Andaya seeks debt, salary caps

The chairman of the House appropriations committee proposed yesterday reforms on spending and borrowing that include putting a cap on the amount of debt the government can incur and a limit on salaries.

The reforms sought by Camarines Sur Rep. Rolando Andaya Jr. are contained in Bill 3890, entitled the Fiscal Responsibility Act.

Andaya, whose committee is the panel that scrutinizes the annual budget, said his proposed reform measures would result in a "balanced budget, controlled borrowings, prioritized capital investment, sound asset management, prudent risk management and protection of fiscal gain."

"If we don’t want to pass this way again, then reforms must begin with the way the government is handling its finances," he said.

He wants the public sector debt to be limited to 80 percent of gross domestic product or GDP, which is the amount of goods and services produced in the country in one year. The nation’s GDP is about P5 trillion. Andaya’s proposal would thus limit debt to P4 trillion.

The public sector debt represents the borrowings of the national government and state corporations. As of December last year, the public debt stood at about P6 trillion. This has prompted 11 economists at the University of the Philippines to raise the alarm on unmanageable debt that could cause a fiscal crisis.

Andaya said while the public sector debt should be capped at 80 percent of GDP, national government borrowing should be limited to 65 percent of GDP.

He said liability reduction targets should be set for state corporations, and those failing to meet their targets should be banned from any further borrowing and their funding in the annual budget should be drastically cut.

At present, state firms, including those that are losing by the tens of billions, have the unrestricted freedom to borrow here and abroad, and will even be given subsidies under the 2005 budget that the Andaya committee had endorsed and which the House of Representatives and the Senate had approved.

The biggest loser among these firms is the National Power Corp., which lost P113 billion last year. It is projected to lose at least P85 billion this year. It is followed by the National Food Authority, which has a mandate, according to its officials, to lose and not make money.

This is not the first time that a debt cap has been proposed in Congress. There is no dearth of proposals on restricting borrowings but Malacañang has successfully blocked them all.

To avoid payroll costs from saddling government expenditures, Andaya wants to limit "personnel expenses" to 45 percent of net internal revenues.

At present, 33 centavos out of each peso in the budget goes to the salaries of the 1.1 million government employees. The P290 billion set aside for this purpose this year is more than half of last year’s collections of the Bureau of Internal Revenue.

Andaya is proposing that the salary cap be applied to state corporations and local government units as well. — Jess Diaz