport
5.Mindanao Railway Project
6.Rail Transportation
7.Air Transportation
8.Sea Transportation
9.Land Public Transportation
10.Maritime Infrastructure
Additional instances of the
budgets that the infrastructure
sector allocates:

Among the twenty or so officers under
the Department of Commerce and Industry,
the important ones are the following:
Bureau of Commerce, Bureau of the
Census Authority, Rice and Corn Board, and
the Board of Travel and Tourist Industry.
OFFICES AND FUNCTIONS

The Bureau of Commerce is for all purposes the
implementing arm of the department in the
development, promotion and regulation of the Philippines
commerce. The Bureau of the Census and Statistics is
charged with the all-important function of conducting
demographic, economic, educational and other census
implementation by the authorities. The Securities and
Exchange Commission is responsible for codifying,
listing, and classifying all types of business entities
according to nationality of incorporators, types of
business engaged in, capitalization, etc. The
Cooperatives Administration Office is mandated by law
to foster, promote, develop and regulate the operation
of all non-agricultural cooperatives in the country.

The National Cottage Industries Development
Authority is charge with the vital function of
developing and promoting small-scale, labor-intensive
cottage industries while the Rice and Corn Board is
charged with the task of studying and recommending
measures for the improvement of the rice and corn
industry and hastening the transfer of control over
this industry from alien to Filipino hands. The Board
of Travel and Tourist Industry is charged with the
function of promoting tourism and developing the
country’s tourist attractions.

Among the officers falling under the category, the
following are the most important: National Economic
Council, National Science Development Board,
Presidential Arm on Community Development,
Electrification Administration, the different
development authorities, such as the Mindanao
Development Authority and the Central Luzon-Cagayan
Valley Development Authority, the University of the
Philippines, the Board of Industries, etc.
OFFICES AND FUNCTIONS

The National Economic Council is assigned the task of
formulating the country’s economic policies. The
National Science Development Board has the function of
optimizing the use of science and technology for overall
socio-economic development and the Presidential Arm on
Community Development is charged with responsibility of
developing the rural communities as the foundation-stone
of progress and prosperity. On the other hand, the
Electrification Administration is charged with the function
of providing much-needed electricity to the population,
especially those living in the rural areas, and the
different development authorities were created to
promote regional development in the country.

The Board of Industries was establish to evaluate and
encourage the development of basic industries and to grant
tax exemption privileges to these industries. The
University of the Philippines was put up to be the
forefront and torch-beater of education in the country. Its
affiliate offices, such as the National Research Council of
the Philippines, are the dedicated to the promotion of
scientific research.
Other offices and funds classified to be contributing to the
function of other economic development are the following:
Department of National Defense insofar as its economic
projects are concerned, Foreign Assisted Projects Peso-
Supported Fund and the Reparations Commission.

1.education, culture and manpower development;
2.health services;
3.social security, welfare, and employment;
4.housing and community development; and
5.land distribution.
Allocation for Social
Services include those for:

Three Major
Items:
1
2
3
EDUCATION
PUBLIC HEALTH AND
MEDICAL CARE
Labor and Welfare

• Development of human talents
- Pursuit of knowledge for its own sake
- an end in itself - not a means to an end
• The Gearing of the Educational System to the
requirement of socio
-economic growth
- not as an end in itself but as a means to an end
Board Objectives of
Expenditures of Education

The substantive functions of the Philippine educational
system are entrusted to the Department of Education
which “aims to provide efficient and effective leadership
in the administration and supervision of the bureaus and
agencies under it for the cultural, social and economic
development of the country”. The Philippines Constitution
ordains that “All schools shall aim to develop moral
character, personal discipline, civic conscience , and
vocational efficiency and to teach the duties of
citizenship.
Philippine Educational
System

• To inculcate moral and spiritual values inspired
by an abiding faith in God:
• To develop an enlightened, patriotic, useful and
upright citizenry in a democratic society
• To instill habits of industry and thrift and to
prepare individuals to contribute to the economic
development and wise conservation of natural
resources
Board and Specific aims
of Education:

• To maintain family solidarity, to improve
community like, to perpetuate all that is
desirable in our national heritage and serve the
cause of world peace
• To promote sciences, arts, and letters for the
enrichment of life and recognition of the dignity
of the human person
Board and Specific aims
of Education:

the policy-making body of the
Department of Education.
Board of National
Education

• To formulate general education objectives and
policies, coordinate the curricular offerings,
activities and functions of all educational institutions
with a view to carrying out the provisions of the
Constitution and to accomplish an integrated, well-
rounded, nationalistic and democracy-inspired
educational system.
• To establish guidelines, policies, and criteria on the
basis of which the examinations, evaluation and
approval of textbooks shall be made.
Functions:

• To compile educational statistics, keep records on
education, conduct researchers, surveys, and studies
on educational conditions and problems; evaluate the
effects of national educational policies.
• To secure data and information from all government
offices and entities and educational institutions, public
and private, and to consult and confer with the
officers and personnel thereof.
• To submit an annual report to the President and to
Congress not later than January thirty-first of each
year which shall include a compilation of the national
educational system and re- commendations on the
improvement of the educational system of the country.

• DepEd
• SUCs
• CHED
• TESDA
• Universal Access to Quality Tertiary Education
• Basic Education Facilities Program
• Educational Assistance and Subsidies
• Basic Education- Learning Continuity Plan
• DepEd Computerization Program
Here are a few instances of
how the education sector has
allocated its budget:

Public Health and
Medical Care

Charge with the responsibility of carrying
out the program of the government which
embraces public health, disease
prevention, cure and rehabilitation, health
and medical education practices.
The Department of
Health

The allocation or distribution of resources, such as
funding, equipment, or personnel, towards health-
related initiatives, programs, or institutions. This
term is often used in discussions about healthcare
financing, public health policies, and resource
management within healthcare systems. Effective
health appropriation is crucial for ensuring
equitable access to healthcare services, addressing
public health challenges, and improving overall
health outcomes within a population.
Health Appropration

1.National Health Insurance Program (PhilHealth)
2.Health Facilities Enhancement Program
3.Purchase of drugs, medicines, and vaccines for
government facilities
4.Human Resource for Health Deployment Program
5.National Health Immunization Program
6.Assistance to Indigent Patients
7.New Health Programs/Projects for COVID-19 Response
Additional instances of the
budgets that the health sector
allocates:

Labor or manpower is a productive factor whose importance
in the production process is matched only by land. It is the
country's greatest and most indispensable resource - in
fact, it is its main power. Progress can emanate only from
ideas and ideas In fact, the very freedom can originate
only in people's minds. that society enjoys can grow and
flourish only when people have freed themselves from the
tentacles of ignorance. Change must begin with people. As
a former chairman of the National Economic Council once
said, "underdeveloped countries are directly traceable
to underdeveloped peoples."
A. Labor

• It is the central “actor” or participant in any
development process, and
• It is the recipient of the fruits of economic
growth.
The Development of Human
Capital is Important for Two
Reasons:

The Department of Labor is charged with the
“administration of the various existing labor laws and
such other laws which may be enacted by Congress.
The major areas of activity with which the
Department is primarily concerned are: promotion of
industrial peace, employment and manpower
development and labor law administration”.
The Department of
Labor

• Supervision over Bureau of Labor Standards and
the Labor Standards Commission attach to it;
• Administration and enforcement of laws related to
the welfare of Filipino industrial, commercial and
agricultural workers here and abroad;
• Initiation, study, formulation and execution of the
Government’s labor policy;
Major Function:

• Establish of a national system of free public employment
offices as an integral part of the national program for the
achievement and maintenance of maximum employment
and the development and use of manpower resources;
• Compilation and analysis of labor market information and
statistics; and
• Regulatory and supervisory action with respect to the
enforcement of laws relating to employment,
apprenticeship, wages and hours, women and minors,
industrial health and safety, workmen’s compensation,
labor organizations and labor relations.
Major Function:

For the forgoing functions, the Department
of Labor gets only a small sum for its
operational requirements.
The Budget of
Department of Labor

Under the Philippines budget system, welfare
expenditures include all expenses for child,
youth, and community services, and assistance
to the destitute and victims of calamities.
B. Social Welfare

The functions, powers, duties and
responsibilities of the Department of Social
Welfare are derived from the pertinent
provisions of the Revised Administrative Code,
Reorganization Plan No. 50, Executive Order No.
326, and Republic Act Nos. 1179 and 5416.
The Department of
Social Welfare

• Provide material aid to the indigent, physically
handicapped and unemployed;
• Assist in establishing self-help projects which will
substantially reduce the need for public assistance;
• Provide social work, counselling and services to assist
adults and children in adjusting to their economic
and social problems;
• Provide guidance through the courts to youths who
are placed under probation and parole;
Act 1 of Reorganization Plan
No. 50, major function :

• Provide a training program for the physically
handicapped to enable them to become self-supporting
and adjusted to economic and social problems;
• Provide for institutional care and. supervision for
children and adults where are in their own homes is
not practicable or possible; and
• Supervise and license private homes and local
charitable institutions.
Act 1 of Reorganization Plan
No. 50, major function :

• The Office of the Secretary and his Assistance,
• The Bureau of Child and Youth Welfare,
• The Bureau of Family Welfare,
• The Bureau of Vocational Rehabilitation,
• The Bureau of Field Services,
• The Bureau of Research, Training and
Special Projects, and
• The Bureau of Women’s Welfare
7 Major Offices Design of
Dept of Social Welfare :

• The lopsided growth of the country’s manpower
supply in relation to the urgent demands of the
economy for the services of technically trained
personnel.
• The unemployment and underemployment of a
very significant segment of the labor force, and
• The “brain-drain” problem, which deprives
the economy of its brain and brawn
For the Department of Labor, the
Following Compromise its Major
Problems:

1
2
Additional instances of the budgets that the
social welfare sector allocates:
1.Pantawid Pamilyang Pilipino Program
(4Ps)
2.Unconditional Cash Transfer Program
3.Social Pension for Indigent Senior
Citizens
4.Supplementary Feeding Program
5.Protective Services for Individuals and
Families in Difficult Circumstance
6.Sustainable Livelihood Program

National Defense Expenditures
represent two broad categories; one,
for national defense proper and
second; for the maintenance of
peace and order. These two broad
items of expenditure are
complimentary.

The Armed Forces of the Philippines
(AFP) is the guardian of the nation's
security. It is charged with the important
function of providing maximum defense
and security to the country, both internal
and external.
A. The Armed Forces of the Philippines

• The Philippine Army (PA)
• The Philippine Constabulary (PC)
• The Philippine Air Force (PAF)
• The Philippine Navy (PN)
Major Commands:

Two basic effects of defense or war
expenditures:
• Opportunity cost, and
• Fiscal Effects
- effects upon employment
- effects upon output and consumption, and
- effects upon prices
B. Effects of Defense Expenditures

Expenditures for Defense includes those that
support the general effort to ensure national
security, stability and peace which are
indispensable to economic growth and
development.

1.Department of Justice
2.Bangsamoro Autonomous Region in
Muslim Mindanao
Additional instances of the budgets
that the defense sector allocates:

What are the major
sources of funds to
finance the
national budget?

Revenues refer to all cash inflows of the national
government treasury which are collected to
support government expenditures but do not
increase the liability of the NG. Revenues consist
of tax and non-tax collection.
What are revenues and
their major classification?

A tax is compulsory contribution mandated by law
and exacted by the government for a public
purpose. The major tax collecting agencies of the
national government are the Bureau of Internal
Revenue and the Bureau of Customs.
What is a tax? What
agencies are authorized to
collect taxes?

What are the major
classes of tax
revenues?

1
Taxes on income and profits are imposed on all taxable income
earned or received by a taxpayer, whether as an individual,
as a partnership, or as a corporation, during a particular
period of time, usually lasting one year.
Taxes on domestic goods and services are imposed on the use or
sale of locally manufactured goods as well as local services
availed of the domestic territory.
2
4
3
5
Taxes on International trade and Transaction includes import and
customs duties, and other international trade-related collections
of the government.
Taxes on property are imposed on the ownership of wealth or
immovable property levied at regular intervals and on the
transfer of real or personal property.
Other Taxes primarily include collections from the vehicles tax,
immigration tax and forest charges.

Non-tax Revenues refer to all other
impositions or collections of the government in
exchange for services rendered, asset
conveyed, penalties imposed, etc.
What are Non-Tax
Revenues?

The privatization program was launched by the
government in 1987 pursuant to Proclamation No. 50
to sell Non-Performing Asset (NPAs) of government
financial institutions and government-owned and
controlled corporations transferred to the national
government. This program enables the NG to divest
itself of assets that would be more productive in the
hands of the private sector.
What is the privatization
program?

Borrowings refer to funds obtained from repayable
source, such as loans secured by the government from
financial institutions and other sources , both
domestic and foreign, to finance various government
projects and activities.
What is borrowings?

Domestic borrowings are funds obtained from sources
within the country. Domestic borrowings of the
national government are usually made through the
auction of treasury bills, notes and bonds to the
public.
What is Domestic
Borrowings?

Foreign borrowings are funds obtained from sources
outside the country, such as Asian Development Bank
(ADB), International Bank for Reconstruction Development
(IBRD), Overseas Economic Cooperation Fund (OECF), etc.
Foreign borrowings can be obtained through loans secured
from foreign financial institutions or through the flotation
of government securities in the international market.
What is Foreign
Borrowings?

What does the
Government
Borrow?

Constructive cash receipts are foreign loan
proceeds in the form of goods and services for
which no cash is remitted to the national
treasury. Such goods and services has been
paid directly by the lender of the supplier.
What are constructive cash
receipts?

Net Borrowings refer to gross
borrowing less debt amortization.
What are Net Borrowing?

1.General Administration and Support;
2.Support to Operations, and
3.Projects.
The National Government
Budget is Broken Down into the
following cost categories:

Expenditures for general administration
represent those that are normally considered
as agency overhead (i.e. the cost of general
supervision) which the agency will incur to
exist as a unit.
Support to operations refers to those
activities that facilitate the performance of
the agency's mandated functions and services.

Expenditures for operations are those that go
to regular activities directly addressing the
agency's mandates. They include expenditures
for programs involving the production of goods;
delivery of public services; regulation of
societal activities; conduct of basic
governance; or provision of general
management and supervision of the entire
government bureaucracy.

Project expenditures are those that fund
activities which result in the
accomplishment of identifiable outputs
within a designated period. Project
expenditures may be sourced from foreign
assistance or from local funding.

The categorization of the budget by
functional cost components allows for a
better analysis of government
expenditures to focus on more priority
needs thus improving the quality of
government spending.

Employment in the
Government
The debt service expenditure of the
national government is already high. It is
definitely higher than what the government
has been appropriating for the Department
of Labor, the Department of Commerce and
Industry and for Other Economic
Development.

General Public Services
Expenditures are those that
spent for:
1.general administration such as general government
stipulation fiscal affairs, foreign affairs and international
commitments, electoral, audit, civil service and
lawmaking functions; and
2.public order and safety including various functions
pertaining to law enforcement, maintenance of public
order and safety and political administration.

Expenditures for Debt Burden are
those that go into servicing of
government’s regular and assumed
debts from domestic and foreign
sources, including interest payments.

1
2
Debt Services refers to the sum of the
debt amortization and interest payment
on foreign and domestic borrowings of
the national government or the public
sector. Under the current system of
budgeting, only interest payments are
treated as part of the expenditure
program because it represents as a real
expense item, the cost of borrowed
funds, which should form part and
parcel it of cost of the items financed
by the loan. Debt principal is treated as
an off-budget item because it is merely
a return of borrowed funds; hence it is
reflected as a financial account.

1
2
Debt Service consists of the repayment
of interest and related costs. The
payment of principal amortization is no
longer included in the budget, but it is
included in the cash outflow. The reason
for this is that principal payment is a
financing transaction rather than an
expenditure.

GOALS OF
GOVERNMENT
EXPENDITURE

• Promoting a desirable level of
employment
• To promote a more desirable level of
output
• To promote a more desirable level of
income and its proper distribution
• The promotion of a more desirable
level of prices

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