PRESS RELEASE

SEP
19
2016

Recto: Nat’l gov’t payroll to hit P1 trillion 

National government payroll cost will breach the P1 trillion mark next year, double from what it was in 2010, and could swell by at least P200 billion in 2018 due to the third installment of the Salary Standardization Law IV (SSL-IV), hikes in soldier and policeman pay, and hiring of new personnel.

WEB ARTWORK: P1 trillion - salary and personnel services 2017 National Budget

Senate Minority Leader Ralph Recto said meeting the “pay, pension, perks and premium contributions” of the projected 1.6 million national employees in 2017 would require “a daily payroll burden of about P3 billion.”

For 2017, allocation for “Personal Services” or PS – the budgetary term for all personnel compensation expenses – will reach P997 billion.

It accounts for nearly 30 percent of the P3.35 trillion proposed national budget for 2017.

The trillion-peso compensation outlay, however, is for national government agencies alone and does not include local governments, Recto said.

“Real PS,” Recto added, would be bigger than the P997 billion as the wages of many government contractual employees are not booked as PS but are drawn from allocations for “professional services” which is considered as a non-payroll “maintenance or operating expense.”

Outsourced jobs, like security and janitorial, also deflate the PS cost as they are charged to “general services” fund.

Some P37.2 billion is earmarked for professional and general services in 2017, Recto said.

Recto recalled that PS in 2010 was P457.6 billion, and was P350.3 billion three years before, in 2007. “It will triple in a decade,” he said.

Of the P1 trillion PS budget for 2017, P707.6 billion is for civilian personnel while P183.3 billion is for military and uniformed men – policemen, soldiers, firemen, jail guards and Coast Guard personnel.

One big—and growing—item in the PS bill is for the pension of military retirees, veterans, former policemen and other uniformed personnel, for which P102.2 billion is being set aside for 2017, up from P75.8 billion this year, or a P26.4 billion jump.

In 2010, uniformed personnel pension was about P44.08 billion, following the general trend of the doubling of PS expenses since then.

“We have reached the point where the pension of the retired servicemen is bigger than the pay of those in the active service,” Recto said.

Recto said meeting the payroll, amidst pay hikes and annual hiring of essential personnel like teachers and policemen, is the biggest source of pressure on revenue collection.

What we will spend for PS in 2017 is equivalent to 2 years and one month of Bureau of Customs collections, Recto said.

Half of the annual Bureau of Internal Revenue collection will go to pay envelopes, he said.

A year’s worth of sin tax collection from tobacco and liquor is just enough to underwrite the payroll requirements for 63 days, Recto said.

Despite its current huge footprint, PS cost will balloon in the coming years on account of pay hikes and the need to recruit more personnel to cope with increase in population.

One such ongoing pay amelioration is the SSL-IV, which hikes public sector pay over a period of four years, beginning in 2016.

The 2017 cost of SSL IV is P108.4 billion, which will go up to P174.4 billion in 2018, before topping at P222 billion in 2019.

To address the yearly increase in school enrollment and general population growth, the government recruits teachers and policemen by thousands, “a hiring spree costing billions a year.”

Burgeoning PS cost can also be due to President Duterte’s promise to double the salaries of policemen and soldiers which, using base pay as basis and not counting allowances, would mean an additional P77.6 billion in PS expenses a year.

By agency, the Department of Education accounts for the biggest PS expense in the 2017 national budget, at P352.4 billion, or 62 percent of its proposed 2017 budget of P566.2 billion.

 

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