02196: Government Spending

One of the major issues of the day is the question of whether or not the President was justified in vetoing the proposed PHP 2,000 increase to SSS pensions. One the one hand, the bill as proposed promised a modest increase in benefits to make SSS pensions have a bit more meaning. Currently, SSS pensions payments can hardly support a retiree even just in terms of basic needs. On the flip side, the President's office argued that the proposed increase would result in a failure of the social security system in a few years since SSS income could not keep pace with the increased costs.

There's a lot of arguments going back and forth regarding whether or not the SSS can actually afford things without increasing contributions for active members. Many point to the fact that SSS collection yield is about 38%, which is pretty bad. It means that most SSS members are not paying the organization what has been committed to, although whether the error is mostly on the part of employers or on the part of individual contributors has yet to be made clear. Many argued that the President wouldn't have vetoed the bill given how politically charged the issue is, but clearly the Palace didn't feel that way. Then again, they might have been avoiding the political backlash of people complaining about increased premiums or something like that - it's always hard to say when it comes to politics.

Yes, increasing collection yield is definitely a good thing, although it in turn requires the SSS to allocate more resources to chasing after erring companies in order to close the gap. We've seen similar efforts with the BIR and to some extent the Customs Bureau (which is also under the BIR if I'm not mistaken) and thus both agencies are hardly popular with the average citizen. Improving collections efficiency makes sense, but it also takes time and I fear that it will take too long before collections will catch up with the increased obligations of higher pension rates. Some sort of an increase to premiums would be needed in the short term to address the shortfall.

On the whole though, I often feel that a lot of laws get passed promising new benefits without necessarily securing budget allocations for these new initiatives. Government-mandated benefits always sound like something we want as individuals but then we're often quick to change our tune when the new benefit results in higher taxes or something along those lines. I often feel that our legislators sidestep this discussion entirely by leaving it to the development of the implementing rules and regulations to figure out funding or maybe just the next annual budget discussion. The RH Law is now a good example of a well-intentioned bill that did not legislate a funding source and thus was effectively rendered invalid during the annual budget deliberations. No money = no power to implement the law.

Without access to all the numbers, I can only look at things in this way - the US has repeatedly worried about their own social security system and their ability to continue to pay out benefits to its recipients. If that system can be shaky, is it too hard to believe that our own system could have even more problems? And while it's easy to point at bonuses received by SSS executives, this is still a drop in the bucket versus the full funding needed to pay for additional member benefits. Then you have to consider the problems with how government employees are paid versus the private sector and the steps that have been taken in the interim to ensure that government pay remains competitive enough to keep talent from moving back to the private sector because of the need for higher compensation.

In other words, we have a lot of problems that still need figuring out and we can't just rush into a bill that would look good on the papers and would certainly help any re-election campaigns for eligible legislators.