The National Economic and Development Authority (Neda) remains confident that the shift to a federal form of government will not derail the Duterte administration’s massive infrastructure program.
Socioeconomic Planning Secretary Ernesto M. Pernia told reporters on Wednesday that shifting to federalism may take two or three years more. By that time, many infrastructure projects would have already been completed.
“If at all, federalism will not be implemented in the next two, three years, toward the end of the administration. So I don’t think that would be a stumbling block [to ‘Build, Build, Build’]. It will take time to implement federalism; lots of preparations are needed,” Pernia said.
As of June 2017, the Neda estimated that 53 of its 75 flagship projects would cost P1.58 trillion. The other 22 projects still do not have cost estimates.
This is the reason the government put together a list of 70 projects in the “Build, Build, Build” program. According to the government’s web site, the Build, Build, Build consist of a mixed bag of projects ranging from roads, bridges, railways, bus-rapid transits, to the Philippines’s first subway.
Pernia also said the Neda is still calculating the impact of federalism on the economy. This, he said, is the reason they could not yet give a definite answer on its economic ramifications.                                
However, Philippine Institute for Development Studies (PIDS) senior research fellow Rosario G. Manasan said that from a public finance perspective, shifting to federalism may lead to higher costs, especially if tax assignment and expenditure distribution are not done properly.
Manasan added the fiscal gap in regions could reach as much as P1.09 trillion, or 84 percent of the total expenditure needs of subnational governments.  This also represents some 57 percent of total revenues from national governmental internal revenue taxes in 2017, or 7.5 percent of GDP.
With the increase in regional government functions, subnational governments will be hard-pressed to increase their revenues. According to Manasan’s calculations, subnational governments can only finance P213.59 billion of the total needs of P1.3 trillion.
Manasan earlier told the BusinessMirror that the computation is based on her proposed shared and exclusive functions of the federal and subnational government. The estimates specifically cover the shared functions that subnational governments need to finance under a federalist regime.
She said that while most the exclusive functions of the subnational government are already being financed currently through the Local Government Code provisions concerning devolved services and the Internal Revenue Allotment, the shared functions under a federal form of government may prove to be costly.  Shared powers in the context of subnational governments, Manasan added, include mostly the delivery of services, such as infrastructure, education and agriculture, to name a few which have since been financed nationally.
No funds for Cha-cha
Palace-backed plans to tinker with the 1987 Constitution to shift to a federal form of government, a move seen extending terms of incumbent Executive officials, as well as senators and congressmen during the transition, is not likely to prosper for lack of funds.
Sen.  Francis G. Escudero raised this scenario on Wednesday as he bucked talks of any referendum on Charter change (Cha-cha) simultaneous with the barangay elections on May 14 or even in the 2019 elections, pointing out that “there is no fund for any plebiscite for 2018.”
“There is no way to hold that together with the 2018 elections because it [referendum to  ratify Charter changes] does not come without a cost and, given the very little time to prepare for it, that plan is already down the drain,” Escudero said.
The senator asserted that holding a national referendum to ratify proposed Charter changes “can only be funded through a request for supplemental budget that must conform with the Supreme Court ruling” on the use of savings.
“Any budget request must be approved by the two chambers of Congress, and any realignment of fund must not exceed the original allocation for the item needing supplemental budget,” Escudero added.
He said funding for any plan to hold a referendum to ratify proposed amendments in the 1987 Constitution must be included in the General Appropriations Act, stressing that this “must also be approved by the Senate.”
“I have no idea if the DBM [Department of Budget and Management] will include that in their 2019 budget proposal,” the senator said, adding: “We will see the administration’s intention regarding this matter based on the budget they will submit for 2019.”
In a statement, Escudero took issue with the House of Representatives’ position that congressmen could proceed to convene Congress into a constituent assembly to tinker with the Charter without the Senate.
He said congressmen themselves “contravened” the basis for such move, citing their adoption of House Concurrent Resolution 9 seeking to convene Congress into a constituent assembly to amend the Constitution.
“The title in itself, ‘concurrent resolution,’ is already an admission that any proposal or move to amend the Constitution necessitates the separate votes of both houses of Congress,” the senator said.

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