FUNDING THE TRANSITION TO BARMM:

MANDATES, MYTHS AND REALITY


This policy report is a product of a series of round table discussions organized by:

For questions or concerns regarding the findings of this report, you may contact:
Ramie Toledo
Communication Manager
Institute of Autonomy and Governance
r.toledo@iag.org.ph


Executive Summary

The primary question on the smooth transition of the Autonomous Region in Muslim Mindanao (ARMM) to the Bangsamoro Autonomous Region in Muslim Mindanao (BARMM) is the availability of funds. Are funds readily available for the operation of the BARMM government and the Bangsamoro Transition Authority (BTA)? What are the sources of these funds? To provide answers to these questions, the Institute of Autonomy and Governance (IAG) in partnership with Konrad Adenauer Stiftung (KAS) carried out a roundtable discussion in Cotabato City on 29 April 2019 to shed light on relevant provisions of the Bangsamoro Organic Law (BOL) and the ARMM existing practices on how to access resources vis-a-vis financing the transition. Among the participants were members of the Bangsamoro Transition Authority (BTA) and employees of the previous ARMM.

Are funds available for BTA/BARMM operations? The BARMM has taxing powers and mandated revenue shares, as follows: (a) 50% of revenues from utilization of strategic minerals, (b) 70% of internal revenue taxes, and (c) 50% of the yearly incremental VAT. However, these are not yet in effect at the moment.

How does BARMM fund the transition? None is specifically provided for a Transition Fund under the FY 2019 GAA. However, Section 16 of the BOL suggests that the BTA-BARMM may utilize “any available fund from the current GAA of the National Government or from the current appropriations provisions intended for the ARMM which—as provided under BOL—shall be transferred to the BARMM.

There are budgetary provisions for ARMM in the Fiscal Year (FY) 2019 GAA that should now be transferred to the BARMM. But the BTA-BARMM cannot just disburse it based on what it deems fit, because these key budgetary allotments are provided through legislation—the General Appropriations Act—in the form of line-item budgeting intended for ARMM agencies that are still there and have implemented and still implementing continuing programs.

As to the ARMM local funds for 2019, the BTA-BARMM can access that and the BTA (as a Parliament) has the authority to make use of those funds, because ARMM is already abolished. But the BTA (as Parliament) can make representation with the Philippine Congress through Resolution and dialogue on the transfer of ARMM funds provided under GAA to the BTA-BARMM Government, pursuant to the BOL.

Pending availability of the Block Grant, OPAPP funds for Normalization can be sourced out. It is important that the Normalization Process will be implemented already.

What is the Block Grant? This is equivalent to: (a) 5% of the BIR’s net Internal Revenue Tax Collection and BOC’s Net Collections (from the Third Fiscal Year immediately preceding the Current Fiscal Year); and (b) automatically appropriated and shall be released directly and comprehensively to the Bangsamoro Government, without need of any further action. It is the share of the Bangsamoro Government from the national internal revenue collections, based on the prior third fiscal year immediately preceding the current. For 2019, BARMM-BTA does not have a Block Grant, but in 2020, it will be appropriated by Congress.

How does budget preparation in the BARMM work? In the budget preparation the following steps have to be observed: (a) National Budget Call (National Budget Memorandum 129 dated Jan 3, 2018 for FY 2019; and National Budget Memorandum 131 dated Feb 26, 2019 for FY 2020); (b) Budget Priorities Framework under Tier 2 (National Budget Memorandum 130 dated April 13, 2018 for FY 2019; National Budget Memorandum 130 dated April 12, 2019 for FY 2020).

The disbursement, spending of funds allocation by BARMM or the BTA (in the Transition Period) will not be technically and legally in order unless an Appropriations Law is passed by the BTA (as a Parliament).

The BARMM government has to assert the mandated shares in FY 2020: (a) 50% of revenues from utilization of strategic minerals, (b) 70% of internal revenue taxes, and (c) 50% of the yearly incremental VAT. There are articles in the BOL that spelled out on how to generate funds for the operation of the BARMM government and the BTA (Parliament) such as: Article XII’s Section 10; Section 11, Sections 12 and 37.

The Intergovernmental Fiscal Policy Board shall promulgate rules to determine the income that shall be subject to the sharing scheme between the National Government and the Bangsamoro Government. Article XII, Section 38 indicates the composition of the IFPB, which includes the Secretary of Finance and appropriate Ministry in Bangsamoro (co-chairpersons), the Secretaries of DBM and DTI and NEDA, and heads or representatives of appropriate departments, agencies of the National Government and Ministries of the Bangsamoro Government.

This roundtable resulted in the following policy recommendations:

  1. The phase out plan or the Transition Plan should be submitted to the BTA (the Parliament) for approval. The Transition Plan contains the Phase-out Plan that the ARMM government has already been abolished. The BTA should deliberate on and approve the proposal.
  2. Set up the intergovernmental relations (IGR) bodies as soon as possible. IGR bodies and mechanisms will help resolve issues like sources of funds, guidelines on how to prepare the budget proposal and how to utilize the Block Grant.
    One of these IGR bodies is the Intergovernmental Fiscal Policy Board (IFPB). The BTA as a Parliament should discuss with the Interim Chief Minister the need to request the Office of the President to initiate the formation of the board, while at the same time nominating representatives of the BTA-BARMM Government to the IFPB.
  3. Fast-track establishment of ministries replacing corresponding ARMM agencies. With the establishment of relevant ministries on fund sourcing, proposed actions that the BTA as a parliament have to consider: (a) Adopt the current Operating Expenditure (COE) provisions intended for the ARMM in the GAA which covers budgetary allotment for General Administrative Support (GAS), Support to operations (STO), and General Operations (GO), as well as nationally-funded programs in the amount of Php31.9B; (b) Authority from BTA to disburse the remaining ARMM Local Funds in FY 2018, and FY 2019; (c) Operationalize the Ministry of Finance, Budget and Management to fast track budgeting process; (d) The setting-up of Bureau of Local Government Finance (BLGF) in the BARMM should follow the standards set by the BLGF and Department of Finance; (e) Preparation of the Regional Expenditure Program (REP) for the BTA and BARMM agencies for FY 20191; and (f) Use existing funds from the ARMM such as the funds of the ARMM HELPS and ARMM BRIDGE to construct houses for the ex-combatants of MILF and MNLF for the normalization purpose.

Download the policy report here.