Idle earmarked funds hit PHP 813 billion in 2024

By Francis Allan L. Angelo

While lawmakers held contentious bicameral talks over the proposed 2026 national budget, a new study is drawing attention to a different problem inside the spending system: money that is already legally set aside for specific purposes but still isn’t being used.

More than PHP 813 billion in earmarked public funds sat idle by 2024 because weak oversight and outdated rules keep Philippine agencies from fully spending revenues that laws have already reserved for specific purposes, according to a study presented at a transparency-and-accountability forum on public budgeting.

The findings were presented by Congressional Policy and Budget Research Department researcher Anthony Arvin Salazar during the 11th Socioeconomic Research Portal for the Philippines (SERP-P) Knowledge-Sharing Forum of think tank Philippine Institute of Development Studies.

Salazar framed earmarking as a tool meant to protect priority programs but one that can also trap resources in underused accounts.

“Earmarked revenues act much like a specialized trust fund within a large organization, where the money is designated for specific vital projects,” Salazar said.

“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 rose from PHP 56.4 billion in 2013 to PHP 200.9 billion in 2021, then jumped again in 2024 after the inclusion of the National Tax Allotment, the study said.

Despite that growth, utilization remained low, Salazar said, with the study estimating “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.”

“This low utilization has resulted in a steady increase in cumulative year-end balances, reaching PHP 813 billion by 2024,” he added.

Salazar described the underuse as persistent, with obligations staying below revenue levels and balances accumulating as “unobligated funds from earmarked revenues.”

A separate CPBRD “Facts in Figures” brief on earmarked revenues and expenditures reported PHP 185.9 billion in earmarked revenues in 2020, PHP 200.9 billion in 2021 and PHP 1,182.2 billion in 2022, with expenditures of PHP 118.6 billion, PHP 157.3 billion and PHP 1,135.3 billion, respectively.

That same brief reported balances of PHP 67.3 billion in 2020, PHP 43.6 billion in 2021 and PHP 46.9 billion in 2022, alongside year-to-year changes that included a PHP 981.3 billion revenue increase and a 488.5% revenue growth rate from 2021 to 2022.

The CPBRD brief attributed the 2022 jump primarily to the inclusion of local governments’ National Tax Allotment shares in reporting starting with the Budget of Expenditures and Sources of Financing FY 2024.

Across 2015–2022, the brief reported earmarked-fund utilization rates of 60.5%, 31.2%, 57.4%, 19.1%, 42.1%, 63.8%, 78.3% and 96.0%, and an average year-on-year balance of PHP 53.8 billion per year.

Even with utilization rising to 96.0% in 2022, the brief said the year-on-year balance still grew by 7.5%—or PHP 3.3 billion—to reach PHP 46.9 billion in 2022 versus the prior year.

Legal framework allows gaps

Salazar traced part of the problem to the governing framework for earmarked revenues, which he said relies largely 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 said.

In the transcript, Salazar also described how earmarked funds are reported in the BESF and classified based on how the Department of Budget and Management releases them, including “use of income” under automatic appropriations and releases charged against special accounts in the general fund through special budget requests and Special Allotment Release Orders.

He said ambiguities and broad interpretations have weakened enforcement, citing the Malampaya Fund under PD 910 as a major example.

In the transcript, Salazar pointed to the PD 910 catch-all clause—“and for such other purposes as may be hereafter directed by the president”—as a driver of misuse that included “transfers to NGOs of questionable existence,” use “by the PNP for office expenses,” and funding for the “coconut corn intercropping program.”

The Supreme Court’s 2013 ruling struck down that catch-all phrase as unconstitutional, limiting PD 910 use “solely to energy resource development and exploitation PAPs,” Salazar said.

Structural constraints compound the problem

Salazar said structural issues in managing special accounts in the general fund can also undercut earmarking because pooled cash can be spent elsewhere before an earmarked obligation comes due.

“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.

In the transcript, Salazar described the issue as the tension between earmarking and the “one fund concept,” where receipts can accrue to the broader general fund without “clear safeguards” to ensure earmark obligations are cash-backed.

He called for a legally mandated system to track cash resources and ensure “separate subsidiary ledgers are cash back at all times.”

Overlapping programs weaken spending efficiency

Salazar also flagged earmarked expenditures that duplicate items already funded through the General Appropriations Act or regular agency programs, which he said can reduce spending quality and blur accountability.

“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.

He cited the Special Road Fund—earmarked for road construction and rehabilitation—as potentially overlapping with the Department of Public Works and Highways’ asset preservation program.

Salazar said a lack of comprehensive monitoring makes it harder to determine whether earmarked funds have fulfilled their intended purpose and whether spending is efficient and effective.

He cited the Tobacco Fund as a case where “While its original purpose has been fulfilled, its use now is just limited to augmenting the National Tobacco Administration’s operational requirements,” leaving balances idle “for many years.”

Reform measures proposed

Salazar said the policy trade-off is unavoidable: “While earmarking increases funding certainty, it simultaneously reduces the government’s overall fiscal flexibility and control over the budget.”

He recommended evaluating earmark proposals against the entire national budget, updating governing laws and fast-tracking the Budget Modernization Bill, which he said would institutionalize reforms to address persistent underutilization.

“The BMB is critical as it aims to institutionalize reforms addressing the persistent underutilization of earmark revenues,” Salazar said.

In the press release summary of his recommendations, key provisions cited included periodic review and rationalization of earmarked funds, sunset clauses to limit duration, and performance-based funding to link earmarks 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.

In the transcript, Salazar also argued for “deficit neutrality,” saying new spending tied to earmarks should be covered by new revenue to avoid destabilizing fiscal policy and adding to national debt.

Citizen monitoring, shadow pork

In the forum, WeSolve Foundation President Ken Abante said ordinary people are often excluded from decisions on “trillions of pesos in taxpayer money,” and described citizen participation as central to budget accountability.

Abante, who is also a member of the People’s Budget Coalition, cited past coalition proposals when the budget ceiling was more than PHP 5 trillion and advocates sought to reallocate “PHP 1.2 trillion,” but “what we got was around PHP 69 billion.”

Abante also described tracking insertions since 2021 as the scale of questionable items increased.

In one segment, he cited flood-control disclosures, saying a government website release showed “just more than 500 billion pesos,” but that monitors saw “around 2 trillion pesos worth of flood control projects.”

He also cited their estimate of “260 billion pesos in the House version,” which the Senate committee process initially reduced to “110 billion pesos” and then “150 billion pesos,” while warning that “backdoor insertions, or shadow pork,” could appear through unprogrammed appropriations.