A too-controlled budget

MANY OF THOSE who oppose the Disbursement Acceleration Program (DAP) do so in the belief that executive discretion over a big pool of savings is an invitation to misuse or abuse. The knee-jerk preference is for some degree of control, for a system of checks and balances. The classic admonition you hear after the DAP is: Follow the rules — you cannot shortcut your way to your noble end.

Control has been at the very heart of bureaucracies ever since they were invented. In modern times, it accounts for the ubiquity of rules and the prevalence of line item budgeting. It forms a tenacious mindset, unforgiving toward any initiative for change like the DAP, as the DAP experience itself has shown.

Control per se is not the opposite of good, but it’s not the worst enemy of bad either. Rules rule society and nobody is complaining about that. We accept them to keep bad things from happening. The problem starts when rules become the pervading answer to everything that is wrong or could possibly go wrong in government.

Corruption, for understandable reasons, seems to elicit a stronger impulse to control, hence the pronounced aversion to managerial discretion. Is discretion = corruption? The complex phenomenon reaches out beyond the person, beyond the organization, into society itself and its culture for explanation — but no one has offered a plausible one yet.

One heuristic model suggests a more realistic equation even as it assumes away the socio-cultural elements of corruption, like this: Corruption = monopoly power + discretion — accountability. This, too, oversimplifies, but it’s not simplistic. By considering two more variables, monopoly power and accountability, it avoids giving the lone weight to discretion that allows it to stand in direct relation to corruption.

It’s as if the model is saying: Go ahead, broaden the discretion. But to weaken the temptation to corruption, you put a limit to monopoly power, if any, and you enhance accountability and transparency. You reap the results of broadened discretion without necessarily sowing the seeds of corruption. Control is not the only choice.

Control aims to plug leakages and stop the waste of resources. But it’s not cost-free itself. Red tape, for example, is borne of control in office processes, which yields unquantified waste and gives rise to corruption.

Control is power going by its other name. In our state system where powers are separated, Congress holds the power of the purse: that is, it controls the budget, which in turn is better served by line items.

In its traditional version, items of expenditures (activities, salaries, supplies, equipment, etc.) are lined up with their proposed amounts — for what purpose, the budget never tells. You see the items in detail, but not their place in the whole scheme of things, which there seems none. No targets are set and there are no promises of results. The focus is on input.

Control of agency spending is the avowed purpose. Congress sets a cap on expenditures by item and requires the breakdown of big items into smaller items. The degree of control is directly related to the degree of detail demanded of the items.

In looking into performance, you go by the items and track the expenditures. You should spend wisely, according to the rules, but you don’t get to keep your savings — they go to the general treasury at the end of the year. Because budget amounts are estimated incrementally, your budget for next year runs the risk of getting cut by the amount of savings you gained. Here is why offices find it better to spend every remaining peso in their account, even if they don’t have to. The approach is an open invitation, if not home, to waste.

The law prohibits cross-item transfer of funds without the approval of Congress. If you put an item for a school building but missed putting an item for student desks, you’re bound to have teachers holding standing-room-only classes for the rest of the year. An exaggeration, for sure, but that’s the sacrosanct rule in line item budgeting. It yields rigidity. It caused the early demise of the DAP.

Line item appropriation in the United States is as old as its First Congress, intended precisely to limit executive authority. We came to adopt it in 1937 by way of a colonial act. Subsequent years saw major attempts at introducing other approaches, but line items persisted to co-exist with the features of the new.

Why? I leave the scholarly answer to the wise. My guess harks a long way back to 1935 when the framers of the Constitution thought it wise (what the US framers thought otherwise) to provide this: “The President shall have the power to veto any particular item or items of an appropriation bill, but the veto shall not affect the item or items to which he does not object. ”

Henceforth shall all appropriations be line-itemized; lump sums amount to a curtailment of the line item veto power of the president, which may be challenged as unconstitutional. The same provision found its way merrily into the Marcos constitution, and then into the 1987 one.

We live in the glory of our past, we leave its follies last.

Mario M. Galang is a senior fellow of Action for Economic Reforms and a development and governance specialist.

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