[In This Economy] Is the Marcos government unlawfully dipping into PhilHealth funds?

The 2025 budget season is already upon us. But we haven’t even talked much about the shenanigans concerning this year’s (2024) budget.

One of the biggest irregularities is that lawmakers were able to insert colossal “unprogrammed funds” in the 2024 budget.

When we say unprogrammed funds, we mean standby funds that don’t yet have a definite purpose at the outset. But such amounts can be funded and spent under certain conditions.

At first, the executive branch requested in its proposed budget only P281.91 billion in unprogrammed funds. But surprise, surprise: in the final version of the budget that President Ferdinand Marcos Jr. signed, those unprogrammed funds ballooned by 2.6 times to a whopping P731.45 billion.

That’s almost half a trillion pesos worth of extra funds. Nothing to sneeze at.

Opposition lawmakers have already contested that this brazen increase is unconstitutional. The President’s proposed budget cannot be expanded by Congress – that’s plainly stated in the 1987 Constitution. Lawmakers already filed a case before the Supreme Court to contest this dubious provision in the 2024 budget.

But while that case is ongoing, the 2024 budget is intact. How on earth can the government fund P731.45 billion worth of unprogrammed funds?

As stated in the 2024 budget law, unprogrammed funds can be financed from four sources. Let me enumerate the ways verbatim:

1. Excess revenue collections in the total tax revenues or any of the identified non-tax revenue sources from its corresponding revenue collection target, as reflected in the BESF submitted by the President;
2. New revenue collections or those arising from new tax or non-tax sources which are not part of, nor included in, the original revenue sources reflected in the BESF;
3. Approved loans for foreign-assisted projects; or
4. Fund balance of the Government-Owned or -Controlled Corporations (GOCCs) from any remainder resulting from the review and reduction of their reserve funds to reasonable levels taking into account the disbursement from prior years.

I’m highlighting the fourth item because this is a new “special provision” in the General Appropriations Act or GAA. Just last year, in the 2023 budget law, you will only see the first three.

The fourth special provision essentially means that the Marcos government can activate the gargantuan unprogrammed funds using surpluses (excess funds) from GOCCs like PhilHealth.

This is a very weird and dangerous provision that was flagged by budget analysts, including my friend Zy-za Suzara, as early as last year.

The dangers became real this year. (Hat tip to my UPSE colleague Cielo Magno for pointing out this issue in her TikTok, as well as to Men Sta. Ana of the Action for Economic Reforms for pointing out this issue in his recent BusinessWorld column.)

It turns out that on February 27, 2024, the Department of Finance (DOF) issued Department Circular 003-2024, giving instructions to GOCCs with surpluses on how to implement special provision 4.

They used flowery words to justify this move, like: “Consistent with the Medium-Term Fiscal Framework, the National Government aims to consolidate the resources of the government so that these are mobilized and utilized to gain the maximum benefit and high multiplier effects for the economy.”

Then on April 24, DOF instructed PhilHealth (one of the GOCCs with surpluses) to remit P89 billion to the Treasury within 15 calendar days – citing the 2024 budget law and Department Circular 003-2024.

This is problematic because PhilHealth’s money can’t be reallocated just like that.

In fact, it’s specifically stated in the Universal Health Care Act (UHCA) that the PhilHealth’s excess funds, above and beyond their “reserve funds,” “shall be used to increase the Program’s benefits and to increase the amount of members’ contributions.” Unused portions of the reserve fund, meanwhile, “shall be placed in investments.”

Very clearly, the law states: “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.”

But that’s exactly what the DOF wants to happen. In short, the DOF is possibly violating the UHCA by siphoning P89 billion from PhilHealth.

What’s more, these developments are already reflected in government statistics. The screenshot below shows that P50 billion worth of funds were remitted by PhilHealth and PDIC (the Philippine Deposit Insurance Corporation) in May, citing the DOF circular and the 2024 budget’s special provision. PhilHealth remitted P20 billion, while PDIC remitted P30 billion.

It’s like the Marcos government created extra revenues out of thin air. Except that they didn’t really “create” money, so much as they extorted money from GOCCs.

Source: Bureau of the Treasury

I only learned about PDIC’s remittance when I looked at the spreadsheet. Their involvement in this scheme is just as disturbing, for PDIC “exists to provide deposit insurance coverage for the depositing public to help promote public confidence and stability in the economy.” When a bank fails, depositors’ monies are insured by PDIC to a certain extent (P500,000 per account, to be exact).

If the government is also touching PDIC’s funds, then it is compromising PDIC’s mandate – and possibly endangering the banking sector.

Apart from violating the UHCA, the DOF’s circular may also be violating two more laws: Republic Act No. 11467 (Sin Tax Law of 2020) and Republic Act No. 10963 (TRAIN Law) – both of which provide that some portion of tax revenues they generate must be earmarked for the UHCA’s implementation, and that includes PhilHealth’s coverage.

Many questions are unresolved. To what end is the Marcos government sweeping GOCCs to get billions of funds for them? On what types of things will the unprogrammed funds be spent? How is this scheme akin to the modus operandi of the Maharlika Investment Fund, which also siphoned billions from state-owned banks and the Bangko Sentral ng Pilipinas itself?

And why aren’t Filipinos talking about this scandal? Because budget issues are inherently un-sexy and not worthy of people’s attention? Until when will Filipinos turn a blind eye to these budget shenanigans? – Rappler.com

JC Punongbayan, PhD is an assistant professor at the UP School of Economics and the author of False Nostalgia: The Marcos “Golden Age” Myths and How to Debunk Them. In 2024, he received The Outstanding Young Men (TOYM) Award for economics. JC’s views are independent of his affiliations. Follow him on Twitter/X (@jcpunongbayan) and Usapang Econ Podcast.