National Budget: Spending and Planning

• A budget is a plan for future spending based on expected income
• It is a government's action plan for spending in the future based on income expectations
• Governments calculate how much to spend on sectors for the year
• National budgets translate development goals into spending plans
• Budgets fund policies with activities supporting priorities
• Budget development, implementation, and reporting need PFM understanding

National Budget Basics

• National budgets show how governments spend taxpayer money
• It outlines how activities, borrowings, and repayments are funded
• Budgets estimate expenditures and financing sources
• Government budgets are financial plans for a fiscal year
• They show resource allocation and generation
• It promotes socio-economic objectives, strategies, and programs

National Budget Scope

• The National Government budget includes all department budgets
• It covers support for Local Government Units (LGUs) and Government Owned/Controlled Corporations (GOCCs)
• It shows the government's plans for programs, projects, and funding sources

Purpose and Components

• Budgets allocate funding for government programs/projects based on priorities
• National budgets should balance resources and expenditures
• Budgetary resources come from revenues (taxes and non-tax collections) and borrowings
• Revenues are the most stable funding source

Borrowings

• Borrowings are repayable funds from financial institutions and other sources
• They finance development projects and/or budget support
• Domestic borrowings and foreign borrowings are subcategories
• Governments borrow to cover development requirements
• Borrowing funds capital projects and generate economic activity
• Borrowings cushion future needs and exploit markets
• Borrowing stabilizes markets by absorbing excess liquidity
• Domestic borrowing is readily available and involves no exchange risks
• Competing in the domestic market increase interest rates and lessen job opportunities
• Foreign sources offer long-term loans and low rates

Borrowing Risks

• Borrowing from foreign sources risk fluctuating exchange rates
• Government selects capital projects carefully to improve economic productivity and loan repayment

Domestic Borrowing

• Governments do domestic borrowing through treasury bills, notes, and bonds

Domestic Instruments

• Treasury bills are short-term debt instruments issued by the government
• Treasury bonds/notes are longer-term certificates maturing beyond one year
• Issuance depends on market needs

Foreign Borrowing

• Foreign borrowing comes from:
  • Multilateral sources (multiple owners)
  • Bilateral sources (another country's government)
• Foreign borrowing can be loans from institutions or government securities in the international market
• Examples include the Japan Bank for International Cooperation, the Asian Development Bank, and the World Bank
• Types of foreign borrowings
  • Project loans finance specific projects and multipurpose
  • Program loans enhance sectors with conditioned reforms

2025 Budget

• The education sector received the highest allocation
• Education sector allocation: PhP1.05 trillion
• Department of Public Works and Highways (DPWH) allocation: PhP1.007 trillion
• Department of National Defense (DND) allocation: PhP315.1 billion
• Department of Interior and Local Government (DILG) allocation: PhP279.1 billion
• Department of Health (DOH) allocation: PhP267.8 billion
• Department of Agriculture allocation: PhP237.4 billion

Public Finance Role & Scope

• Public finance studies government revenue, expenditure, and economic effects
• It studies economic aspects arising from public budgets
• Public finance is needed as a body to govern a given economy
• It governs free enterprise, centrally managed, or "mixed" systems

Economic Structures

• Free enterprise economies have perfect market competition
• Centrally managed economies have state planning
• Mixed economies have substantial goods/services and private regulation

Private vs Public Finance

• Private finance deals with private wants
• Public finance involves public wants
• Private wants through the market are subject to price payment
• Public wants lack market satisfaction because individual enjoyment lacks payment
• Social wants link satisfaction to consumer sovereignty
• Merit wants use exclusion to allow market satisfaction

Public Finance Functions

• Allocation-provides goods/services to satisfy public wants
• Distribution-determines a proper state income distribution
• Stabilization-maintains resource use, factors of production, and value for money

Budget Recipients

• National Government Agencies perform functions outside the private sector
• Local Government Units include provinces, cities, municipalities, and barangays
• Government-Owned/Controlled Corporations are stock/non-stock and directly controlled by the government

Sector Spending

• Sectors include categories of expenditures
  • Economic services pertain to industrial/agricultural production
  • Social services pertain to education, health, housing, and welfare
  • Defense services pertain to security and peace
  • General Public services pertain to administration, research and justice
• The government has 20 executive departments
• The government is also composed of the Office of the President, Office of the Press Secretary, etc

Public Finance History

• Government was created to protect and promote welfare

State Composition

• Government organizes laws, enforcing and interpreting them
• People live in its governance
• Territory is the area used to exercise authority
• Sovereignty allow government to control itself without external interference

Pre-Spanish

• Early Filipinos had monarchal barangay government
• Barangays were governed by rulers (datus/rajas)
• People paid tribute (buiz) from crops

Spanish Period

• Spain imposed tariffs/taxes on Filipinos
• 1569 strict collection of tributes
• Tariffs included:
  • specific duties, surtaxes, ad valorem taxes, consumption taxes, and export duties
• Revenue taxes came from industrial taxes, Urbana taxes, stamp taxes, cedulas, and the public domain

American Period

• Paris Treaty of 1898 transferred the Philippines to the US
• income taxation in the Philippines. was brought in 1913

Modern Era

• Tydings-McDuffie Act of 1934 established the Philippine Commonwealth

Budgeting

• Budgeting developed while under American sovereignty
• The Philippine Commission approved the annual budget
• The Constitution governs the national government budgetary system

Financial Management

• The Bureau of Treasury and the General Auditing Office influence financial management
• The Bureau of Treasury received government funds from 1948
• General Auditing Office was reestablished as the Commission on Audit

Public Revenues

• Public revenues are collected by governments and are vital to the maintenance of the State
• Public revenues empowers governments to fulfill responsibilities
• Governments can allocate resources, distribute wealth, and stabilize the economy

Objective of Finance

• Government finance prioritizes protecting the nation
• Protecting the territory involves defense, law enforcement, and disaster management
• Creating a stable macroeconomic involves financial actions from the goveremnt through fiscal policies

Income Sources

• Tax revenues are legally mandated to finance and for functioning of the state

Tax Revenu Types

• Income taxes: imposed on income
• Property tax: wealth ownership
• Estate and gift taxes: privileges
• Import Duties: taxes on foreign products
• Amnesty Taxes: special laws
• Community Tax: poll tax
• Excise Tax: taxes on alcohol, sugar, cards, etc
• Business License Taxes: Occupation taxes
• Documentary Stamp Taxes: legal documents

Other taxes

• Charges On Forest Products - Taxes on wood
• wharfage fees - import and export charges
• Franchise Taxes - taxes from special rights
• Capital revenues refers to money that is generated through the sale of long-term assets
• Extraordinary incomes are non-recurring financial resources from specific instances
• Grants are resources from individuals or organizations

Local Government Financing

• Financing of LGUs ensure delivery of services

Local Government definition

• Local government is defined as political subdivision of a nation
• Local governments are responsible for maintenance of a functional community government.

LGU Purposes

• Act as a State Instrument to carry on functions and exercises of government
• Serves as as agents for inhabitants or communities for the well fare of the people

LGU government types

• The provincial government is autonomous of all others within the republic with executive/legislative branches
• The municipal government coordination delivery with general services
• The City government serves it inhabitants with effective governance.
• The Barangay Serves with implementation of government plans and activities

Intergovernmental Relationship

• Local autonomy make and make local units an effective part

Planning for Development

• Socio Economic development of regions