Short-cutting Budgeting Procedures
The act of using presidential regulations to make drastic changes to the state budget is seen as a violation to the constitution.
ON Monday, April 6, The House of Representative’s (DPR) Commission XI Chairman Dito Ganindito reminded colleagues to stick with the day’s meeting agenda. But it did not work. Several members of the commission, which deals with state finance, still talked about the issuance of Government Regulation in lieu of Law (Perpu) No. 1/2020. They barraged the Financial System Stability Committee (KSSK), which was also appeared in the online conference meeting, with questions.
The virtual meeting, held amid the social restriction over Covid-19 pandemic, was the first time that Commission XI met with the KSSK after President Joko Widodo issued Perpu No. 1/2020, which governs the state’s finances and financial system stability policy amid the economic threats posed by the pandemic. The regulation was issued on March 31. Dito, the Golkar politician, who was chairing the meeting, reminded colleagues to focus on the meeting agenda. “The Perpu will be discussed at the Budgetary Body. Today is a regular work meeting,” he said to Tempo on April 16, repeating what he said in the meeting.
The meeting was set to discuss the economic situation amid the Covid-19 pandemic. All members of the KSSK, namely Finance Minister Sri Mulyani Indrawati, Bank Indonesia Governor Perry Warjiyo, the Financial Services Authority’s Board of Commissioners Chief Wimboh Santoso, and the Deposit Insurance Corporation’s Board of Commissioners Chief Halim Alamsyah, joined the online meeting.
Despite the reminder from Dito, members of the Finance Commission cannot help but talk about the Perpu. The DPR was already heating up—not because of the law’s article 27, which incited protests from anti-corruption activists for excluding from criminal charges the use of state expenditure for Covid-19 relief budget, but because of article 12.
Paragraph 2 of article 12 provides the bases for a presidential regulation to make changes to budgets’ postures and details—without the parliament’s approval. With this provision, President Jokowi signed Presidential Regulation (Perpres) No. 54/2020 on changes in posture and details of the state budget for the 2020 budget year, on April 3.
One commission member unhappy with Perpu No. 1/2020 and Perpres No. 54/2020 is Heri Gunawan from the Great Indonesia Movement (Gerindra) Party. He said that the government must involve the parliament in discussing the state budget and its amendments, as regulated by the 1945 Constitution’s article 20 paragraph 1, and article 23. “If Perpres No. 54/2020 is coerced, the government will be considered as castrating DPR’s constitutional rights to have a say in the stage budget,” Heri said on April 16.
Protests did not only come from the finance commission, but also from the legal commission. The DPR’s member of the legal commission from the Democrat Party Faction, Benny Kabur Harman, said that the Perpu dismissed the parliament’s right to budgeting. Despite the emergency, Benny said, the government must still propose amendments to the state budget in accordance with the constitutional mandate. “The hearing could be completed in a week, if they are planning to propose it,” Benny said on April 15.
PRESIDENT Joko Widodo made the decision to re-allocate the 2020 state budget for Covid-19 relief during a cabinet meeting on March 16. He asked for inessential spending to be eliminated during this pandemic, such as business trips and meetings.
Two days later on March 18, Finance Minister Sri Mulyani held a conference. The ministry calculated that Rp5 trillion to Rp10 trillion can be re-allocated for dealing with Covid-19. There was also a budget of up to Rp17.7 trillion from regional transfer funds, which can be used for mitigating outbreaks at the regional level.
At that time, Minister Sri said the government would immediately report changes to the budget allocation to the parliament. The DPR was on recess when Mulyani held the conference. “We will conduct informal communication first,” she said. The parliament began its third session period for 2019-2020 on March 30.
Virtual meeting of the KSSK with DPR’s Finance Commission, April 6./ private doc.
Article 19 of the 2020 State Budget Law stipulates that the government may change budgets for reasons such as natural disaster mitigation. For the same purpose, the government can also add foreign loans. However, these changes must be reported in the revised state budget.
But on April 2, what Sri Mulyani submitted was not the 2020 revised state budget draft. With Minister of Justice and Human Rights Yasonna Laoly, Sri submitted Perpu No. 1/2020 to DPR Speaker Puan Maharani. Perpres No. 54/2020 was issued the day after.
The presidential regulation that acts as a ‘new dress’ for the 2020 revised state budget contains significant budget changes. The projection of state revenue will decrease from Rp2,233.2 trillion to Rp1,760 trillion. On the other hand, state expenditure rose from Rp2,540.4 trillion to Rp2,613.8 trillion. Among that was the increased expenditure for handling Covid-19, amounting to Rp255 trillion.
The corrected revenue assumption and the increased expenditure caused the budget deficit to soar, from Rp307.2 trillion or 1.76 percent of the gross domestic product (GDP) to Rp852.9 trillion or 5.07 percent of the GDP. As a result, debt projection nearly tripled, from Rp351.9 trillion to Rp1,006.4 trillion.
Perpu No. 1/2020 changed the provision in State Finance Law that caps a budget deficit at a maximum of 3 percent of GDP. The unlimited deficit relaxation is expected to last until 2022 at the longest.
Yustinus Prastowo, Finance Minister’s special staff for strategic communication, said that until mid-March the ministry was still contemplating an option to submit a revised state budget draft to the parliament. But at the same time, Covid-19 transmission was becoming faster and more wide-spread. The precarious situation prompted the government to shift gear and opted to issue the Perpu. “If we use laws for each change, the number of victims will jump,” Yustinus said on April 17. “(This situation) needs a very fast response, in matter of days.”
Yustinus mentioned the Pre-employment Card program, which was originally prepared for the training of fresh-graduate jobseekers. The pandemic made the government decide to use the program as relief for workers who lost their jobs because of the pandemic. The budget doubled to Rp20 trillion, since the number of recipients and the amount of financial assistance increased. “If we waited for a Revised State Budget Law to be passed, it would take 30-60 days,” he said.
In theory, he said, it is possible to pass a law immediately. Law No. 11/2016 on tax amnesty, he pointed, was completed in just 23 days. “But this is a different situation. We have a work-from-home order and other things,” Yustinus said.
Aside from matters related to budget, he said, the government also took into account the need to provide guarantees to decision makers—so they can issue policies without hesitations. Therefore, Article 27 of Perpu No. 1/2020 was issued to ensure that the cost of Covid-19 relief is not a state loss. The article also guaranteed that officials implementing the Perpu are shielded from civil and criminal charges, provided they were in good faith. “If we do not create this protective wall, no one will have the guts to make the policy,” Yustinus remarked.
PERPU No. 1/2020 did not only rile up government opposition parties. After the parliament received a letter about the Perpu on April 2, leaders of the Indonesian Democratic Party of Struggle (PDI-P) Faction—Jokowi’s main supporter—held a meeting at its headquarters in Menteng, Central Jakarta. Among the attendees were PDI-P Faction Chairman Utut Adianto and Secretary Bambang Wuryanto.
According to Bambang, even though they will eventually support the government’s move, the PDI-P was felt uneasy about the Perpu issuance, deeming it inappropriate. When Tempo contacted him on April 17, Bambang confirmed there was a discussion with Utut at the party’s headquarters. But he refused to elaborate.
Not just the DPR, the Perpu also shocked the Supreme Audit Agency (BPK). BPK leaders actually had a consultation session with the KSSK about mitigating the potential crisis as a result of Covid-19 pandemic on March 30. The virtual meeting also discussed budget changes, including the option to issue Perpu or a revised state budget bill.
But without further discussions, the Perpu was published the next day. A senior auditor said that the BPK chief felt he was deceived. BPK leaders felt cheated because several articles in the Perpu could complicate the BPK in auditing the budget for mitigating Covid-19 risks.
BPK member Achsanul Qosasi confirmed that the consultation meeting with the KSSK did not discuss the substance of the Perpu. But he stressed that the BPK now believes that as long as it is a part of state finance, the budget spending and other financial policies for the purpose of Covid-19 relief can be audited—especially since Perpu No. 1/2020 mandates the issuance of an derivative technical regulation in lieu of a previous technical rule. “If there is a violation against technical rules, which results in a concrete loss of state finances, we can categorize it as state loss,” Achsanul said.