Downsizing government in times of fiscal stress

The Author is a Professor at the National College of Public Administration and Governance of the University of the Philippines.  This article was published in the Yellow Pad column of Business World, 25 October 2004 edition.

A few weeks ago, five gurus of past and present reorganization efforts
appeared together at the UP to debate the merits of reorganization in a
forum aptly, if wordily entitled, “Reinventing/Reengineering/Reorganizing the Bureaucracy: Why We Should be More Hopeful?” Coming at the heels of the Arroyo administration’s effort to reduce bureaucratic fat to plug the fiscal deficit and the expose on the huge salaries of GOCC executives, the forum drew a huge crowd who waited for good news from the speakers.

At the end of the four-hour forum, Armand Fabella (Marcos), Luis
Villafuerte (Aquino), Salvador Enriquez (Ramos), Emmy Boncodin and
Karina David (GMA) agreed that reorganization efforts in the country
were all well-meaning – but have failed to produce the intended
results. Enriquez drew the most applause when he said changing the
government, rather than reorganization, was the best option for the

The Politics of Reorganization

Every president since the postwar period has asked Congress for
wide-ranging powers to reorganize the bureaucracy which has been called
by then President Ramos as the “employer of last resort.” Some got
their wish (Quirino, Magsaysay), others decreed it (Marcos, Aquino),
while the rest simply waited in vain until the end of their terms.

The reorganization imperative is often anchored on the desire to align
bureaucracy with new development goals, reduce the cost of government,
correct mistakes in previous implementation efforts, or to put favored
political followers in office. The goals and principles of
reorganization – economy, efficiency, elimination of overlaps,
decentralization – have remained the same through the years, with newer
buzzwords such as “reengineering” and “reinventing” thrown into the mix
in the past decade.

While there appears to be agreement on the need to reorganize
bureaucracy, there is little agreement on who should initiate (Congress
or the President?), parameters to be used, composition of the
reorganization team (bureaucrats or technocrats/academicians? private
sector- or public sector-led?), and length of implementation.

All reorganization efforts have been stymied by the politics of
reorganization. While the evaluation of government agencies is a
technical process, the decision on which recommendations to adopt and
implement is a political one made by Congress and the President based
on inter-chamber and interbranch accommodation and compromise.
Reorganization, in this context, often results in incremental change
with limited possibilities for policy reforms or the creation of a
leaner, more efficient and rational bureaucracy.

The inability to reduce the size of government, negative impact on
employee attitudes and morale, and stymied program implementation has
made reorganization a controversial effort, and legislators since the
8th Congress have been reluctant to pass another reorganization law.
Administrative Reorganization

In the absence of a law from Congress, the Executive branch, through
the Department of Budget and Management (DBM) and the Civil Service
Commission (CSC) embarked on an “government rationalization program” in
2001 with the goal, according to CSC Chairman Karina David, of “making
government do the right things… in the right or best way… at
affordable levels… to be achieved in the most accountable and
transparent manner.” David reported that the effort has abolished 102
agencies under the Office of the President (OP) and transferred 23
other OP agencies to other departments.

DBM Sec. Boncodin recently unveiled a P30-billion early retirement
package that supposedly embodies GMA’s commitment to “reengineer
government and provide silver parachutes for redundant offices.” The
early retirement package, which will give an average retirement benefit
of close to P1 million per beneficiary, will be funded by the GSIS (P15
billion) and the National Government (P15 billion) through a
$300-million World Bank loan.

While efforts at administrative reorganization are laudable, their
impact on the bureaucracy are minimal. In the absence of a
reorganization law, the President can only examine, abolish, and merge
agencies created by executive fiat. The more problematic areas – such
as government-owned and -controlled corporations (GOCCs) and state
universities and colleges (SUCs) – can only be abolished or merged by
Congress. Administrative reorganization, in this regard, becomes an
exercise in rearranging organization boxes rather than the more drastic
“reinventing” or “reengineering.”

Moreover, administrative reorganization efforts do not get good press.
The general public will not appreciate the impact of abolishing 102 OP
agencies if they don’t know the total number of agencies in the OP, or
the savings that accrued to government as a result of these abolitions.
What the public gets to read are presidential actions (appointing a
sixth DepEd undersecretary and recycling of former cabinet members to
GOCCs) that cast doubt on the seriousness of this effort.

Cheaper Government

Reorganization advocates have also argued that “governmental
reorganization” reduces the cost of running government. Administration
allies point out that the P30-billion expenditure for early retirement
will save the government some P7.7 billion yearly from the P290-billion
budget for government employee salaries.

The empirical evidence out there does not support this assertion. The
Clinton reorganization effort in the 1990s reduced the cost for
employee salaries but increased expenditures for consultants and
contractual employees.

Besides, more than a third of the 1.5 million government employees in
the Philippines are teachers and law enforcement personnel that cannot
be reduced without compromising education and peace and order programs.
Any savings in employee salaries due to early retirement will have to
be allocated to hire new teachers, policemen, and military personnel to
cope with our ever-increasing population.

As American political scientist Rowland Egger asserted, the attempt to
sell reorganization legislation “however honorable the motives… is a
snare and a delusion… administrative reorganization never saved large
sums of money…” The only way to save significant sums of money, added
Egger, is to eliminate activities and reduce the scale of operations.
What Can be Done?

Filipinos have been promised time and again that the problems of
government bureaucracy will be fixed through reorganization.
Politicians routinely tell us that they will turn the system around and
make real changes in the way that bureaucracies work. The problem is
that we have not seen any evidence that this is happening.

It is high time the Arroyo administration learned from the mistakes of
its predecessors and forget about a system-wide reorganization in this
time of fiscal stress. It should instead focus on the chronic problems
of our economy.

But if GMA must reorganize, she can:

  1. Focus her efforts on the GOCCs sector, particularly the
    nonperforming agencies that have wreaked havoc on the economy and
    resisted all efforts to rationalize their salaries and perks since
    2001. The president can exercise political will and get strong public
    support by giving GOCCs a 60-day period to rationalize their pay
    scales, upon which she presses for legislation that will put all of
    them under the salary standardization law (SSL). I am sure
    congressional leaders will support the President in this effort.
  2. Show her seriousness by rationalizing the number of
    undersecretaries and assistant secretaries in all departments of
    government. Executive officials have routinely violated existing laws
    by justifying that they use their own funds to pay for the additional
    salary of the appointee. What they conveniently fail to tell the public
    is that every additional Usec or Asec needs office space, staff, a
    service vehicle, and allowances that are paid for by public funds. She
    can use the fiscal crisis to resist political pressure to pay off
    political debts by appointing additional Usec’s and Asec’s in
  3. Show leadership by declaring that she will veto any new law that
    will increase the size of government, particularly the creation or
    conversion of new state universities and colleges ( SUCs). The
    moratorium on creating new SUCs has been recommended by every
    educational commission since the 1980s. The number of SUC’s has
    exploded from 23 to 108 over the past four decades. It is about time
    government put its foot down on further SUC conversions.

Congress can help by using its oversight powers more seriously. There
are many existing laws that require automatic review of implementation,
and many more laws that require agencies to report their performance to
Congress. These reports are gathering dust in most offices because
Congress is either unable or unwilling to exercise its oversight

Our first priority right now – and it is enough of a challenge – is to
resolve our fiscal crisis. Until then, a system-wide reorganization
ought to wait for better times.

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