NG’s use of GOCCs’ excess funds flagged
By Kyle Aristophere T. Atienza, Reporter
BUDGET ANALYSTS on Monday flagged the National Government (NG) for diverting excess funds from state-owned companies, noting that the move may compromise their services while the funds may likely be used by politicians as the 2025 polls near.
The move is a populist approach to addressing the fiscal situation, with the government refusing to push for new taxes despite implementing new programs and projects, they added.
However, the Department of Finance (DoF) in a statement defended the move, saying that tapping “unused and idle” funds of GOCCs is a “more prudent fiscal option than borrowing more or imposing taxes.”
Data from the Bureau of the Treasury (BTr) showed that the Philippine Health Insurance Corp. (PhilHealth) and the Philippine Deposit Insurance Corp. (PDIC) in May remitted P20 billion and 30 billion, respectively, to the NG — thanks to an overlooked provision in the 2024 national budget law authorizing a cash sweep from government-owned and -controlled corporations (GOCCs).
Zy-za Nadine M. Suzara, a public budget analyst and former executive director of policy think tank Institute for Leadership, Empowerment, and Democracy, said the move should be a cause for public concern since it “compromises their ability” to deliver their mandated services.
Initially, the Executive branch requested only P281.91 billion in unprogrammed funds in the then-proposed 2024 national budget.
But in the 2024 General Appropriations Act (GAA) or the final version of the national budget that President Ferdinand R. Marcos, Jr. signed in December 2023, unprogrammed funds ballooned to P731.45 billion, prompting several legislators to file a case before the Supreme Court. The case is still ongoing.
From the usual three sources of unprogrammed funds such as excess revenue collections, new revenues from tax or nontax sources, and approved loans for foreign-assisted projects, the 2024 GAA also included fund balance of GOCCs with consideration of their disbursement in previous years.
“Those funds were appropriated for a reason. The solution to poor spending is not to keep taking out the funds but to improve the capacity of institutions to efficiently deliver their respective mandates,” Ms. Suzara said.
She noted tapping the funds of the GOCCs is very similar to what legislators initially wanted to do in the original version of the Maharlika Investment Fund, which received seed funding from the Land Bank of the Philippines and the Development Bank of the Philippines.
“This is in fact worse than the earlier version of Maharlika because it gives blanket authority to the National Government to do a cash sweep of just about any GOCC that’s unable to disburse funds,” she explained “At least in Maharlika, the GOCCs were identified in the bill.”
Ms. Suzara said if GOCCs continue to underspend, then it is very likely that they will remit more funds to the Treasury to finance the long list of items under unprogrammed appropriations in the 2024 budget.
“It is ironic that budget items in the unprogrammed appropriations appear to be more of a priority as election nears when in reality, the unprogrammed appropriations is supposed to be just a standby fund for things that aren’t funded in the programmed appropriations,” she added.
“If this is left unchallenged, then we can expect this to continue as the national budget grows annually.”
Economic managers are proposing a P6.352-trillion national budget for 2025, a 10% increase from this year’s P5.768-trillion budget.
Cielo D. Magno, a professor at the University of the Philippines School of Economics who had served as Finance undersecretary under the Marcos Jr. administration, said what the Congress did at the bicameral conference for the 2024 national budget was “unconstitutional” because it was in effect “trying to amend existing laws and charters of GOCCs by inserting a provision in the GAA to finance the unappropriated portion of the GAA.”
“Congress expanded the budget significantly through the unappropriated portion and tried to find the money to finance it by getting the GOCCs’ reserved fund,” she said in an e-mail. “This happened during the bicameral meeting, not during the actual deliberation/consultation of the proposed 2024 budget.”
The move shows the “opaqueness” of the budget process, the opportunities for abuse, and the lack of accountability, she noted.
In line with this year’s GAA, the DoF last February issued Circular 003-2024 which set the guidelines for financing unprogrammed appropriations sourced from the fund balance of GOCCs.
Citing the circular and the GAA, the DoF asked the PhilHealth to remit its unutilized funds worth P89.9 billion to the Treasury.
The landmark Universal Health Care (UHC) Act mandates the state insurer to use its excess funds to boost the benefits of its members and reduce the amount of their annual contributions.
“No portion of the reserve fund or income thereof shall accrue to the general fund of the national government or to any of its agencies or instrumentalities, including government-owned or controlled corporations,” according to Section 11 of the UHC law.
‘DOES NOT AFFECT VIABILITY’
The DoF defended the move to transfer funds from PhilHealth and PDIC to finance unprogrammed appropriations.
“The move does not affect the viability of participating corporations. It does not impair their delivery of services,” it said.
The DoF said PhilHealth and PDIC’s respective boards “approved” the return of excess and unused funds. “The result promotes the common good, based on the list of recipients identified in the national budget.”
It also noted that in the case of PhilHealth, “unused government subsidies are not part of its reserve funds, nor income that is being restricted by the UHC Act to be used by the National Government as a general fund.”
Former Department of Health advisor Antonio J. Leachon said in a statement that excess PhilHealth funds that will be returned to the unprogrammed fund of the national budget are revenues from taxes on tobacco, vapes, alcohol, and sugar-sweetened beverages, “which are specifically earmarked for health programs.”
“It is alarming that despite having excess funds, PhilHealth has yet to comply with the provisions in Section 11 of RA 11223,” he said.
PhilHealth’s reserve fund hit P463.7 billion in 2023.
Ms. Suzara said that in the case of PhilHealth, private hospitals as well as direct and indirect contributors are affected by the NG’s use of its excess funds.
Most vulnerable are indirect contributors such as indigents, beneficiaries of the government’s conditional cash transfer program or the Pantawid Pamilyang Pilipino Program, senior citizens, persons with disabilities, those sponsored by local governments and other Filipinos aged 21 years old and above without capacity to pay premiums, Ms. Magno noted.
Ms. Magno said PhilHealth beneficiaries are supposed to be getting expanded services from the state insurer but it’s not happening “because instead of pressuring and reforming PhilHealth, we are defunding it.”
Lawmakers who were able to insert their pet projects for funding under unprogrammed appropriations are the gainers, she added.
Ms. Magno described the NG’s act of depriving GOCCs of their excess funds as “populist,” saying it has refused to look for other sources of revenues while “reducing the budget for important programs like PhilHealth.”
“But [it has] continuously increased programs and projects that shouldn’t have been prioritized like the confidential and intelligence funds, and the insertions of congressmen and senators,” she said.
“Misplaced priorities, definitely not for the benefit of the Filipino people.”
Finance Secretary Ralph G. Recto has reiterated there will be no new taxes under the Marcos administration.
“It is difficult for civil society and the media to monitor how the National Government is using funds from the GOCCs because there is no real-time reporting of this,” Ms. Suzara said, adding that while the Department of Budget and Management and the Treasury bureau consistently upload reports, they only contain aggregate figures.
“How do we know where the funds are funneled? Which localities or districts benefit? What projects are funded?” she asked. “We will find out about these things only after the Commission on Audit does its audit.”
She urged the Marcos administration to proactively report how the funds from GOCCs are used through a dashboard.
Ms. Magno said she and her colleagues are planning to question the validity and constitutionality of the insertions in the GAA and the DoF Circular 003-2024.
“We are going to file a petition before the Supreme Court,” she said.