The basics of resource allocation

The good question that we need to ask ourselves once a budget is already identified and estimated is how we allocate the same across the many different needs of our country and people.  This is a question that is universal, be it be the country itself, its political subdivisions especially the local government units (LGUs), or even in the different corporations and businesses of the private sector.  It's even relevant even in the smallest unit of the family.

Firstly, let us understand that for an organization such as the national government, to the smallest unit of the barangay, or any body for that matter, a budget maybe generally divided into that which is used to attain its goals, and that which is used to run the organization itself.  In our previous discussion on the General Appropriations Act (GAA), or the national budget, we see that government operations are funded by the Personnel Services (PS) component and the Maintenance and Other Operating Expenses (MOOE).  What the government expects to achieve will be undertaken using the capital outlay of its different programs and projects.

Cutting PS and MOOE aside, how do we allocate the developmental budget, then?  There are two ways of slicing the pie, so to speak - one is by sector (sectoral) and the other by area of application (spatial).  More often than not, these two seldom meet and represent conflicting interests which needs to be harmonized.  But even within both, conflicts readily arise and different interests compete for the same pie which is seldom enough for all.

If we take the sectoral route, imagine what will happen to the national budget (let's take away the PS and MOOE first, anyway, these are recurrent and will always be there no matter what).  Infrastructure will say we need the bigger slice since we are the basis for the economy to grow.  But agriculture will reply, "who feeds the people, then?"  I need my slice of the pie.  Industry will join the fray and assert it will generate returns much higher than the rest.  Everybody will scramble for their share of the pie jostling each other for a bigger piece.

All the rest will insist - the education, health, and social services sectors, national defence, all the subsectors which translates to the different departments and offices of the national government.  The sectoral needs are further defined to the needs of the different agencies within the sector.  Without a policy guideline, everything will break lose.  What actually happens is that the Office of the President, through the Department of Budget and Management, will craft the different allocations per sector and submit the budget to Congress.

What actually guides the administration is coming up with the national budget is the Philippine Development Plan itself.  Every 6 years, coinciding with the term of the President and Congress, the government approves a Medium Term development plan.  The plan outlines what the country intends to do in order for it to develop and progress.  In the plan will be the sectoral priorities which will guide the administration on how to allocate the annual budget across sectors, sub-sectors, departments, and agencies.  Most, if not all, won't be fully satisfied with it since, everybody would always want more.  But all will just have to accept the allocations or what we call, "budget ceilings," as defined by the chief executive.

You have an allocation, the next thing we need to ask is how will each department, agency, or office, allocate the budget "ceilings" across the different regions of the country - 1 to 12, plus NCR, CAR, ARMM, and Caraga (National Capital Region, Cordillera Administrative Region, and Autonomous Region of Muslim Mindanao).  That is a spatial allocation and each agency has their own way of dividing the pie, using certain criteria specific to each.  All in all, what happens is that each regional office of a department or agency will receive their respective ceilings and they will just have to propose the programs and projects for each region within the budgetary ceilings allocated to them.

This sectoral, then spatial way of allocation has its own merits.  In general, it's either sectoral first, then spatial, or, the budget allocation can be distributed by region first, and then allocated to the different sectors within the region.  The latter has never been done and I doubt it ever will.  But it is important in the subsequent discussions on how the two - sectoral and spatial interact with each other in resource allocation (to be continued).