Weak oversight and outdated rules are preventing the Philippine government from fully spending earmarked revenues, resulting in more than PHP 813 billion in idle funds by 2024, according to a study presented by the Congressional Policy and Budget Research Department (CPBRD).
The findings were presented by Mr. Anthony Arvin Salazar of the CBPRD during the 11th SERP-P Knowledge-Sharing Forum, which focused on transparency and accountability in public budgeting.
“Earmarked revenues act much like a specialized trust fund within a large organization, where the money is designated for specific vital projects,” Salazar explained.
Citing the CPBRD study, Salazar said earmarking is meant to protect priority programs, but in practice, it has locked funds into accounts that agencies are unable to use fully.
“But without strict oversight and performance measures, that money can sit idle or be inappropriately diverted, preventing the organization from meeting its core objective,” he warned.
Revenue grows, spending lags
Earmarked revenues increased from PHP 56.4 billion in 2013 to PHP 200.9 billion in 2021, with a sharp rise in 2024 following the inclusion of the National Tax Allotment.
Despite this growth, actual spending has remained low.
“The average annual utilization rate from 2014 to 2024 is only 24.3%, or just 13.6% accounting for the effects of the national tax allotment,” Salazar said.
“This low utilization has resulted in a steady increase in cumulative year-end balances, reaching PHP 813 billion by 2024,” he added.
Salazar said the growing balances reflect systemic weaknesses rather than prudent savings, as funds are collected but not translated into timely public spending.
Legal framework allows gaps
Salazar traced part of the problem to the legal framework governing earmarked revenues, which relies mainly on Presidential Decree 1234 and the 1987 Constitution.
“All income and collections for special or fiduciary funds authorized by law must be remitted to the National Treasury and are treated as special accounts in the General Fund, or [Special Accounts in the General Funds (SAGF)],” he explained.
He noted that ambiguities in the law have allowed weak enforcement and broad interpretations, citing the Malampaya Fund as an example.
The fund was initially intended for energy resource development, but became vulnerable to misuse due to a catch-all clause.
In 2013, the Supreme Court declared the clause unconstitutional, strictly limiting the use of the fund to energy resource development.
Structural constraints compound the problem
Salazar also pointed out structural issues in the management of special accounts in the general fund.
“While funds can legally be drawn when needed, the pooled cash resources might be insufficient at the moment the earmarked funds are obligated,” he said.
He stressed the need for legally mandated tracking systems to ensure that subsidiary ledgers for earmarked funds are always cash-backed, warning that the current setup undermines the original purpose of earmarking.
Salazar also flagged overlapping expenditures that weaken spending efficiency.
“Some earmarked funds are set aside for expenditures that overlap with programs already funded under the GAA or are part of the NGAs’ regular programs,” he said.
For example, the Special Road Fund, earmarked for road construction and rehabilitation, may overlap with the Department of Public Works and Highways’ existing asset preservation program.
The need for monitoring and evaluation
The absence of systematic monitoring to ensure earmarked funds achieve their intended goals remains a concern.
Salazar cited the Tobacco Fund as an example.
“While its original purpose has been fulfilled, its use now is just limited to augmenting the National Tobacco Administration’s operational requirements,” he said.
As a result, the fund’s cumulative balance has remained idle for many years.
He stressed the importance of tracking performance metrics to measure the efficiency and effectiveness of spending.
Reform measures proposed
Salazar underscored the need to balance funding certainty with fiscal flexibility.
“While earmarking increases funding certainty, it simultaneously reduces the government’s overall fiscal flexibility and control over the budget,” he said.
He recommended evaluating earmark proposals within the context of the entire national budget, updating governing laws, and fast-tracking the passage of the Budget Modernization Bill (BMB).
“The BMB is critical as it aims to institutionalize reforms addressing the persistent underutilization of earmark revenues,” Salazar said.
Key provisions include periodic review and rationalization of earmarked funds, the introduction of sunset clauses to limit their duration, and performance-based funding to ensure earmarks are tied to measurable outcomes.
“Our goal is to ensure that these special purpose funds are utilized swiftly and accurately, delivering the benefits they were legally intended to provide,” Salazar concluded.
Read more about CPBRD’s study at and watch the playback of the discussion here: . — MAEC
