Chapter-6_Government-Expenditure.pptx. J

for requirements only

1. GOVERNMENT EXPENDITURE CHAPTER 6

2. Table of Contents 1 2 3 PATTERNS AND TREND OF EXPENDITURES EXPENDITURES BY FUNTION ECONOMIC SERVICE 4 5 SOCIAL SERVICE DEFENSE SERVICES

3. Table of Contents 6 7 8 GENERAL PUBLIC SERVICE DEBT BURDEN GOALS OF GOVERNMENT EXPENDITURES

4. Government Expenditures exert a decisive impact on the entire company. In countries where economic planning has gained a foothold, government spending is one single factor that would significantly influence their rise, stagnation, or decay, In the ultimate analysis because of its far-reaching importance in the nation’s economy, public spending can be metamorphosed into an instrument for either progress or retrogression. INTRODUCTION

5. Evaluation of the expenditure program in terms of the following fiscal goals: To promote a desirable level of employment To promote a desirable level of output To promote a desirable level of income and its “proper” distribution To promote a desirable level of prices

6. What is Expenditure? By expense class and object of expenditures; By sector; By recipient entities; By region Expenditures are obligations that the government incurs that must be paid during or after the year when they were incurred. The term “expenditure” is more generic than “expense” in that the latter refers to items of expenditure that are current. Classification

7. What is meant by Expense Class? Current Operating Expenditures (COE); Capital Outlays (CO); Net Lending; and Debt Amortization. Expense Class refers to the classification of expenditures by the nature or type of obligation. Classes

8. PATTERNS AND TREND EXPENDITURES

9. Wagner's law on government expenditures - accounts for accelerated government spending. In effect, these expenditures are all directed to the harnessing and exploitation of available resources for speedy growth.

10. The Growth in population; Inflation (or the increase in the prices of goods and services purchased by the government), and The increasing demand for economic and social development projects. Major Factor’s affecting the increasing expenditure trend are:

11. Personal services, like salaries and wages, social security contributions, overtime pay; Maintenance and other operating expenditures, such as traveling expenses, supplies and material, water, illumination and power services, rent; Interest Payments; Allotments to Local Government Units; Subsidies to government-owned and controlled corporations. Major Current Operating Expenditures of the National Government

12. Limit the growth of current operating expenditures with provision for inflation adjustments; Encourage cost reduction measures in operation, particularly overhead expense items; provide adequate maintenance finds for infrastructure facilities; and Control the growth of spending for personal services within the level that can be sustained by available resources. The Government’s Policy Regarding Current Operating Expenditures

13. The capital outlays of the national government are appropriations spent for the purchase of goods and services, the benefits of which extend beyond the fiscal year and which add to the assets of government, including investments in the capital stock of government-owned or controlled corporations and their subsidiaries. The capital outlays of the national government may be broadly classified as follows: infrastructure outlays, equity contributions to government corporations, capital transfers to local government units, and other capital outlays. Capital expenditures, particularly those classified as capital goods or durable goods to be used for non-military and productive purposes, such as construction of roads and bridges, dams, power and irrigation works, schools and hospitals, are generally desirable because of their high multiplier effect on the economy, i.e., they stimulate the growth and expansion of economic activities of the private sector and facilitate the integration of industries. The Capital Outlays of the National Government

14. Infrastructure expenditures refer to the disbursement of funds for the construction of various basic public works of the country, such as roads, ports, airports, water supply, irrigation, and other capital investments, the benefits of which extend to the general public. In the national budget, infrastructure expenditures generally refer to the capital outlays of the Department of Public Works and Highways and the Department of Transportation and Communication, the School Building Program of the Department of Education, Culture and Sports, and the national irrigation projects of the Department of Agriculture. Infrastructure Expenditures

15. The other capital outlays of the government consist of land acquisition of vehicles, aircraft, water vehicles, equipment, furniture, fixtures. What Constitute the other Capital Outlays of the Government?

16. Capital transfers to local government units (LGUs) pertain to the portion of the Internal Revenue Allotment (IRA) which accrue to LGUs equivalent to not less than twenty percent (20%) of their IRA allocations, earmarked for development projects such as the construction/improvement, repair and maintenance of local roads, concrete barangay roads/multi-purpose pavements, and the rehabilitation and improvement of communal irrigation projects/systems. Capital Transfer to Local Government Units (LGUs)

17. Equity contributions to government corporations refer to the national government investments in the authorized capital stock of government-owned or controlled corporations The Equity Contributions to Government Corporations

18. Interest payments represent the cost of borrowed funds which form part and parcel of the cost of the items financed by the loan. Interest payments are, therefore, considered as the real expense item in the budget. Interest Payments

19. The National Government Budget is allocated according to the following major sectors: social services, defense, general public services, and debt burden. The National Government Budget Sectoral Allocated

20. ECONOMIC SERVICES

21. communications, roads and transportation facilities; agriculture, agrarian reform and natural resources; water resources development and flood control; trade industry; power and energy; and tourism. Provision for Economic Services include those for:

22. Agriculture and Natural Resources

23. Despite the government's avowed objective and determination to "conserve and develop the patrimony of the nation" the natural resources of the country are still basically untapped, such that the majority of the people remain poor. The reforestation program of the government is beset with problems posed by the "kaingin" system and indiscriminate logging, and the gap between reforestation and deforestation seems to be widening. The Economic Research Journal of the University of the East editorialized in one of its issues thus: "The conservation of our natural resources is a critical issue of development and survival. On it depends the present and future growth of the national economy. Thus, the challenge to our people and to the national leadership is to adopt policies and measures that will ensure the conservation of our natural resources for the present and future generation. " Forest Resources

24. The Philippines has one of the world's richest fishing grounds, with some 2,000 fish species. Despite this almost unlimited wealth the country suffers from a perennial fish shortage. According to a special report the annual fish production of the country trails behind its domestic consumption requirements. Since 1962, the Philippine government has undertaken a deep- sea fisheries program to expand production to the level of the country's consumption requirements and possibly for export. The project also emphasizes technical assistance, marketing, refrigeration, canning, artificial spawning, and doing away with dynamite fishing. FISHERIES

25. 1.DA 2.DAR 3.Philippine Crop Insurance Corporation 4.Agricultural Credit Policy Council 5.Support to Farmers and Fisherfolk 6.Farm-to-Market Roads 7.Rice Competitiveness Enhancement Fund 8.National and Communal Irrigation Systems 9.Financial Subsidy to Rice Farmers 10.National Rice Program Additional instances of the budgets that the agriculture sector allocates:

26. Infrastructure

27. Public Works Expenditure Railroad Transportation

28. The allocation of government funds for construction, maintenance, and infrastructure projects, is pivotal for societal development. It drives economic growth by creating jobs and fostering investment, while also promoting inclusive development. Infrastructure projects improve connectivity, regional progress, and overall quality of life, while social investments enhance education, healthcare, and community welfare. Public Work Expenditure

29. Another vital artery of the nation's economy. This holds true whether in times of peace or during war and other periods of emergency. The railroad is a "reversible coat" which transports not only goods and people but also troops and military supplies and hardware. Railroad Transportation

30. 1.Network Development Program 2.Asset Preservation Program 3.Bridge Program 4.Subsidy for Mass Transport 5.Mindanao Railway Project 6.Rail Transportation 7.Air Transportation 8.Sea Transportation 9.Land Public Transportation 10.Maritime Infrastructure Additional instances of the budgets that the infrastructure sector allocates:

31. Trade and Industry

32. Among the twenty or so officers under the Department of Commerce and Industry, the important ones are the following: Bureau of Commerce, Bureau of the Census Authority, Rice and Corn Board, and the Board of Travel and Tourist Industry. OFFICES AND FUNCTIONS

33. The Bureau of Commerce is for all purposes the implementing arm of the department in the development, promotion and regulation of the Philippines commerce. The Bureau of the Census and Statistics is charged with the all-important function of conducting demographic, economic, educational and other census implementation by the authorities. The Securities and Exchange Commission is responsible for codifying, listing, and classifying all types of business entities according to nationality of incorporators, types of business engaged in, capitalization, etc. The Cooperatives Administration Office is mandated by law to foster, promote, develop and regulate the operation of all non-agricultural cooperatives in the country.

34. The National Cottage Industries Development Authority is charge with the vital function of developing and promoting small-scale, labor-intensive cottage industries while the Rice and Corn Board is charged with the task of studying and recommending measures for the improvement of the rice and corn industry and hastening the transfer of control over this industry from alien to Filipino hands. The Board of Travel and Tourist Industry is charged with the function of promoting tourism and developing the country’s tourist attractions.

35. Other Economic Development

36. Among the officers falling under the category, the following are the most important: National Economic Council, National Science Development Board, Presidential Arm on Community Development, Electrification Administration, the different development authorities, such as the Mindanao Development Authority and the Central Luzon-Cagayan Valley Development Authority, the University of the Philippines, the Board of Industries, etc. OFFICES AND FUNCTIONS

37. The National Economic Council is assigned the task of formulating the country’s economic policies. The National Science Development Board has the function of optimizing the use of science and technology for overall socio-economic development and the Presidential Arm on Community Development is charged with responsibility of developing the rural communities as the foundation-stone of progress and prosperity. On the other hand, the Electrification Administration is charged with the function of providing much-needed electricity to the population, especially those living in the rural areas, and the different development authorities were created to promote regional development in the country.

38. The Board of Industries was establish to evaluate and encourage the development of basic industries and to grant tax exemption privileges to these industries. The University of the Philippines was put up to be the forefront and torch-beater of education in the country. Its affiliate offices, such as the National Research Council of the Philippines , are the dedicated to the promotion of scientific research. Other offices and funds classified to be contributing to the function of other economic development are the following: Department of National Defense insofar as its economic projects are concerned, Foreign Assisted Projects Peso-Supported Fund and the Reparations Commission.

39. SOCIAL SERVICES

40. education, culture and manpower development; health services; social security, welfare, and employment; housing and community development; and land distribution. Allocation for Social Services include those for:

41. Three Major Items: 1 2 3 EDUCATION PUBLIC HEALTH AND MEDICAL CARE Labor and Welfare

42. Education

43. Development of human talents - Pursuit of knowledge for its own sake - an end in itself - not a means to an end The Gearing of the Educational System to the requirement of socio -economic growth - not as an end in itself but as a means to an end Board Objectives of Expenditures of Education

44. The substantive functions of the Philippine educational system are entrusted to the Department of Education which “aims to provide efficient and effective leadership in the administration and supervision of the bureaus and agencies under it for the cultural, social and economic development of the country”. The Philippines Constitution ordains that “All schools shall aim to develop moral character, personal discipline, civic conscience , and vocational efficiency and to teach the duties of citizenship. Philippine Educational System

45. To inculcate moral and spiritual values inspired by an abiding faith in God: To develop an enlightened, patriotic, useful and upright citizenry in a democratic society To instill habits of industry and thrift and to prepare individuals to contribute to the economic development and wise conservation of natural resources Board and Specific aims of Education:

46. To maintain family solidarity, to improve community like, to perpetuate all that is desirable in our national heritage and serve the cause of world peace To promote sciences, arts, and letters for the enrichment of life and recognition of the dignity of the human person Board and Specific aims of Education:

47. the policy-making body of the Department of Education. Board of National Education

48. To formulate general education objectives and policies, coordinate the curricular offerings, activities and functions of all educational institutions with a view to carrying out the provisions of the Constitution and to accomplish an integrated, well-rounded, nationalistic and democracy-inspired educational system. To establish guidelines, policies, and criteria on the basis of which the examinations, evaluation and approval of textbooks shall be made. Functions:

49. To compile educational statistics, keep records on education, conduct researchers, surveys, and studies on educational conditions and problems; evaluate the effects of national educational policies. To secure data and information from all government offices and entities and educational institutions, public and private, and to consult and confer with the officers and personnel thereof. To submit an annual report to the President and to Congress not later than January thirty-first of each year which shall include a compilation of the national educational system and re- commendations on the improvement of the educational system of the country.

50. DepEd SUCs CHED TESDA Universal Access to Quality Tertiary Education Basic Education Facilities Program Educational Assistance and Subsidies Basic Education- Learning Continuity Plan DepEd Computerization Program Here are a few instances of how the education sector has allocated its budget:

51. Public Health and Medical Care

52. Charge with the responsibility of carrying out the program of the government which embraces public health, disease prevention, cure and rehabilitation, health and medical education practices. The Department of Health

53. The allocation or distribution of resources, such as funding, equipment, or personnel, towards health-related initiatives, programs, or institutions. This term is often used in discussions about healthcare financing, public health policies, and resource management within healthcare systems. Effective health appropriation is crucial for ensuring equitable access to healthcare services, addressing public health challenges, and improving overall health outcomes within a population. Health Appropration

54. 1.National Health Insurance Program (PhilHealth) 2.Health Facilities Enhancement Program 3.Purchase of drugs, medicines, and vaccines for government facilities 4.Human Resource for Health Deployment Program 5.National Health Immunization Program 6.Assistance to Indigent Patients 7.New Health Programs/Projects for COVID-19 Response Additional instances of the budgets that the health sector allocates:

55. Labor and Welfare

56. Labor or manpower is a productive factor whose importance in the production process is matched only by land. It is the country's greatest and most indispensable resource - in fact, it is its main power. Progress can emanate only from ideas and ideas In fact, the very freedom can originate only in people's minds. that society enjoys can grow and flourish only when people have freed themselves from the tentacles of ignorance. Change must begin with people. As a former chairman of the National Economic Council once said, "underdeveloped countries are directly traceable to underdeveloped peoples." A. Labor

57. It is the central “actor” or participant in any development process, and It is the recipient of the fruits of economic growth. The Development of Human Capital is Important for Two Reasons:

58. The Department of Labor is charged with the “administration of the various existing labor laws and such other laws which may be enacted by Congress. The major areas of activity with which the Department is primarily concerned are: promotion of industrial peace, employment and manpower development and labor law administration”. The Department of Labor

59. Supervision over Bureau of Labor Standards and the Labor Standards Commission attach to it; Administration and enforcement of laws related to the welfare of Filipino industrial, commercial and agricultural workers here and abroad; Initiation, study, formulation and execution of the Government’s labor policy; Major Function:

60. Establish of a national system of free public employment offices as an integral part of the national program for the achievement and maintenance of maximum employment and the development and use of manpower resources; Compilation and analysis of labor market information and statistics; and Regulatory and supervisory action with respect to the enforcement of laws relating to employment, apprenticeship, wages and hours, women and minors, industrial health and safety, workmen’s compensation, labor organizations and labor relations. Major Function:

61. For the forgoing functions, the Department of Labor gets only a small sum for its operational requirements. The Budget of Department of Labor

62. Under the Philippines budget system, welfare expenditures include all expenses for child, youth, and community services, and assistance to the destitute and victims of calamities. B. Social Welfare

63. The functions, powers, duties and responsibilities of the Department of Social Welfare are derived from the pertinent provisions of the Revised Administrative Code, Reorganization Plan No. 50, Executive Order No. 326, and Republic Act Nos. 1179 and 5416. The Department of Social Welfare

64. Provide material aid to the indigent, physically handicapped and unemployed; Assist in establishing self-help projects which will substantially reduce the need for public assistance; Provide social work, counselling and services to assist adults and children in adjusting to their economic and social problems; Provide guidance through the courts to youths who are placed under probation and parole; Act 1 of Reorganization Plan No. 50, major function :

65. Provide a training program for the physically handicapped to enable them to become self-supporting and adjusted to economic and social problems; Provide for institutional care and. supervision for children and adults where are in their own homes is not practicable or possible; and Supervise and license private homes and local charitable institutions. Act 1 of Reorganization Plan No. 50, major function :

66. The Office of the Secretary and his Assistance, The Bureau of Child and Youth Welfare, The Bureau of Family Welfare, The Bureau of Vocational Rehabilitation, The Bureau of Field Services, The Bureau of Research, Training and Special Projects, and The Bureau of Women’s Welfare 7 Major Offices Design of Dept of Social Welfare :

67. The lopsided growth of the country’s manpower supply in relation to the urgent demands of the economy for the services of technically trained personnel. The unemployment and underemployment of a very significant segment of the labor force, and The “brain-drain” problem, which deprives the economy of its brain and brawn For the Department of Labor, the Following Compromise its Major Problems:

68. 1 2 Additional instances of the budgets that the social welfare sector allocates: Pantawid Pamilyang Pilipino Program (4Ps) Unconditional Cash Transfer Program Social Pension for Indigent Senior Citizens Supplementary Feeding Program Protective Services for Individuals and Families in Difficult Circumstance Sustainable Livelihood Program

69. DEFENSE SERVICES

70. National Defense Expenditures represent two broad categories; one, for national defense proper and second; for the maintenance of peace and order. These two broad items of expenditure are complimentary.

71. The Armed Forces of the Philippines (AFP) is the guardian of the nation's security. It is charged with the important function of providing maximum defense and security to the country, both internal and external. A. The Armed Forces of the Philippines

72. The Philippine Army (PA) The Philippine Constabulary (PC) The Philippine Air Force (PAF) The Philippine Navy (PN) Major Commands:

73. Two basic effects of defense or war expenditures: Opportunity cost, and Fiscal Effects - effects upon employment - effects upon output and consumption, and - effects upon prices B. Effects of Defense Expenditures

74. Expenditures for Defense includes those that support the general effort to ensure national security, stability and peace which are indispensable to economic growth and development.

75. 1.Department of Justice 2.Bangsamoro Autonomous Region in Muslim Mindanao Additional instances of the budgets that the defense sector allocates:

76. What are the major sources of funds to finance the national budget? Revenues from both tax and non-tax sources Borrowings from both domestic and foreign sources Withdrawals from available cash balance Major Sources

77. Revenues refer to all cash inflows of the national government treasury which are collected to support government expenditures but do not increase the liability of the NG. Revenues consist of tax and non-tax collection. What are revenues and their major classification?

78. A tax is compulsory contribution mandated by law and exacted by the government for a public purpose. The major tax collecting agencies of the national government are the Bureau of Internal Revenue and the Bureau of Customs. What is a tax? What agencies are authorized to collect taxes?

79. What are the major classes of tax revenues? Taxes on income and profits; Taxes on property; Taxes on domestic goods and services; Major Classes Taxes on international trade and transactions; Other Sources.

80. 1 Taxes on income and profits are imposed on all taxable income earned or received by a taxpayer, whether as an individual, as a partnership, or as a corporation, during a particular period of time, usually lasting one year. Taxes on domestic goods and services are imposed on the use or sale of locally manufactured goods as well as local services availed of the domestic territory. 2 4 3 5 Taxes on International trade and Transaction includes import and customs duties, and other international trade-related collections of the government. Taxes on property are imposed on the ownership of wealth or immovable property levied at regular intervals and on the transfer of real or personal property. Other Taxes primarily include collections from the vehicles tax, immigration tax and forest charges.

81. Non-tax Revenues refer to all other impositions or collections of the government in exchange for services rendered, asset conveyed, penalties imposed, etc. What are Non-Tax Revenues?

82. The privatization program was launched by the government in 1987 pursuant to Proclamation No. 50 to sell Non-Performing Asset (NPAs) of government financial institutions and government-owned and controlled corporations transferred to the national government. This program enables the NG to divest itself of assets that would be more productive in the hands of the private sector. What is the privatization program?

83. Borrowings refer to funds obtained from repayable source, such as loans secured by the government from financial institutions and other sources , both domestic and foreign, to finance various government projects and activities. What is borrowings?

84. Domestic borrowings are funds obtained from sources within the country. Domestic borrowings of the national government are usually made through the auction of treasury bills, notes and bonds to the public. What is Domestic Borrowings?

85. Foreign borrowings are funds obtained from sources outside the country, such as Asian Development Bank (ADB), International Bank for Reconstruction Development (IBRD), Overseas Economic Cooperation Fund (OECF), etc. Foreign borrowings can be obtained through loans secured from foreign financial institutions or through the flotation of government securities in the international market. What is Foreign Borrowings?

86. What does the Government Borrow? To finance national government deficit; To obtain foreign exchange; To secure financing at more favorable terms than the opportunity cost of revenues Reasons: To take advantage of benefits attached to the funds, technology To balance the timing of resources with the project gestation and repayment of benefit

87. Constructive cash receipts are foreign loan proceeds in the form of goods and services for which no cash is remitted to the national treasury. Such goods and services has been paid directly by the lender of the supplier. What are constructive cash receipts?

88. Net Borrowings refer to gross borrowing less debt amortization. What are Net Borrowing?

89. General Administration and Support; Support to Operations, and Projects. The National Government Budget is Broken Down into the following cost categories:

90. Expenditures for general administration represent those that are normally considered as agency overhead (i.e. the cost of general supervision) which the agency will incur to exist as a unit. Support to operations refers to those activities that facilitate the performance of the agency's mandated functions and services.

91. Expenditures for operations are those that go to regular activities directly addressing the agency's mandates. They include expenditures for programs involving the production of goods; delivery of public services; regulation of societal activities; conduct of basic governance; or provision of general management and supervision of the entire government bureaucracy.

92. Project expenditures are those that fund activities which result in the accomplishment of identifiable outputs within a designated period. Project expenditures may be sourced from foreign assistance or from local funding.

93. The categorization of the budget by functional cost components allows for a better analysis of government expenditures to focus on more priority needs thus improving the quality of government spending.

94. GENERAL PUBLIC SERVICES

95. Employment in the Government The debt service expenditure of the national government is already high. It is definitely higher than what the government has been appropriating for the Department of Labor, the Department of Commerce and Industry and for Other Economic Development.

96. General Public Services Expenditures are those that spent for: general administration such as general government stipulation fiscal affairs, foreign affairs and international commitments, electoral, audit, civil service and lawmaking functions; and public order and safety including various functions pertaining to law enforcement, maintenance of public order and safety and political administration.

97. DEBT BURDEN

98. Expenditures for Debt Burden are those that go into servicing of government’s regular and assumed debts from domestic and foreign sources, including interest payments.

99. 1 2 Debt Services refers to the sum of the debt amortization and interest payment on foreign and domestic borrowings of the national government or the public sector. Under the current system of budgeting, only interest payments are treated as part of the expenditure program because it represents as a real expense item, the cost of borrowed funds, which should form part and parcel it of cost of the items financed by the loan. Debt principal is treated as an off-budget item because it is merely a return of borrowed funds; hence it is reflected as a financial account.

100. 1 2 Debt Service consists of the repayment of interest and related costs. The payment of principal amortization is no longer included in the budget, but it is included in the cash outflow. The reason for this is that principal payment is a financing transaction rather than an expenditure.

101. 1 2

102. GOALS OF GOVERNMENT EXPENDITURE

103. Promoting a desirable level of employment To promote a more desirable level of output To promote a more desirable level of income and its proper distribution The promotion of a more desirable level of prices

104. THANK YOU FOR LISTENING!! FAINA, GIECEL FABITO, EYVIND RUSSEL FALCUTILA, ARJEN GALANGA, RODELLA GAPI, LAIKA SHANE RODESMA, CARLOTA SHALE SISCAR, KYZYL AN GROUP 4: