The Philippine government has accumulated over P813 billion in idle earmarked funds by 2024, a result of weak oversight and outdated legal frameworks preventing state agencies from fully spending designated revenues, according to a study by the Congressional Policy and Budget Research Department (CPBRD).
The low utilization rate of these funds, which are revenues designated for specific vital projects, is leading to a massive and growing balance that reflects systemic weaknesses in public finance management, CPBRD’s Anthony Arvin Salazar said during the 11th SERP-P Knowledge-Sharing Forum.
The study noted that while earmarked revenues increased sharply from P56.4 billion in 2013 to P200.9 billion in 2021 and further in 2024 with the inclusion of the National Tax Allotment, actual spending has lagged significantly.
“The average annual utilization rate from 2014 to 2024 is only 24.3 percent, or just 13.6 percent accounting for the effects of the national tax allotment,” Salazar said.
This consistent underutilization has caused the cumulative year-end balances to reach P813 billion by 2024. Salazar said the growing balance indicates that funds are being collected but are not being translated into timely public spending, undermining the goal of protecting priority programs.
A key part of the problem lies in the legal framework, which relies mainly on Presidential Decree 1234 and the 1987 Constitution. These laws treat earmarked revenues as Special Accounts in the General Fund (SAGF), which should be remitted to the National Treasury.
Salazar said ambiguities in the law have enabled weak enforcement and broad interpretations. He cited the Malampaya Fund, initially intended for energy resource development, as an example of a fund that became vulnerable to misuse due to a catch-all clause, which the Supreme Court later declared unconstitutional in 2013.
Structural issues further complicate management. Salazar warned that while funds could legally be drawn, the pooled cash resources might be insufficient when the earmarked funds are obligated, weakening the intended purpose of earmarking.
Overlapping expenditures also contribute to inefficiency, such as the Special Road Fund potentially funding programs already covered by the General Appropriations Act (GAA) or regular agency programs.
Salazar called for systematic monitoring and performance measures, citing the idle cumulative balance of the Tobacco Fund as a case where the fund’s original purpose has been fulfilled but its current use is limited to augmenting the National Tobacco Administration’s operational requirements.
To address the issues, Salazar recommended balancing funding certainty with fiscal flexibility by evaluating earmark proposals within the national budget context and updating governing laws.
He urged the fast-tracking of the Budget Modernization Bill (BMB), which he considers “critical” for institutionalizing reforms.
Key provisions in the BMB include periodic review and rationalization of earmarked funds, the introduction of sunset clauses to limit their duration, and performance-based funding to ensure 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 said.
