‘Dept of pensioners’? How retirement funds swallow PH defense budget

MANILA, Philippines — The budget of the Department of National Defense (DND) increases every year, but it does not necessarily mean it all goes to the military’s purchase of new weapons and equipment or operational expenses.

For 2020, DND has a proposed budget of P258-billion, which is 1.43% higher than its budget this year. However, more than half of it would go to manpower costs and pensions of retired personnel and veterans.

DND is among government agencies with the highest allocations in the national budget since it oversees the Armed Forces of the Philippines (AFP), Office of Civil Defense, National Defense College of the Philippines, Philippine Veterans Affairs Office, Government Arsenal, and the Veterans Memorial Medical Center.

Based on next year’s National Expenditure Program, P68.70 billion or 27% will go to payments for veterans and retired servicemen’s pensions while the remaining P188.6 billion will be allocated for DND’s regular budget. 

The proposed budget for the pension of retired personnel for next year grew by P11.93 billion or 29% from this year due to the automatic indexation system, which adjusts the retiree’s pension to the prevailing salary of active personnel of the same rank.

Pensions of retired personnel are non-contributory and taxpayers carry the burden in paying for it. 

Payment for regular personnel services of DND bureaus and AFP – civilian and military – is pegged at P119.12 billion or 46% of the proposed DND budget for 2020.

Maintenance and other operating expenses (MOOE) has an allocation of P40.7 billion or 16% of the DND budget while there is P28.31 billion (11% share) earmarked for capital outlay.

But money required for the procurement of assets for the military’s modernization program is not all included in this budget proposal.

A need for definite plan

At a Senate budget hearing early this week, Senate Minority Leader Franklin Drilon sounded the alarm over the ballooning pension and ordered Lorenzana to provide solutions. 

“It’s time that we come up with a definite plan to solve it because if we don’t, we would become a department of pensioners,” the lawmaker said.

“This has been a problem ever since and we keep sweeping it under the rug,” he added.

Lorenzana said his agency had presented a proposed legislative measure on pension reform to the President early this year but it did not push through because it did not sit well with active uniformed personnel.

He said they are coming up with revisions that would be fair to those in the active service.

Senator Panfilo Lacson warned that if the problem goes unsolved, “a lot of programs whose funds could be sacrificed in order to fund the retirement of uniformed personnel.”

He said the actual obligation for the pension of retired personnel is around P99 billion, which is way more than the P69-billion requirement in the proposed budget.

The senator pointed out that this was already at an unsustainable level, as it is already equivalent to 86.71% of the P115-billion budget for active military personnel.

For Drilon, there could come a time when the budget for pensions will overtake those for active personnel.

But Lorenzana said the problem could not be addressed immediately since the pension comes from the annual General Appropriations based on the law.

Part of the planned pension scheme, he said, is for the uniformed personnel to contribute a part of their salary to the pension fund. 

A new unit under the Government Service Insurance System will be established to manage the funds and oversee the pensions.

Lorenzana said his agency has also identified 15 properties that could be leased to fund the insurance system.

He also said they would need at least P4-trillion seed money for a self-sustaining pension scheme that will cover all military and uniformed personnel – AFP, Philippine National Police, Philippine Coast Guard, Bureau of Fire Protection, Bureau of Jail Management and Penology, and National Mapping and Resource Information Authority. /kga

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