1. Speaker de Venecia announced last September 11 that he and senior party leaders had agreed to abolish the pork barrel system starting with the proposed 2005 national budget following an all-party caucus last week.
2. The adoption of “line-item budgeting” was considered to ensure transparency in the nature and amounts of executive and congressional allocations in the next year’s budget.
3. However, the media attacked the issue as mere changing the system in the PDAF from a “lump-sum appropriation” to “line-item budgeting”. The reality is that the “pork barrel” is not truly abolished.

Budgeting techniques used in the Philippines

 1.      There are four budgeting approaches and techniques used in the Philippines: (1) Line-item budgeting or LIB; (2) Performance budgeting or PB; (3) Planning, Programming and budgeting system or PPBS; and (4) Zero-based budgeting or ZBB. All four are largely American-introduced and American-installed.

2.      We cannot single-out what budgeting system is being used in the government today. The financial management offices of government agencies will say that (1) in the budget preparation, agencies are enjoined to use ZBB; (2) in budget authorization and accountability, PB sets out the standards; and (3) in actual implementation, it is still the good old line-item budgeting.

3.      However, the DBM claims that performance budgeting is their prescription. Although LIB could be used only for the appropriation of pork barrel for each congressman (since it is impossible due to time constraints to use the technique in all of government agencies) it is good to take a look at LIB in its entirety: concept, history, advantages and disadvantages.  

On the “what” of Line-Item budgeting

1. LIB, which dominated the US Federal government from 1900s to early 1950s gives emphasis on listing of objects for itemized expenditures – supplies, personnel, equipment – without much regard for the purposes of programs for which such items are proposed.
2. LIB is also called “item of expenditure approach” as it controls expenditures at the agency level with emphasis on the accounting aspect of governmental operations in terms of items bought or paid.
3. LIB is incremental – the figures in the previous year’s budget are always increased when carried over the next year’s budget proposal.
4. LIB is sequential – it uses previous year’s budget as the basis for the following year’s budget proposal.
5. LIB is non-programmatic – budget proposal does not focus on any program/activity, only focuses on detailed tabulations on the items of expenditure, not on the program or project output.
6. In the Philippines, LIB in government was adopted through the enactment of Commonwealth Act No. 2546, otherwise known as Budget Act of 1937.
7. LIB provided an administrative control of costs of inputs to government activities and projects. To that extent, specific items of expenditure were provided without relating them to any objective or output of activity.
8. The efficiency in budget management was based on its ability to maintain ceilings per item of expenditure.
9. Line item budgeting gives agencies plenty of opportunities to manipulate the facts to their advantage and considerable leeway in estimating the projected benefits of proposed activities.
10. Agencies are able to express their subjective interpretation of anticipated benefits without being encumbered by analytical instruments. Nor are they required to weigh in a systematic and uniform manner the cost effectiveness of their proposals. Budgeting by object obtains “the best care” for the agency. An agency needs only to promise benefits to justify its requests.
11. In the Philippines’ experience with LIB during the legislation or authorization phase, the legislators wielded so much influence on agencies of their choice. Through the LIB, the lawmakers were able to pinpoint “objects of future choice”, especially those referring to new positions. Thus, even before the actual authorization of agency budget estimates, compromises had already been bonded with various legislators.

Other advantages of LIB

1. LIB enables central authorities to control inputs; that is, to control the cost of inputs before expenditures are made or obligated.
2. It provides external control by legislators who are not beholden to a particular agency.
3. Line-item control is especially effective for salaries and purchases, which together account for the bulk of state government spending.
4. There are multiple opportunities for control – central authority can be exercised at many points in the expenditure process and throughout the fiscal year.
5. Line-item supervision ensures that the expenditure ceilings established by law will not be breached, but it also permits control to extend down to particular items.
6. Line-item controls establish the basis for budget cutting. To bring the budget into a desired relationship with income, central controllers are able to delete or reduce items until the target is reached.

Pork barrel versus line-item budgeting

1. The House will adopt the line-item budgeting scheme in exchange for its decision to scrap the pork barrel.
2. But what was actually abolished was the perception that House members had complete control over the pork according to some legislators.
3. Instead of identifying the projects later as had been the practice of lawmakers in their PDAF allocations, through LIB the projects would be identified “in advance” or when congress deliberates on the 2005 budget.
4. The “abolition” of pork barrel and the introduction of line item budgeting would improve transparency and accountability.
5. The congressmen will miss the flexibility of re-aligning their PDAF.
6. Line item budgeting removes the discretionary power of the executive and the legislators over the budget.
7. Line-item budgeting would “flush concealed pork for ghost employees out of their hiding places in the national budget”.
8. Line-item budgeting will transfer the burden of providing projects in rural areas from congressional initiatives to efforts of the national budget.
9. LIB would also be impractical because it would take a long time for Congress to approve the budget if it would take up each budget line by line.

On the Committee on Appropriations

1. Congressman Andaya said they are ready to conduct a line item scrutiny of the 907.6 billion national budget.
2. Line-item approach in budgeting will allow congress to dissect the budget and find the fat that needs to be excised.

Minority group

1.      According to Escudero, the minority group had long been advocating a more transparent approach in writing the national budget, and that implementing the line-item scheme is a welcome development.

2.      All lump-sums in the budget would now be itemized:a.      Discretionary funds of the presidentb.      Unaudited confidential and intelligence expensec.      Priority Development Assistance Fund (PDAF)

3.      Line-item will prevent Malacañang from resorting to unexplained and unilateral alterations in the debt servicing budget, such as what happened this year when the projected budget for principal debt payments at 271 billion pesos was later increased to 310 billion pesos.  

Source: Fiscal Administration In the Philippines by Prof. Leonor Briones