Earmarked revenues play a significant role in the Philippine public financial management (PFM) system by providing a dedicated, and often multi-year, funding source for expenditures with specific purpose identified under existing laws. While earmarking is intended to enhance predictability of agency programming and safeguard said expenditures from political and fiscal uncertainty, its extensive use has raised persistent concerns regarding budget rigidity, weak absorptive capacity, and the accumulation of large unobligated balances. This paper examines the trends, legal framework, revenue performance, and expenditure utilization of national government (NG) earmarked revenues from 2013 to 2024, using data from the Budget of Expenditures and Sources of Financing (BESF) and related budget execution reports.
The paper analyzes the institutional and legal architecture governing earmarked funds, particularly their treatment as either Use of Income (UI) or Special Accounts in the General Fund (SAGF), and highlights how differences in release mechanisms, approval requirements, and oversight arrangements affect fund utilization. Empirical findings show that, excluding the National Tax Allotment (NTA), earmarked revenues exhibit persistently low utilization rates, averaging only 24.3% over the period, with SAGFs accounting for the bulk of unobligated balances. Major earmarked funds—such as the Malampaya Gas Fund, the Special Road Fund, and the Free Public Internet Access Fund—demonstrate recurring revenue-expenditure gaps, reflecting structural constraints, implementation bottlenecks, and weak alignment between revenue inflows and program execution.
Drawing from these findings, the paper identifies key policy and governance issues arising from the current earmarking regime and proposes reform options aimed at striking a balance between funding certainty and fiscal flexibility, strengthening accountability, and enhancing the effective use of earmarked NG resources. These include rationalizing outdated earmarking laws, strengthening performance-based release mechanisms, clarifying sunset provisions, and exploring more flexible frameworks for redeploying underutilized earmarked funds within the bounds of constitutional and statutory constraints. Overall, the paper underscores the need to rebalance the objectives of funding predictability and fiscal responsiveness to ensure that earmarked revenues contribute meaningfully to efficient, equitable, and results-oriented public spending.