The Philippine budget system

The term “budget” originated from the Middle English word bouget that had derived from the Latin word bulga (which means bag or purse). (Magtolis-Briones, Leonor, Philippine Public Fiscal Administration, National Research Council of the Philippines and Commission on Audit, 1983, p. 243.)

In the Philippine setting, Commonwealth Act (CA) No. 246 (Budget Act) defined “budget” as the financial program of the National Government for a designated fiscal year, consisting of the statements of estimated receipts and expenditures for the fiscal year for which it was intended to be effective based on the results of operations during the preceding fiscal years. The term was given a different meaning under Republic Act No. 992 (Revised Budget Act) by describing the budget as the delineation of the services and products, or benefits that would accrue to the public together with the estimated unit cost of each type of service, product or benefit. For a forthright definition, budget should simply be identified as the financial plan of the Government, or “the master plan of government.” (Manasan, Rosario G., Public Finance in the Philippines: A Review of the Literature, Philippine Institute for Development Studies Working Paper 81-03, March 1981, p. 37; Magtolis-Briones, op. cit., p. 79)

American economist Prof. Philip E. Taylor has tendered the following understanding of the term budget (as quoted in Magtolis-Briones, op. cit., p. 243), to wit:

The budget is the master plan of government. It brings together estimates of anticipated revenues and proposed expenditures, implying the schedule of activities to be undertaken and the means of financing those activities. In the budget, fiscal policies are coordinated, and only in the budget can a more unified view of the financial direction which the government is going to be observed.

The concept of budgeting has not been the product of recent economies. In reality, financing public goals and activities was an idea that existed from the creation of the State. To protect the people, the territory and sovereignty of the State, its government must perform vital functions that required public expenditures. At the beginning, enormous public expenditures were spent for war activities, preservation of peace and order, security, administration of justice, religion, and supply of limited goods and services. In order to finance those expenditures, the State raised revenues through taxes and impositions. Thus, budgeting became necessary to allocate public revenues for specific government functions. The State’s budgeting mechanism eventually developed through the years with the growing functions of its government and changes in its market economy. (G.R. No. 209287, July 01, 2014)

The Philippine Budget System has been greatly influenced by western public financial institutions. This is because of the country’s past as a colony successively of Spain and the United States for a long period of time. Many aspects of the country’s public fiscal administration, including its Budget System, have been naturally patterned after the practices and experiences of the western public financial institutions. At any rate, the Philippine Budget System is presently guided by two principal objectives that are vital to the development of a progressive democratic government, namely: (1) to carry on all government activities under a comprehensive fiscal plan developed, authorized and executed in accordance with the Constitution, prevailing statutes and the principles of sound public management; and (2) to provide for the periodic review and disclosure of the budgetary status of the Government in such detail so that persons entrusted by law with the responsibility as well as the enlightened citizenry can determine the adequacy of the budget actions taken, authorized or proposed, as well as the true financial position of the Government. (Manasan, op cit., at. 39; Manasan, Budget Operations Manual Revised Edition, Operations Budget Commission [1968], p. 3.)

The budget process in the Philippines evolved from the early years of the American Regime up to the passage of the Jones Law in 1916. A Budget Office was created within the Department of Finance by the Jones Law to discharge the budgeting function, and was given the responsibility to assist in the preparation of an executive budget for submission to the Philippine Legislature. (Magtolis-Briones, op cit., at 80.)

As early as under the 1935 Constitution, a budget policy and a budget procedure were established, and subsequently strengthened through the enactment of laws and executive acts.[61] EO No. 25, issued by President Manuel L. Quezon on April 25, 1936, created the Budget Commission to serve as the agency that carried out the President’s responsibility of preparing the budget. CA No. 246, the first budget law, went into effect on January 1, 1938 and established the Philippine budget process. The law also provided a line-item budget as the framework of the Government’s budgeting system, with emphasis on the observance of a “balanced budget” to tie up proposed expenditures with existing revenues. (G.R. No. 209287, July 01, 2014, citing

CA No. 246 governed the budget process until the passage on June 4, 1954 of Republic Act (RA) No. 992, whereby Congress introduced performance-budgeting to give importance to functions, projects and activities in terms of expected results. RA No. 992 also enhanced the role of the Budget Commission as the fiscal arm of the Government. (Magtolis-Briones, op cit., p. 269;

The 1973 Constitution and various presidential decrees directed a series of budgetary reforms that culminated in the enactment of PD No. 1177 that President Marcos issued on July 30, 1977, and of PD No. 1405, issued on June 11, 1978. The latter decree converted the Budget Commission into the Ministry of Budget, and gave its head the rank of a Cabinet member. The Ministry of Budget was later renamed the Office of Budget and Management (OBM) under EO No. 711. The OBM became the DBM pursuant to EO No. 292 effective on November 24, 1989. (G.R. No. 209287, July 01, 2014)