Editorial: When is a surplus good?

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Tuesday, April 29, 2014


WHEN the Cebu Provincial Government’s accounting office closed its books this week, it reported a surplus of P566 million in 2013.

Although Gov. Hilario Davide III served only for half of the year, one can argue that all of 2013 demonstrated the spending priorities and habits of local Liberal Party (LP) allies. After all, Vice Gov. Agnes Magpale served as acting governor for much of the first half of the year.

The surplus reveals both good and bad points in the way the local LP handles the public purse. Why is a surplus good? For one, it suggests restraint, almost always a welcome quality in the handling of scarce public funds. A surplus also reflects an expansive economy, as growth enlarges tax revenue.

Since 1994, the Department of Budget and Management (DBM) revealed in a 2012 primer, the government has encouraged “surplus budgeting”. The theory is that the less government borrows to cover a deficit, the more resources it frees up for private businesses and households to borrow and use.

But a surplus can also be unhealthy, in that it suggests government could be ignoring urgent needs, in favor of a good-looking bottom line. When governments spend mostly to run themselves, without creating anything new to benefit constituents, a surplus may be a less-than-desirable outcome.

Indeed, for all its resources, the Cebu Provincial Government has spent “very low” in terms of total expenditure per capita, from 2010 to 2012. The Bureau of Local Government Finance, in its Iskor ng ‘Yong Bayan scorecard, reported that Cebu Province spent around P696 per constituent in 2010, increasing slightly to P725 in 2011 and P936 in 2012. (There is no report yet for 2013.)

Compare that with another first-income class province, Davao del Norte, which spent P1,103 per constituent in 2010, followed by P1,044 in 2011 and P1,048 in 2012.

Like most local governments, Cebu Province has more needs it needs to spend on, than the resources to cover all of them, so it must prioritize. Will it fix the Cebu International Convention Center? Build typhoon shelters or buy resettlement sites in vulnerable towns? Equip disaster-response teams or hire more doctors for public hospitals?

Any one of these options may be preferable to chasing a surplus, in a time of dire need.

Published in the Sun.Star Cebu newspaper on April 30, 2014.

Opinion

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