‘Tight fiscal space’

With the appointment of former Tarlac Rep. Gilberto Teodoro as full-time Secretary of the Department of National Defense, the economic team of President Ferdinand “Bongbong” Marcos Jr. now finds a champion to reform the controversial pension system of the military and uniformed personnel (MUP). With the “acting” Defense Secretary on board, Teodoro is henceforth part of the discussions on the so-called “elephant in the room” of Finance Secretary Benjamin Diokno.

Diokno fondly calls the MUP pension system as the “elephant in the room” that no one dares to talk about or acknowledge the problem because it is more comfortable to avoid conflict. In the MUP pension system, Diokno faces the stiff and vehement objections from the affected sector of the government personnel in uniformed services.

As the head of PBBM’s economic team, Diokno is principally tasked to raise much needed revenues to bankroll the annual National Expenditure Program (NEP), or the government’s budget for short. Diokno is currently working out with Congress to impose “sweet and salty” taxes on beverage and junk foods, respectively.

This “elephant in the room” is carried year in and year out of each and every budget bill submitted to Congress. As far as the Finance chief is concerned, this “elephant in the room” must be taken up to public national debate, in and out of the halls of Congress.

Just how big is the allocation for MUP pension in the annual budget?

Department of Budget and Management (DBM) Secretary Amenah Pangandaman, a member of PBBM’s economic team, told us in our Kapihan sa Manila Bay last Wednesday that the MUP is lumped in the annual Pension and Gratuity Fund (PGF). “As of now, it’s in the PGF. That’s why our fiscal space remains tight,” Pangandaman rued.

Under the Congress-approved 2023 budget, the PGF has an allocation of P272.94 billion. Notably, this is almost 50 percent higher than the 2022 level of P183.94 billion.

The annual fund is meant to pay off the MUP pension and retirement gratuity and terminal leave benefits, including separation benefits and incentives.

“If you free up that (P230 billion) amount, we will be able to fund more roads, more school buildings, hospitals, and livelihood projects for our social sector,” Pangandaman pointed out.

Included in the MUP pension system are, as follows: the Armed Forces of the Philippines (AFP); the Philippine National Police (PNP); the Philippine Coast Guard (PCG); the Bureau of Fire Protection; the Bureau of Jail Management and Penology (BJMP); the Bureau of Correcions; and, the Philippine Public Safety College. They are all covered in this proposed MUP pension reform bill.

The existing MUP pension system in our country has been non-contributory through these years. But their civilian counterparts automatically remit contribution to the Government Service Insurance System (GSIS) for their retirement pension as deducted from their monthly take-home pay. Then, how come the retirement pensions and benefits of the MUPs are fully funded by the national government through the annual appropriations?

“The intention (of the MUP reform bill) is good. To let them contribute to ease up our fiscal space,” Pangandaman stressed.

To date, the proposed MUP pension reform bill remains pending at the Senate’s technical working group. The House of Representatives earlier already passed their own version of the MUP bill. Currently, the economic team has been conducting dialogue and consultations with MUP services in various military and police camps.

“We are going around to come up with a better version that we can propose,” Pangandaman cited. Just last Monday, Teodoro sat down with them in discussing the proposed MUP bill at Camp Aguinaldo in Quezon City.

In the current proposal, the MUP fund will be managed by the GSIS and an oversight committee shall be formed composed of the Executive Secretary, the Secretary of Finance, the DBM Secretary, and the GSIS president and general manager as ex-officio members, and representatives from the MUP services.

Our MUPs would surely find comfort that the DBM Secretary herself is a fellow uniformed officer. She was recently conferred the first-ever two-star General rank to a woman upon entry at the Coast Guard Auxiliary Executive Squadron. She was given this rank during conferment rites that included DBM Undersecretary Margaux Salcedo as Admiral among the newly accepted Coast Guard Reserve officers.

Pending approval into law of the proposed MUP bill by the 19th Congress, Pangandaman disclosed, the DBM still provided funding for it in the 2024 budget. She informed us the DBM is now in the final stages of preparation for the 2024 budget.

This is the first full-year budget proposal prepared by the Marcos administration. She recalled being pressed for time to meet the submission deadline when the Marcos administration took over on June 30 last year and inherited the 2023 budget bill drafted by their immediate predecessors.

As required in our country’s 1987 Constitution, the President is mandated to submit to Congress the annual budget bill one month after the state of the nation address (SONA). The DBM chief is confident they can submit the printed copy of the voluminous budget bill even ahead of the Constitution’s deadline. Barring any hitches, Pangandaman announced they can transmit the printed 2024 NEP bill one week after PBBM’s SONA on July 24 at the Batasan Pambansa in Quezon City.

Pangandaman presented to the President and the Cabinet the final draft of the 2024 NEP during their meeting yesterday at Malacañang. The President and the Cabinet approved it for printing and submission to Congress.

According to her, the 2024 budget bill closely hews to the priority programs as spelled out in the 8-point agenda of the Marcos administration.

Among the priorities stated in the Philippine Development Plan, she stressed, call for more government investments to education, infrastructure, agriculture, health, digitalization programs, etc. within tight fiscal space.