How national budgeting works

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One of the most persistent myths in fiscal debates is that money carries memory.

In public finance, it does not.

The national government finances its programs and initiatives from three sources: first, from revenues from tax and non-tax sources; second, from borrowings from domestic and foreign sources and, third, from withdrawals from available cash balances.

Tax revenues accounted for 88.6 percent of total revenues on the average, from 2022 to 2024, according to a report from the House of Representatives Congressional Policy and Budget Research Department. The bulk of the tax revenues are generated through collections of the Bureau of Internal Revenue, followed by those from the Bureau of Customs and other offices (such as the Land Transportation Office for the motor vehicle user’s tax, the Bureau of Fire Protection  for the fire code tax, travel taxes collected by TIEZA, the Bureau of Immigration’s immigration taxes, the DENR’s forest charges, among others).

Meanwhile, the Department of Budget and Management explains that as a general rule, all fees, charges, assessments and other receipts or revenues collected by departments, bureaus and offices of the national government, including constitutional offices enjoying fiscal autonomy, shall be deposited to the national treasury as income of the general fund, except those receipts which are authorized by law to be recorded as a special account in the general fund, trust fund or other funds and other instances authorized by law.

Disbursements or expenditures by agencies without legal authority shall be void and shall subject erring officials and employees to disciplinary actions as well as appropriate criminal action, the DBM added.

Once these revenues enter the National Treasury, they do not retain labels. 

They become part of a unified pool of government resources that Congress allocates through the budget process, the end result of which would be the enactment of the General Appropriations Act which authorizes the government’s spending program for a specific fiscal year. 

The 2024 General Appropriations Act under Special Provision 1(d) authorized the return of the fund balance or excess reserve funds of government-owned or -controlled corporations to fund unprogrammed appropriations under the 2024 GAA. Following this legal mandate, the Department of Finance (DOF) directed GOCCs, including the Philippine Health Insurance Corp. or PhilHealth, to transfer their excess funds to the National Treasury. In the case of PhilHealth, P60 billion of P89.9 billion in excess funds were actually transferred to the treasury.

The President later ordered the return of PhilHealth funds already in the treasury back to PhilHealth.

The Supreme Court subsequently declared as void both the 2024 GAA’s Special Provision 1(d) for being a rider or one that is not germane or related to the bill’s purpose and for impliedly repealing the Universal Health Care Act and the Sin Tax law, as well as DOF’s Circular 003-2024 that implemented the GAA’s directive.

Subsequently, the 2026 GAA allocated nearly P129.8 billion to PhilHealth, which includes the restored P60 billion transferred to the National Treasury in 2024.

But even during the time when the P60 billion was with the National Treasury, the bulk or around P27.45 billion was used to pay for the Health Emergency Allowances of COVID-19 frontliners. 

Other critical programs funded were the medical assistance to indigent and financially incapacitated patients (P10 billion), the procurement of various medical equipment for the Department of Health and local government units as well as primary care facilities (P4.1 billion), three DOH health facilities (P3.37 billion) and the Health Facilities Enhancement Program (P1.69 billion). The rest or around P13 billion was used to fund government counterpart financing for foreign-assisted infrastructure and social determinants for health projects, the DOF explained.

The DOF emphasized that if there is an upside to its compliance with a law passed by Congress, it is that it triggered an upward adjustment of PhilHealth benefits. For instance, the package rate for breast cancer patients rose from P100,000 to P1.4 million. Those for dialysis sessions and medications were made free for an entire year. Kidney transplant expenses are now reimbursable from the previous P600,000 now to P2.1 million.

The funds were never used to finance unprogrammed flood control projects. They may have left the coffers of PhilHealth but they were still used largely for health-related expenses benefitting not only PhilHealth members but also the public in general.

There are those who assert that PhilHealth funds should have remained permanently earmarked for PhilHealth. This, is however, conceptually wrong. Unless a revenue stream is explicitly earmarked by law, then it is treated as part of the general revenue. That is the default rule, not the exception.

Budgets are not zero-sum between moral categories. They are exercises in balancing competing needs using legally available resources. The idea that returned funds were automatically siphoned away from health assumes a rigidity that does not exist in real-world budgeting.

Critics also tend to confuse administrative accounting with fiscal authority. Trust accounts, reserve funds and agency ledgers are administrative tools. Budget authority, however, flows from Congress. When funds are remitted pursuant to law, administrative classifications yield to legislative control.

This is precisely why revenue pooling exists. Fragmented funds create silos that prevent governments from responding to crises, settling arrears or reallocating resources when conditions change. Pooling enhances flexibility and accountability because spending decisions must pass through Congress.

The controversy is less about misuse and more about misunderstanding. Treating revenue consolidation as corruption does not strengthen accountability; it weakens public discourse.

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