Happy New Year to our Readers! Have a Safe New Year's Celebration With the Diliman Diary and DOH!

U.P. Diliman 2010 Lantern Parade fireworks display

Are you stuck at home during New Year's Eve? Abroad and unable to come back in time for the New Year's celebrations back in the Philippines? Or do you simply plan to save your digits from being mangled during the New Year's Eve celebration by enjoying a virtual fireworks celebration? Do you plan on staying indoors to avoid stray bullets hurtling back to earth and causing more than just a passing headache? Then hang out with us at the Diliman Diary and enjoy a virtual celebration. All you need is a laptop, PC or netbook adjusted to full volume to enjoy the virtual sound of celebration and firecrackers and fireworks. These audio files are courtesy of the Department of Health (DOH) website with their Goodbye Paputok project. The DOH Hotline may be accessed at number 672-7177.

Enjoy these audio files which may be used in lieu of actual and more dangerous firecrackers and fireworks. Save your digits, and just download these audio files of exploding fireworks and firecrackers from the DOH-designated website: And Happy 2012 to our readers from the editors of the Diliman Diary! :-)

Conditional Cash Transfers forum at CSWCD sheds light on flaws in CCT conceptualization and implementation

By Chanda Shahani

A forum held yesterday on Conditional Cash Transfers at the College of Social Work and Community Development (CSWCD) at the University of the Philippines (U.P.) at Diliman revealed deep problems with the Aquino administration's centerpiece project which is set to receive a significant chunk of the national budget in 2012.

The forum had four speakers: Professor Marivic Raquiza, of U.P. Diliman's National College of Public Administration and Governance (NCPAG), Sonny Africa, Head of Research of IBON Foundation, Christian Deloria, Focal Person, 4Ps Monitoring and Evaluation of Department of Social Work and Development (DSWD) and Rommel Millora, Focal Person, 4Ps Grievance and Address System of DSWD.

Dr. Rosalinda Pineda-Ofreneo, Dean of U.P. CSWCD gave the opening remarks. Also distributed during the forum were the results of the Roundtable Discussion of the UPCSWCD Social Protection Cluster, November 17, 2010 which gave in tabular format both the arguments for and against CCTs.

Mr. Africa, referring to the Philippine Development Plan from 2011 to 2016 which is essentially the development blueprint of the administration of President Benigno S. Aquino III, said the document specifically states that CCTs are to be given directly to the poor through the Pantawid Pamilyang Pilipino Program(4Ps) “which shall be the cornerstone of the government's strategy to fight poverty.”

Mr. Africa said that this approach will not solve poverty because it is being used as “a smokescreen” to cover more fundamental structural problems bedeviling Philippine society for decades.

He also criticized the CCT program for not having a clear exit strategy, since the program is destined to end in five years. He likened this to the Ozone Disco tragedy where 164 people died in 1996 in a disco club fire in Timog Avenue, Quezon City when they could not flee due to a blocked exit.

Setting the conceptual framework, Mr. Africa said that 20.9 million Filipinos were unemployed or underemployed. Of this number,4.4 million were jobless, 4.2 million were "unpaid family workers" and 12.3 million were "own account" workers. He said the average unemployment rate in the country was 11.2% from 2001 to 2010, with 65 million living on PhP 104 a day. He said according to the government's own definition of "poverty threshold," only PhP 46.00 a day per person was needed to remain above this threshold, which he said was clearly not enough.

He said problems with the implementation of CCTs including administrative concerns such as non-deserving beneficiaries receiving CCTs, including as those classified as non-poor who owned well-built houses, assets, tricycles and even stores. On the other hand, other problems had to do with deserving non-beneficiaries not receiving CCTs such as those living in remote areas or those not living in permanent or fixed households. Another problem, he said was lax implementation such as those who received CCT funds with unmet conditions or falsified compliance.

Unintended consequences of CCTs including putting additional burdens on their chief recipients - women upon whom the responsibility fell to ensure compliance; misspent cash transfers such as on gambling and alcohol and manipulation of extraneous conditions: granting or witholding of cash due to patronage politics or to discourage activism within a community. He also pointed out that if some people received cash within a community while others did not, friction would be created within a community due to jealousy. He also said that there was a lack of a convincingly strong health component to the CCTs: as those requiring medical help beyond a few pain killers did not have access to affordable quality health care.

He said that there was no true empirical basis to allot such a huge number of household beneficiaries for CCTs under the 4Ps program. The breakdown was as follows with the following number of beneficiaries with corresponding amounts: 2007 (4600), 2008 (320,411), 2009 (734,691), 2010 (1 million and PhP 10 billion), 2011 (2.3 milion and PhP 21.2 billion), 2012 (3 million and PhP 39.5 billion). He added that from the period 2012-2016, a total of PhP 307 billion would have been allocated for CCTs.

Mr. Africa said the problem is that these huge expenditures were backed by skimpy data based on a January to May 2010 study from IPC Ateneo which only targeted 207 respondents from 18 barangays in three provinces, a January 2010 SWS pilot spot check which targeted 760 households, 57 schools and 16 health facilities from 33 barangays in one province and a November 2010 and February 2011 SWS spot check which covered only 8 towns of four provinces.

Professor Raquiza, who is also the co-convener of Social Watch Philippines said that  there were problems with CCTs from a women's rights and gender rights perspective; even if CCTs in fact directly  targeted women as the chief recipients of government funds.

A kind of a caste system was created by choosing some types of poor to receive government funds while other types of poor were excluded from receiving CCT funds, she said.

She said that just because women were the majority recipients of CCTs it did not mean they were its beneficiaries. She explained that the concept of CCTs was  problematic from a feminist perspective because the assumption of the government was that women were rational beings and will engage in optimal behavior which runs counter to the basic tenets of feminism which states that people and the relationships that bind them are determined by society.

She said that her conclusions were derived from an analysis of data which came from a Social Watch Philippines (SWP) study of the 4Ps and a recently held Visayan consultation organized by NCPAG and DSWD.She said she also relied on conclusions and findings from the papers of Corina Rodriguez Enriquez and SMERU Research Institute on women and CCTs in Latin America and Indonesia, respectively.

She said that there is a lack of consideration of gender in the design and implementation of the 4Ps in particular and CCTs in general.

She said that while an overwhelming majority of household beneficiaries of CCT programs including the 4Ps are women, this does not necessarily mean that CCTs are focused on gender or guarantee that these will contribute to the promotion of women's rights and gender equality.

She said that in the 4Ps apart from the goal of achieving Millenium Development Goals on maternal mortality, there are no other explicit program goals related to women's rights and gender equality.

Professor Raquiza also said that CCTs were "dole outs" that discriminated against those who did not have access to the labor markets, such as persons with disabilities. The DSWD estimates that at least 10% of the population is made up of persons with disabilities.

While she did admit that the situation in the Visayas showed that CCTs resulted in enhanced relations between spouses in households; these did not necessarily solve the structural problems leading to the disempowerment of women and other disadvantaged groups in terms of the creation of macroeconomic policies to create the right environment for job creation which will lead to a heightened demand for labor within the country, she said.

In terms of decision making over the cash grant, she pointed out that the experience of Indonesia's CCT Program Kelauraga Harapan (PKH) showed that CCTs did not bring about significant changes to the position of women or in intra-household gender relations. Moreover, the bargaining power of women in relation to her husband remained unaltered because while the wife decided on daily household expenses, the men decided on matters that were deemed more strategic or important including the more prominent expenses.

Professor Raquiza said that a fundamental weakness of CCTs in general and the 4Ps in particular was that women were singled out as being the main participants in the program leading to gender stereotyping of women such that women were forced into the role as primary caregivers within the family, thus freeing their partners from this responsibility.

She said this is controversial because it perpetuates the notion that women must be the primary caregivers within the family and reinforces the traditional gender division of labor which is at the root of gender inequality.

Professor Raquiza's colleague in Social Watch, its Convenor and NCPAG Professor Leonor Briones has also said in the past that CCTs by themselves are not capable of substantially addressing the issue of poverty. CCTs also need to be augmented with a package of other measures for there to be a real dent in levels of poverty in the country.

Meantime the DSWD's Mr. Deloria acknowledged that there were many criticisms regarding the 4Ps program. He added that the proposed funding submitted by the Aquino administration to Congress for 2012 had DSWD receiving PhP49 billion with PhP going to DSWD's traditional services and PhP39 billion for CCTs.

"CCTs are not the solution; but we recognize that the Aquino administration is really pro-CCT," he said, adding that "it was not a magic bullet," and that several politicians, such as Senator Miriam Defensor-Santiago were not in favor of CCTs. Senator Santiago has questioned the premise for allocating such huge amounts of cash to CCTs at the expense of other legitimate and vital government expenditures such as allocation to State Universities and Colleges (SUCs).

He said that in 2012, 700,000 households would be the target beneficiaries of CCTs with the end goal of human capital development such that the behavior of the recipients would need to be changed in order for them to engage in more ideal behaviors leading to a greater probability of their becoming more successful in economic terms.

He said that cash was an ideal commodity as opposed to some physical commodity like rice because money does not spoil and can easily be transferred and disbursed throughout the banking system of the country. Money can be used for priority expenditures of households, he said.

Responding to Professor Raquiza's comments on CCTs not being gender-responsive, he said that CCTs and the 4Ps were not meant to be gender-responsive per se.

Mr. Deloria said that important evaluations of the success of the 4Ps would be done in November and December of 2011 where 8000 households would be surveyed. He also said the program was dynamic, and that after three years, there would be a mid-term assessment and an end-of-program assessment when the program is finished in 2016.

Mr. Millora, also of the DSWD said that any interested party could complain about the 4Ps program at the DSWD hotline at 0918 912-2183. He said that in general, money is not disbursed without the conditions of the transfer being met. "If we cannot monitor you, then the conditions do not exist for us to transfer cash to you," he said, referring to recipients of CCTs under the 4Ps program who had complained about not receiving their funds.

President Benigno S. Aquino III himself has said that CCTs are intended to infuse cash directly into the countryside creating a pump-priming effect benefiting the less advantaged sectors who cannot benefit from traditional trickle down growth expectations coming from economic growth.

A U.P. study co-authored by U.P. School of Economics (UPSE) Dean Arsenio M. Balisacan and released in 2010 found that CCTs worked well in their pilot form under theadministration of former President Gloria Macapagal-Arroyo and had the potential to help end the vicious cycle of poverty.

The UPSE study said that assessments of CCT programs show significant positive impacts on nutritional intakes, schooling performance,and reduction in poverty and inequality. "Of all the government's current subsidy programs, the CCT initiative holds perhaps the most promise for breaking the vicious cycle of poverty and, hence, is a good candidate for upscaling toward a national anti-poverty program," the study said.

Meantime, Lila Ramos Shahani, an assistant secretary of the national Anti-Poverty Commission in the Office of the President said in a letter to the Philippine STAR that was uploaded on September 8, 2011, that "for those who maintain that CCTs cannot be the cornerstone of the government's anti-poverty strategy, the fact of the matter is that, quite simply, they're not." Assistant Secrtetary Shahani's explanation of the government's conceptual framework of CCTs can be accessed here.

Notice of full disclosure: Assistant Secretary Shahani is the sister of this writer. Professor Marivic Raquiza is a contemporary from U.P. Diliman when we were both students there and Professor Leonor Briones is a personal friend of this writer's mother, former Senator Leticia R. Shahani. Nevertheless, every effort has been made by the Diliman Diary to present a balanced account of CCTs which remains a contentious issue that we will continue to cover at every possible opportunity.

President Benigno S. Aquino III's 2012 Budget Message

Year 2012

THE PRESIDENT'S BUDGET MESSAGE

Ladies and Gentlemen of the 15th Congress of the Philippines: 

Through the President of the Senate and the Speaker of the House of Representatives, I have the honor to submit, for your consideration, the proposed National Budget for 2012.

THE DIVIDENDS OF REFORM

Last year, you gave your overwhelming support for the 2011 National Budget, this administration’s first financial blueprint. You diligently and meticulously scrutinized the same, while making sure that it is enacted before the Fiscal Year 2011 started: the first time in over a decade. 

But that timeliness meant not only promptness: it also meant relevance. It reflected your belief that the programs we proposed are able to respond to the immediate and pressing needs of our people, while making sure that our long-term agenda for reform is on track. And I laud you, the men and women of Congress, not only for enacting the current year’s budget on time but also for giving this administration a stable first footing by supporting the 2011 Reform Budget. 

Our pursuit of reform in the long-term cannot blind us from our people’s current concerns. In other words, change also has to be felt now. 

This administration was hoisted to power by the overwhelming mandate of our people, fatigued by the preponderance of corruption and abuse of power. They have expressed their deep yearning for Philippine society to be transformed into one that truly empowers them to pursue their aspirations for themselves, their families, their communities and the country. Through People Power via the ballot, they have demonstrated their longing to be emancipated from poverty and helplessness through honest and effective governance. 

This is the core inspiration by which this administration crafted the 2012 National Expenditure Program that I am hereby proposing to Congress: to deepen the reforms we are setting in place; to go one notch higher in our fight against corruption and our pursuit of good governance, in poverty reduction, and in employment generation from inclusive and sustained economic growth.

Noong nakaraang taon, tinangkilik po ninyo ang aming pakay na tahakin ang landas Tungo sa Paggugol na Matuwid. 

Sa paparating na taon, hinihikayat ko po kayong patuloy na sumama at lumahok sa biyaheng ito: sa pagsiguro na ang benepisyo ng Paggugol na Matuwid ay nakatutok sa ating mga prayoridad at Diretso sa Tao.

THE RESULTS-FOCUSED BUDGET OF 2012
 

With the same degree of political will and sense-of-duty, I ask you to examine, deliberate on, and thereafter approve this P1.816 trillion National Budget for 2012.

This proposed budget is higher by 10.4 percent than the current year’s budget of P1.645 trillion. With the reduction of leakages, inducement of efficiencies and better selection of project priorities, we can ensure that more of our people’s hard-earned tax money is spent on programs, projects and activities that benefit them the most. 

More importantly, this budget—the first that this administration is fully crafting—embodies our commitment to lift the poor from poverty through honest and effective governance. It is intently focused on fulfilling my administration’s Social Contract with the Filipino People as I heeded their clamor for a leadership that will emancipate them from the shackles of hopelessness. It is firmly anchored on our vision and priorities, and focused on results. 

This proposed budget is a Results-Focused Budget. 

Read the rest here.

Department of Budget and Management proposes to Congress that the U.P. System will have a zero capital outlay for the 2nd straight year in 2012

Analysis

By Chanda Shahani

This comment has been published today in the Facebook page of the University of the Philipines System:

"Citing statistics on page 5 of this PDF file, the University of the Philippines (UP) has a budget allocation of P5.5 billion (i.e., P4.8 billion for personal services, P0.7 billion for maintenance and other operating expenses and zero budget for capital outlays)."

The Department of Budget and Management's budget allocation for U.P. in 2012 can be accessed here. 

It is perhaps out of a sense of courtesy (i.e., from one sector of government to another) that the U.P. System website's neutral tone belies the terrific body blow dealt to the U.P. System by the Department of Budget and Management. For no organization, ranging from a very large state university down to a neighborhood day care center can exist without an allocation for capital outlays.

The Facebook page of the University Student Council of U.P. Diliman also said today that: "The UP budget proposed for next year is 17B but the DBM only approved 5.54B. That's a 3.6% decrease from the GAA, 20.6% decrease for the Maintenance and other Operating Expenditures (MOOE) and ZERO Capital outlay yet again."

An earlier analysis made several weeks ago by the Diliman Diary shows how much the U.P. System has already had to endure (percentage-wise), in terms of budget cuts since 2006.

Analysis of 2006-2011 U.P. Budget with implications for the 2012 budget.

The DBM argued in 2010 that there were so many projects (new buildings such as the National Science Complex, etc.) in the pipeline that U.P. did not need any more capital outlay for 2011. 

This reasoning is erroneous, because the definition of the financial term “capital outlay” transcends just building new buildings. In a complex organization such as the U.P. System, capital outlays are always needed not only from year-to-year to acquire assets or improve the useful life of existing assets, but to fund long-term projects that are expensed as they are completed stage-by-stage. 

Using 2006 and 2007 as representative years in order to ferret out the ratio of capital outlay (CO) to overall budget, we can see that the average CO is 11%. We did not anymore include 2008, 2009 and 2010 because those were extraordinary years in terms of obtaining funds from the National Government which were heavily influenced by the U.P. Centennial years and these would tend to artificially inflate the ratio of CO to the overall budget.

The point is that historically (at least based on these partial figures, U.P.'s budget for CO should be at around 11% of the overall budget). Of course, having a longer time series (say 20 years) would be preferable, as we could then get more representative data, but 11% capital outlay a year does not seem unreasonable for any institution whose assets are continually, depreciating, falling apart and in need of replacement or upgrading.

Some legitimate capital outlay expenditures for a university and research institution would include building new buildings, acquiring major new equipment (e.g.: research equipment) or even acquiring land or even putting up a new extension of an existing college (eg: U.P. College of Business Administration and U.P. College of Law in Fort Bonifacio, Taguig City). 

It is imperative for the Aquino Administration and Congress to recognize Capital Outlay as a necessary and legitimate expense for any public or private entity, and to restore an amount for the 2012 budget.

We have put in Annex A aggregate figures from 2006 to 2011. Using a Time Series or Horizontal Analysis of U.P.'s budget from the national government in order to get an appreciation of the respective increase or decrease (in percentage terms in year-to-year growth), we can see that U.P.'s budget shrank by 7% in 2007 compared to 2006, but from 2008 to 2009, it grew by 25%, which are due to lobbying efforts by the U.P. Administration to DBM and Congress to increase its budget because of positive publicity for U.P. generated by the U.P. centennial (please see Annex A). However, U.P.'s budget decreased from 2010 to 2011 by 18%, due to a non-insertion of even a single peso for capital outlay by the Department of Budget and Management for 2011. 

The removed figure for capital outlay (equivalent to 18% of U.P.'s budget in 2010) in 2011 is PhP 1.28 billion

Some thoughts on Core Inflation and its impact on the U.P. Budget.

The next question is, if CO should not be 0% (as it was in 2011), but 11% in 2012, as per historical precedents, then CO should be 11% of what? We cannot resort to zero-based budgeting computations, as we do not have the institutional advantage that DBM and the U.P. Budget Office has (i.e., access to all the data on the budget down to the last office expenditure) as they can throw out all previous assumptions and start from scratch (minus the politics of budgeting, this is strictly speaking, a valid approach). 

What we can do, however, is to treat 2006 as a base year and see the impact of core inflation on the U.P. budget.

The National Statistical Coordination Board (NCSB) argues that core inflation (which is a lower figure) rather than headline inflation (which is a higher figure because it includes more price volatile commodities in its index) is the more meaningful figure to use in gauging the impact on inflationary effects on policy making. We are adopting this point of view in terms of making adjustments to a yearly budget such as U.P.'s (http://www.nscb.gov.ph/resolutions/2003/6.asp), and this has the benefit of also being the more conservative figure than headline inflation, as we prefer to err on the side of conservatism when it comes to financial computations.

Using 2006 as a base year of comparison and utilizing data from NCSB for core inflation (please see Annex B which is sourced from: http://www.nscb.gov.ph/secstat/d_price.asp), we can see that average core inflation was 4.46 a year, which means that using 2006 as a base year, one budget peso in 2006 is now worth 22.3% less in 2010 , 27% less in 2011 and 31% less in 2012. 

Assuming for the sake of discussion that there were no new programs implemented, additional personnel hired, or new buildings built in U.P. post-2006, U.P.'s budget should have at the very minimum, increased by 31% of its total PhP 5,456,428,000 in 2006 to a larger amount in 2011 just to keep abreast with core inflation. 

Thus U.P.'s budget should be at the very minimum have been PhP 6,929,663,000 in 2011 (to counter the 27% deterioration in the value of the peso from 2006 as the base year) in and 7,147,921,000 in 2012 (to counter the 31% deterioration in the value of the peso from 2006 as the base year) in real terms compared to its budget of PhP 5,949,619,000 in 2011 which is really too low. 

Thus for the Aquino Administration to say that there was no budget cut because there was simply no provision for CO in 2011 (as the claim was that all the new buildings in the pipeline negated the necessity for having any sort of capital expenditure in 2011), is false and misleading because it ignores the effects of core inflation. 

Additionally, MOOE was even cut from PhP 1,358,322,000 (2010) to PhP 653,999,000 (2011) or by 52%. Also, U.P.'s capital outlay for 2012 should be an estimated 11% of the minimum PhP 7,147,921,000 in 2012 or PhP 786 million,which is even fairly near the capital outlay of PhP 727,560,000 in 2006, so there is already a historical precedent for this.

A minimum budget increase to PhP 7,147,921,000 to keep abreast of inflation does not even take into account increases in Personal Services and MOOE which will come about in 2012 as a result of the new building activities, as these buildings need to be operated, maintained and run properly. However, we will not comment further on this, because we do not have the data to project in any analysis.

Should the U.P. System Cut the Umbilical Cord of 100% Government Subsidy?

Of course, the other side of the problem is that the National Government can always say that U.P. has to work within the budget it was given, and all they can afford is so much, and that since U.P. is a land grant university, then it has to raise the difference from its assets. The problem with this approach, while partially valid, is that it ignores the following:

a)      U.P. has several indispensable schools of learning which are continuously and directly tapped by the national government and the people for national development. To be hard-nosed about it, the tax payers and the government have to pay for what they get. There are no free lunches anywhere. RA 9500 states that U.P. is the only national university bar none, and so the funding also has to be there or the national government itself is in violation of the law. U.P. is not a comparable State University and College anymore, which are now the subject of massive cost-cutting measures by CHED.

b)      Tuition fees only accounted for 5% of U.P.’s total revenue in 2011 and this reality, combined with student and U.P. administration opposition to a tuition fee increase only shows that U.P. will have to look elsewhere (aside from national government allocations) to fill in a possible funding gap.

c)      Assuming for the sake of discussion, that the national government will not be able to completely comply with the law by funding U.P. as the national university, there are several steps that may be taken as part of an overall strategy. For example, U.P. can do more to raise internal funds, and in fact a common size income statement (for internally generated income) from 2006 (Please see Annex C) shows in percentage terms how the gaps may be filled in by internally generated income. Taking into consideration the fact that national government expenditures, as a percentage of U.P.’s total revenue has already begun to decline from 81% in 2006 to 73% in 2011, then other growth areas (in terms of funds generation) would be in U.P.’s income from revolving fund. The increase in income here should be aggressively augmented by money market placements in conservative investments (e.g.: Treasury bills and bonds). It should also be the subject of aggressive audit by the Commission on Audit, which has a long history of complaints about how U.P. handles its cash once it is on hand. There should be complete vouchers, and complete documentation for every deposit and withdrawal into these funds.

d)     Another red flag is grants and donations which according to Annex C, has jumped from almost 0% in earlier years to 7% in 2011, but this could easily be doubled to 14% by an aggressive fund raising campaign by the Pascual administration which may actually already be happening, considering that the year is not over yet. However, grants and donations - an issue which was relevant under the Roman administration - still remains relevant under the Pascual administration (see the part about U.P. in: http://diliman-diary.blogspot.com/2010/11/breaking-news-coa-releases-2009-audit_05.html) because we do not know what is happening to the the funds of these foundations which are not subject to COA monitoring. This cookie jar must be closely monitored, now that the U.P. budget is in dire straits and every peso that is earned must go to its rightful place. Additionally, faculty affiliated foundations (for the list of these foundations submitted by U.P. in 2010 to COA, please see http://www.scribd.com/doc/41260783/Partial-List-U-P-Affiliated-Foundations-From-COA-2009-CAAR-Up-System) must also subject themselves to COA scrutiny under the principle that the chief beneficiaries (the faculty) must get what is due to them, but there should be transparency and accountability and in this, COA’s role is superior to that of any external auditor, no matter how good they are (even SGV). This is because external auditors tend to be biased in favor of their clients who pay them for an external audit, in compliance with SEC rules, while COA tends to play a more neutral role since they are not beneficiaries of these foundations (non-COA external auditors, who are paid by their clients would logically be reluctant to issue reports that would put their clients in a bad light). Even if there are restrictions on monies earned by U.P. from donations and foundations, these should still be subject to scrutiny to ensure that fellowships or stipends (eg for faculty research, travel grants, research projects or travel abroad) are properly disbursed and released in an equitable manner.

e)      Since U.P. is a land grant university, it is likely that more of its properties and even other non-current assets (eg: patents and other intellectual properties) will be maximized. However, RA 9500 requires projects exceeding PhP 50 million to be subject to public consultation, so it would be a good idea for the sectors be ready with a standing committee that can scrutinize such revenue generating projects to ensure that they are beneficial to the university, utilizing proper financial criteria, as well as other criteria (eg: is the project consistent with the mission of the university and its values).

f)       On a final note, it would not be a bad idea for U.P. to consider issuing long term University of the Philippines bonds for some  of its long-term capital expenditures and other expenditures (payable in say, 25 years). U.P.’s excellent reputation would allow this to be favorably received in the capital markets, but the reception would be better if there were no outstanding issues of a financial nature (eg: adverse COA reports) that would scare off the underwriters. An excellent ready market for this would be U.P. alumni here and abroad (thus, the bonds can be peso denominated and dollar denominated bonds).

DBM defines what is allowable capital outlay in a 2010 memo to SUCs and then slashes it to zero in 2011 and 2012

The fact that the administration of U.P. President Alfredo Pascual asked DBM for P17 billion in funds for 2012 (which would reflect the U.P.'s much better appreciation of actual costs compared to ours) but only got a proposed allocation of 32% of that or P5.5 billion shows how seriously flawed and skewed is the reasoning of DBM; especially if we take into account that there needs to be a capital outlay to replace aging machines, depreciating equipment and for other expenses.

President Aquino's State of the Nation Address (SONA) and  its annex to the SONA address, which is the detailed technical report attached to the SONA is revealing in terms of what the Aquino government considers important enough to merit funding (DSWD and conditional cash transfers) and what is of lesser importance (SUCs such as U.P. are hardly mentioned at all). But the annex does state that "As early as 30 December 2010, the DBM had already issued National Budget Memorandum (NBM) No. 107, s. 2010 providing all heads of departments, agencies, bureaus, offices, commissions, state universities and colleges, and other instrumentalities of the national government the overall policy framework and thrusts for the FY 2012 Budget. The NBM also set specific guidelines for the budget preparations."

NBM No. 107, s. 2010 in fact was signed by no less than DBM Secretary Florencio B. Abad and details and defines in Part III DBM's definition of capital outlays which include investments, repair and rehabilitation of occupied buildings, land improvements, the acquisition of office equipment, furniture and fixtures, transportation equipment, public infrastructure, reforestation of lands, loan outlays, livestock and work animal acquistions.

Based on the above DBM definition, which includes many necessary materials and equipments with which to run a complex organization such as the U.P. System coupled with DBM's non-insertion of capital outlay as an item in the proposed 2012 budget, it seems likely that U.P. will have a difficult time operating at full capacity unless this anomaly is corrected by Congress itself.

(Chanda Shahani is the editor of the Diliman Diary. An A.B. Comparative Literature graduate from U.P. Diliman, he also has a Master's degree in Entrepreneurship from the Asian Institute of Management and is a former business page reporter for the Philippine STAR).

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Philippine Government Draft Budget submitted to Congress on July 25, 2011 on the day of the State of the Nation Address

By Chanda Shahani

Amidst all the political theater engendered by President Benigno S. Aquino III's State of the Nation Address (SONA) in the halls of Congress yesterday as well as protests from disgruntled non-government organizations, people's organizations, activists, students and other citizens; the Aquino administration also quietly submitted to Congress its proposal for the National Budget on the same date (July 25, 2011).

A little-known annex to the SONA address, is the detailed technical report attached to the SONA (please see: http://www.gov.ph/2011/07/25/the-2011-state-of-the-nation-address-technical-report/) which is revealing in terms of what the Aquino government considers important enough to merit funding and what is of lesser importance - which barely gets a mention in the report.

The SONA and the accompanying technical report barely made any references to State Universities and Colleges (SUCs). The annex mentions that "The 2012 Budget preparation is ahead of schedule, again, the first budget prepared ahead of schedule since 1998. As early as 30 December 2010, the DBM had already issued National Budget Memorandum (NBM) No. 107, s. 2010 providing all heads of departments, agencies, bureaus, offices, commissions, state universities and colleges, and other instrumentalities of the national government the overall policy framework and thrusts for the FY 2012 Budget. The NBM also set specific guidelines for the budget preparations." Beyond that, however, it is only primary schools and secondary schools that get mentioned in the SONA and the technical report. SUCs seem to be treated like a dirty little family secret: sort of like the mentally retarded brother or sister that family members speak about in hushed whispers (if at all).

The near non-mention of SUCs in the SONA and the technical report is indicative of the Aquino administration's lack on emphasis on giving importance to higher education in national development through suport for SUCs. The race has therefore begun for SUCs, including the University of the Philippines System to start lobbying Congress, twisting arms, calling in favors, and more-or-less making the case that U.P. and other SUCs are indispensable to national development and need to be funded adequately to meet these goals.