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Republie of the Philippines
HOUSE OF REPRESENTATIVES
Metro Manila

SIXTEENTH CONGRESS
First Regular Session

HOUSE BILL NO. 2630

Introduced by Representatives Ungab, Belmonte, Jr. (F.) Nava, Benedicto-Angping, Sy-Alvarado
Andaya, Jr., Violago, Lacson-Nocl, Almario, Ong, Cua, Abayon, Alvarez (M.), Evardone.
Singson, Zamora (Ma, 0), Sema, Quisumbing, Lobregat, Teves, Bataoil, Piamonte,
Sarmiento (M.S.), Robes, Umali (,), Bag-ao, Benitez, , Biazon, CalixtoRRubiano, Cari,
Castelo, Cerafica, Del Rosario (A.G.), Espina, Fortuno, Lopez (C.), Ramos, Jr. Sarmiente
(C), Brice, Rodriguez (0,), Acosta-Alba, Adiong, Fortun, way, Lagman, Jr., Leachon,
Gerona-Robredo, Loong, Mellana, Sakaluran, ‘Ting, Antonino-Nadres, Garcia (G),
‘Tambunting, Panotes, De Venecia, Haresco, Jr. Antonio, Magsaysay, Rodriguez Jr. (M.),
Arbison, Gonzales (F.), Acop, Uchiverri, Deloso-Montalla, Garay, Chipeco, Jr., Hofer, Uy
(R), Alcala, Arenas, Agarao, Jr,, Hataman-Salliman, Nutio, Cagas, Amante, Cruz:
Gonzales, Masongsong, Acharon, Jr., Celeste, scudero, Hagedorn, Lanete, Leonardia,
Rodriguez, Jr. (1), Yap S.), Tan, Yap (A), Ongsiako-Reyes, Belmonte (J.C.), Pernes,
‘Tolentino, Vargas II, Kho, Abu, Matugas, Abellanosa, Sahali, Suansing, Co, Acedillo,
Briones, Almonte, Baguilat, Jr., Bernos, Mendoza (J.), Calalay, Jr., Bravo (MLV), Pancho,
Uy J.)

EXPLANATORY NOTE

‘The proposed FY 2014 national budget which was submitted by President Benigno Simeon C.
Aquino III to Congress, a day after he delivered his State of the Nation Address spells out the fourth
financial blueprint. of the government which embodies its commitment to fulfill his Social Contract with
the Filipino People.

‘The President's budget is supported with documents consisting of the Budget of Expenditures and
Sources of Financing (BUSK), a National Expenditure Program (NIP) with accompanying Annex A
consisting of Volumes 1 and 2, the President’s Budget Message and other documents, in compliance with
the President's constitutional duty under Section 22, Article VII of the Constitution, which provides that
“the President shall submit to the Congress within thirty-days from the opening of every regular session,
as the basis of the general appropriations bill, a budget of expenditures and sources of financing,
including receipts from existing and proposed revenue measures.”

Having laid down the foundation of transparency and accountability in public fund management,
the government continues to face challenges in the remaining three years of the President's social
contract with the Filipino people, As the President declared in the FY 2014 Budget Message, the
proposed national budget supports the agenda for Inclusive Development and is focused on fulfilling the

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five priority areas, to wit: (i) transparent, accountable and participatory governance; (i) pover
reduction and empowerment of the poor and vulnerable; (iii) rapid, inclusive and sustained econom
growth; (iv) just and lasting peace and the rule of law; and (9) integrity of the environment: and clima
change adaptation and mitigation. These are in line with the objective of achieving inclusive growth :
enunciated in the Philippine Development Plan 2011-2016. ‘The proposed budget is crafted to ensure t]
sustainability and irreversibility of the governance reforms already set in place. However, the way tl
budget has been structured through the years were focused on the financials and on the programs ar
projects, with no clear link to performance and does not address the objective of promoting a governme:
attuned to meeting real outcomes for the people. ‘Thus, the F'Y 2014 budget is prepared by embarking
a bold move towards Performance-Informed Budgeting wherein every peso is now presented alongsic
the results, outcomes, outputs and performance targets that government agencies commit to achieve wit
their respective budgets.

‘The proposed budget was also designed not in the usual way, wherein agencies competed again
each other for scarce resources. With the Program Budgeting Approach, government agencies movi
out of their silos to converge their efforts and resources along priority programs. Another structur
reform is moving towards a new Public Financial Management (PFM) regime. With the PFM Refor
Roadmap, the government will move towards a Budget-as- Release Document regime wherein t)
‘budgets of agencies, except those to be contained in a negative list, are considered released to them
soon as the General Appropriations Act is enacted. Finally, in crafting the proposed budget, t]
government continued the mechanisms for citizen's participation in the budget process through Budg
Partnership Agreements between agencies and civil society organizations and bottom-up budgetir
involving local government units (LGUs). ‘The bottom-up budgeting approach was introduced in t!
2013 budget and sustained in the crafting of the 2014 budget as a methodology to amplify the voice of t)
grassroots in the way public funds are allocated and used. ‘This aims to significantly reduce poverty |
incorporating in the budgets of key departments the priority requirements of poor municipalities th
cannot be shouldered fully by the LGUs.

Macroeconomic Assumptions

‘The government remains committed to provide the best opportunities for all Filipinos in
attainment of inclusive growth. ‘The national budget is a potent fiscal tool that can be used to stimula
economic development, thus, the efficient and effective allocation and implementation of the budg
would ensure that resources are made available to support national development objectives.

Given the robust growth in the first quarter of 2013 of 7.8 percent, the 2018 full-year GDP grow
is seen to surpass the high-end target of 6.0 — 7.0 percent. ‘The economic growth assumption for 2014
expected to expand within the 6.5 ~ 7.5 percent range. Inflation rate is maintained at 3.0 — 5.0 perce
while the peso is expected to continue its stability against the US dollar, keeping a P41 — 48 peso-l
dollar exchange rate for next year,

The DBCC-approved growth assumptions for 2014 takes into consideration the followi:
macroeconomic assumptions:

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MACROECONOMIC PARAMETERS, 2013 - 2014

Projections/iangela
Particulars (Adopted by the DBCC on 3 July 2013) _|
_ 2013 2014

| GNI Growth (96): Budget Assumptions 59-69 62-72
GDP Growth (%): Budget Assumption 60-70 65-75
‘Nominal GNI (In Million Pesos)

‘Budget Assumption Low — 14,169,227 ~_ 16,812,087

High 14,828,202 16,192,499

Nominal GDP (in Million Pesos)

Budget Assumption Low 11,914,477 13,396,680

High 12,054,036 13,612,903 |
(Inflation Rate CPI (2006=100) (96) 30-60 06.0
[B04-day T-bill rates 4) 10-30 20-40
| Foreign Exchange Rate P/US#) 41,0—43.0 41.0-43.0
| Dubai Grado Oil Price Gin USS/barrel) 90.0- 110.0 ~110.0
LIBOR Rate, 6-months (4) 08-16 | «0-10
Wxports of Goods, Level Gn US¥ Million) 81,9760 38, 668.0
Growth Rate 0%) 11.0 14,

Imports of Goods, Level Gn USS Million) 09,4890 | 79,2100
F Growth Rate 0%) E : 13.0 140

Source: FY 2014 BESF

‘The 2014 budget is also formulated on the following fiscal program:

+ Total revenue projection of P2.018 trillion which translates to 16.1 percent of
GDP and higher by 15.6 percent from the 2013 program of P1.746 trillion for

2013.

+ Consolidated Public Sector deficit of P 100.783 billion equivalent to 0.8 percent

of GDP.

+ National government budget deficit of P266.2 billion or 2.0 percent of GDP,
which is in line with the medium term fiscal program. ‘The medium-term goal
is to achieve a fiscal deficit of 2.0 percent of GDP by 2013 up to 2016.

* Outstanding NG debt of P6.2 trillion by the end of 2014 or a debt to GDP ratio
of 46.8 percent, compared to the P5.8 trillion by the end of 2013 or a debt to

GDP ratio of 48.7 percent.



‘The Proposed Expenditure Program

‘The proposed 2014 national budget of P2,268 trillion is 13.1 percent or P262.1 billion higher tI
the 2018 level of P2.006 trillion. As a percentage of GDP, the budget is 17.0 percent, slightly higher tl
the 16.8 percent in 2013,

Of the P2,268 trillion obligation budget, the new general appropriations which Congress
authorize is P1.612 trillion, consisting of P1.472 trillion of Programmed New Appropriations and P19
billion of Unprogrammed Appropriations as standby fund should revenues exceed targets or new lo:
be secured to support the proposed budget. ‘The programmed new appropriations of P1.472. trilli
together with the P796 billion of automatic appropriations which is outside the purview of this Gene
Appropriations Bill, will provide for the appropriation cover for the P2.268 trillion budget.

‘The proposed expenditure program, computed on an obligation basis, is presented below:
New Appropriations P 1,811,874 Billion

Programmed New Appropriations “1 ATL9T1
Unprogrammed Now Appropriations

Automatic Appropriations 4 796.029
Interest Payments on NG Debts 352.652
Internal Revenue Allotment 341,545
Retirement & Life Insurance Premiums 28.859
Customs Duties and Taxes, including Tax Expenditure Fund 26,900
Net Lending “24.950
Special Account 21.116

rants and Others __.007

‘Total Available Appropriations 2,407,908

Less: Unprogrammed New Appropriations 139.908

‘Total Obligations P_ 2,268,000 Billion

Financing the Proposed Budget
A. Revenues

‘The national government will raise P2.018 trillion in revenues to support the experiditure plan
2014. This is 15.6 percent or P272.2 billion higher than this year’s revenue target of P1.746 trilli
‘The tax collection effort in 2014 is expected to reach 14.1 percent of GDP, higher than the 13.5 percent
2013. ‘Tax revenues are expected to grow by 16.9 percent, with the BIR and BOG collections increas:
by 16.2 percent and 20.0 percent, respectively. ‘The Bureau of Internal Revenue will collect P1.4
trillion or 72.2 percent of the total revenue while the Bureau of Customs will collect P408 billion or 2
percent, The balance of 7.6 percent or P153.6 billion will be collected by other agencies which :



sourced from fees and charges, BTr income and privatization proceeds, among others. ‘The propost
revenue of P2.018 trillion will support about 88.3 percent of the total cash requirement of P2.284 trillic
in 2014 while the balance of 11.7 percent will be sourced from borrowings,

Shown below is the comparative sources of revenues to support the 2014 budget.
REVENUES

2013-2014
In Million Pesos

Be 2014 | _Increase/(Decrease)

Particulars Estimate _| Estimate | Amount | Percent
Revenues 1,745,857 2,018,051 272,194 15.6%
Tax Revenues 1,607,870 1,879,918 272,048 16.9%
BIR 1,253,679 1,456,320 202,641 16.2%
BOC 340,000 408,096 68,096 20.0%
Others 14,191 15,502 1.311 9.2%
Non-Tax a a 146 0.1%
Fees and Charges 70,532 75,442 «4,910 7.0%
BTr Income 57,729 56,237 (1,492) -2.6%
Other Fees and
Charges 7,726 4,484 (3,272) 42.4%
Privatization 2,000 2,000 0 0.0%

B. Borrowings

‘The projected budget deficit of P266.2 billion will be sourced from net borrowings of P274
billion, of which P5.04 billion will come from foreign sources while P269.07 billion will come fro
‘The remaining excess of the total net borrowings of P7.9 billion will be used to rai:
the necessary cash balance in the'Treasury.

Dimensions of the FY 2014 Budget
Sectoral Allocation

By sector, the government sustains its comprehensive support of the Social Services sector whic
continues to get the largest share among the other sectors with P8428 billion or 37.2 percent of tl
total budget. ‘The Sector will increase by 20.5 percent or P143.4 billion from the 2013 level of P699


billion, The spending for social services will improve the living conditions of the citizens, particularly the
poor, through education, health, social security and other social services to reduce poverty.

‘The Economic Services sector follows with P690.2 billion or 26.0 percent. share, up by 15.9 percent
or P81 billion from the 2013 level of P509.2 billion. ‘The increase will support rapid, sustained, and.
inclusive growth in agriculture, transport infrastructure, and tourism, among others.

General Public Services sector gets the third largest share with P864.5 billion or 16.1 percent,
higher by 5 percent or P17.2 billion from the 2013 level of P347.8 billion. Spending for this sector will
support expenditures for general administration, such as fiscal management, foreign affairs, lawmaking,
and public order and safety, among others,

Debt burden comes next with P352.6 billion or 15.5 percent of the total budget. ‘This will service
the payment of interest of P352.7 billion and net lending account of P24.9 billion.

The Defense sector will get a share of P92.8 billion or 4.1 percent of the total budget, higher by
3.7 percent from the 2013 level of P89.5 billion.

Sectoral Allocation
FY 2018 ~ 2014
(in million pesos) __

Levels ___|_Percent,
= 2013 | 2014 | 2018
Economie Services 509.191 | 590.220] 26.4%] 26.0%| 81.029 | 15.9%
Social Services 699.441] 842,805] 34.9%] 37.2% | 143.364 | 20.5%
Defense 89.539 | 92.850] 4.5%] 4.1%] 3.311] 3.7%
General Public Services 847.327 | 364,523] 17.8% | 16.1%] 17.196] 5.0%
Net Lending 26,500| 24.950| 1.8%) 1.1%] -1.560) -6.8%
Debt Service: Interest Payments | 883.902 | 352.652 | 16.6% | 16.5% | 18.750 | 6.6%
‘Total 7 2,005.900 | 2,268,000 | 100.0% | 100.0% | 262.100 | 13.19%

Allocation by Expense Class

In terms of expense class, the obligation budget of P2.268 trillion is allocated as follows
689.417 billion or 30.4 percent goes to personal services (PS); P803.23Lbillion or 35.4 percent will go tc
maintenance and other operating expenses (MOOW); P364.004 billion or 15.6 percent will be for financial
expenses, of which P352.652 billion corresponds to the payment of interest on NG loans; and P421.347
billion or 18.6 percent will go to capital outlays (CO) of P396.397 billion and net lending (NL) of P24.95¢
Dillion,

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Regional Allocation

By regional allocation, the distribution of the budget by main island. groups will significa:
increase in 2014. The regionalized budget for 2014 increased to P1,261.8 billion or 55.2 percent. share
the total budget of P2.268 trillion as compared to the regionalized budget in 2018 of P918.7 billion
45,8 percent share of the total budget of P2,006.9 billion.

REGIONALIZED BUDGET

- E 2013 - 2014
Levels (in billions) | Percent Share _ Growth _
ISLAND __ [2013 | 2014 | 2013 | 2014 | Amount | Percent
LUZON 489.1 726.1 53.2% 58.0% 237.0 48.5%
VISAYAS 187.1 224.7 204% = 18.0% += 376 20.1%
MINDANAO 2425 301.0 26.4% 24.0% —58.5__24.1%
TOTAL 918,7 1,251.8 100.0% 100.0% 333.1 36.3%

Top Departments

‘The Department of Education (Dep-Hd) consistently gets the biggest allocation with P336.9 billic
consistent with the constitutional mandate of providing the largest budget to education. ‘The amount w

close the critical gaps in the supply of teachers, classrooms and for the increased needs brought about
the K-12 basic education reform program.

The Department of Public Works and Highways (DPWH), as the infrastructure arm of t
government will receive the second largest share of the budget of P213.5 billion. This will enable ¢

DPWH to meet its national roads and bridges targets and support the growth of key sectors such
tourism.

At the third and fourth positions are the Department of the Interior and Local Government (DIL
with P135.4 billion and the Department of National Defense (DND) with P123.1 billion, respectively.

‘The fifth slot will go to the Department of Health (DOH) with P87.1 billion to pursue the Univers

Health Care program, particularly for preventive healthcare services and for health insurance covera

of poor families, among others.

‘The Department of Agriculture (DA) will receive P80.7 billion to raise productivity in agricultu
and improve the incomes of farmers and the fisher folk while the Department of Social Welfare a)
Development (DSWD) will take some P79.0 billion to deliver meaningful social protection service
particularly the expanded Pantawid Pamilyang Pilipino (PPP) Program that will cover the benefits
about 4.3 million indigent households.

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‘The Department of Transportation and Communications (DOTO) will get P48.7 billion to supp:
the construction of airports, seaports and railways needed to improve the competitiveness of industri
‘The Department of Environment and Natural Resources (DENR) and the Department of Agrari.
Reform (DAR) will receive P28.9 billion and P20.4 billion, respectively.

TOP DEPARTMENTS
2013 - 2014
(Amounts, In Billion Pesos)

FY 2014
Particulars Increase/(Decrease)
LEVEL__| RANK [Amount | Percent
Dep-ed (incl. MPBF and SBP) 293.4 |1/) 1 | 3369 | 1 43.5 14.8%
DPWH (incl. BSGC) 152.4 |2/) 2 213.5, 2 61.1 40.1%
DILG (incl. MPBF and PGF) 121.8 3 | 135.4 a 13.6 11.2%
DND (incl. MPBF and PGF) 121.6 4 | 123.1 4 15 1.2%

DOH (incl. MPBF, HFEP and BSGC) | 599 |3/| 6 | 87.1 3/| 5 27.2 45.4%

DA (incl. BSGC) 75.0 5 | 807 6 57 7.6%
DSWD 56.4 7 79.0 cf 226 40.1%
DOTC (incl. MPBF, PGF, and

BSGC) 37.4 8 | 48.7 8 16 31.3%
DENR (incl. MPBF and PGF) 23.7 9 | 239 9 0.2 0.8%
DAR 21.4 10 20.4 10 (1.0) 4.7%

41 Gross of School Building Program
21 Net of School Building Program
3/ Gross of Health Facilities Enhancement Program

‘To summarize, the new general appropriations which Congress will authorize is P1,611.9 bili
consisting of P1,472 billion of Programmed New Appropriations and P139.9 billion of Unprogramm.
New Appropriations. ‘The proposed automatic appropriations of P796 billon has been previous
authorized under existing laws and therefore is outside the purview of this General Appropriations Bill

Vili


The Committee on Appropriations submits this proposed General Appropriations Bill for yow
scrutiny and to report to your constituencies that the budget is the embodiment of their collective hopes
and desires.

Colleagues and Members of the 16" Congress, Jet us once again support this reform budget

Congress is responsible and is committed to the early passage and approval of the budget of the Filipin«
people,

May this representation, the Chairperson, take this opportunity to thank the Speaker, the Vice
Chairpersons and members of the Committee on Appropriations, as well as other members of the Hous:
of Representatives and the Minority for their time, effort, and wisdom in constructively scrutinizing anc
considering the budget.

FOR THE COMMITTEE ON APPROPRIATIONS:

See ae
YSIDRO T.AUNGAB
Chairperson
Committee on Appropriations

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