DBM: Supplemental budget eyed for unpaid military, police pensions

MANILA, Philippines—Amid a flurry of complaints from retired military, police and other uniformed personnel, the Department of Budget and Management (DBM) is pitching a supplemental budget to Congress this year to pay over P34 billion in pension adjustments due three years ago.

In an online interview on Tuesday (Feb. 2), Budget Secretary Wendel E. Avisado said the legislature was amenable to passing supplemental appropriations to fund the unpaid pension differentials for 2018.

In 2018, Congress Joint Resolution No. 1 implemented a higher base pay for military and uniformed personnel which, in turn, also jacked up the amounts of pension that retirees were supposed to get.

Currently, retirees’ pensions were being indexed with the salary increases that those still in active service enjoy—resulting in a ballooning risk to national coffers.

In the case of the 2018 pension adjustments, P36.6 billion was only released in 2019, prompting the DBM to include P172.9 billion in this year’s pension and gratuity fund to cover the unsettled payouts.

The 2021 General Appropriations Act (GAA), however, just had P152.9 billion set aside for pensions, affecting the intended 2018 payments.

As it tried to compensate, the DBM released P25.99 billion in January for pension payouts covering the first quarter of 2021, while also seeking funding sources for the 2018 balance, including a possible supplemental budget.

“The actual amount of the supplemental budget depends on several factors, but most especially availability of funds that will support the same,” said Assistant Budget Secretary Rolando U. Toledo in a text message on Tuesday.

“As to the amount of the 2018 pension differentials, the initial computation is P34.197 billion, which the DBM will endeavor to be included to ensure that we can cover this important requirement,” Toledo added.

Retired military and uniformed personnel’s appeal to get their 2018 dues came amid a prolonged pandemic-induced recession, which was also putting a strain on the government’s fiscal state.

It did not help that the indexation of pension to active personnel’s pay had been a big problem—National Treasurer Rosalia V. de Leon told a Senate hearing also on Tuesday that unfunded liabilities skyrocketed to P9.6 trillion in 2019 from only P5 trillion in 2016.

Unfunded liabilities referred to the amount anticipated by pension funds as future payouts for new retirees.

The executive had long sought to address this fiscal risk, with pending bills in Congress aimed at popping the ballooning unfunded liabilities.

De Leon told senators that the economic team wanted to remove automatic indexation, as doing so would reduce the unfunded liabilities by two-thirds to just P3 trillion.

Pending legislation would also require new military and uniformed personnel to shell out contributions for their pension, while raising the mandatory retirement age to 60 from 56 currently.

Also part of the plan was a separate pension system under a new unit to be created for incoming personnel, which would still be managed by the state-run Government Service Insurance System (GSIS).

To finance this new pension system, the government would raise capital through joint development of military land with the private sector.

To illustrate the “enormous” problem on military and uniformed personnel’s pension, Sen. Panfilo Lacson noted that its budget jumped to P120 billion this year from P80 billion last year.

“This will continuously increase in the coming years,” Lacson added.

Defense Secretary Delfin Lorenzana said military was amenable to the proposals pitched by Finance Secretary Carlos G. Dominguez III as early as three years ago, as long as the new pension system would apply only to new pensioners while retirees enjoy pension adjusted to inflation or about 5-percent yearly in lieu of automatic indexation.

TSB