From FAPE/PEAC to PhilEd

We recently presented a paper at the 5th Paderanga-Varela Memorial Lecture entitled “Alternate Service Delivery Systems: Health and Education.” In that lecture, we looked at the Department of Health (DoH) and the Department of Education (DepEd) as service delivery systems, delivering healthcare and education respectively.

We concluded that the service delivery system of the DoH is far superior to the DepEd for two main reasons. The first is that the DoH has devolved its hospitals to the local government units while the DepEd has not. Secondly, the DoH has spun off its health financing into the Philippine Health Insurance Corp. (PhilHealth) while the DepEd has not. In this article we argue for the creation of the Philippine Education Development Fund (PhilEd).

When Isidro Consunji, President of DMCI Holdings, Inc. was asked by his officers what the role of his Chief Financial Officer (CFO) would be, he gave a three-word answer, “Fund my dreams.”

Likewise the role of PhilEd would be to fund the education dreams of all Filipinos especially the neediest and most deserving.

Filipinos have three dreams in education. The first is to enroll in a chosen course in the school of their choice. This dream will be funded by the School Vouchers Program which will now be transferred from DepEd to PhilEd.

The second dream, especially for Filipino parents, is to save enough money to fund the college education of their children, hence the prevalence of pre-need Educational Plans. Unfortunately, most of the pre-need companies went into bankruptcies causing financial ruin and emotional distress to their plan holders. There has been a massive market failure and so government must intervene. But intervention should not involve the government offering educational plans but rather in insuring these plans. Just as the Philippine Deposit Insurance Corp. (PDIC) insures the bank deposits of Filipinos, so will the PhilEd insure their educational plans. Just like PDIC which is funded from the premiums paid by the banks, PhilEd will fund this program from the premiums by the educational plan companies. PhilEd will be ideally suited to do this as it could swap the failed educational plans with school vouchers from its repository of school vouchers.

The third dream is based on the realization of Filipino school graduates that their learning must continue even as they leave their alma maters. For in this modern age, the fount of personal knowledge must continuously be replenished. In healthcare, we have the Health Maintenance Organizations (HMOs) which continuously monitor and minister to our health. We need Lifelong Learning Organizations (LLOs) to continuously monitor and minister to our learning. HMOs exist in the Philippines. LLOs do not. In partnership with the international development agencies and the private sector, PhilEd will create this industry. The international development agencies will provide the technical assistance grants that will create the developmental and regulatory framework for the industry while the private sector will organize the LLOs. PhilEd will be the “bastonero” or project manager, managing the project as well as mobilizing government support and assistance.

FAPE or the Fund for Assistance to Private Education was a part of the Special Fund for Education set aside by the American government in 1963 from the surplus funds authorized by the War Damage Act of 1962 and organized under Executive Order 156 issued by President Ferdinand Marcos on Nov. 5, 1968.

From the initial seed money of $6,154,000 or P215 million (based on the 1968 peso to dollar exchange rate), the FAPE fund in 55 years had barely grown to P277 million. In contrast the trustees managing the fund have expanded their services, basically as service provider to the DepEd. As a consequence, it has been spun off as a separate organization, the Private Education Assistance Committee (PEAC).

Over the years, PEAC has evolved into co-implementing externally funded programs, namely the DepEd’s Education Service Contracting (ESC), Teachers’ Salary Subsidy (TSS), the SHS Voucher Program (SHS VP), the In-Service Training (INSET), and the Bayanihan for Basic Education (BBE) as well as implementing internally funded programs of assistance for private education in the areas of training, school quality assurance, school improvement programs, and grants programs.

In sum, the PEAC has been an effective instrument to operationalize “complementarity” between private and public schools as provided in the Philippine Constitution. It has also been an incorruptible partner of the education agencies in efficiently co-implementing national subsidy programs for students and teachers in private schools.

We propose that FAPE/PEAC structure and organization be moved to PhilEd. Operationally this would mean folding into PhilEd, the roles and responsibilities of FAPE and PEAC as well as their financial resources.

Folding FAPE/PEAC into PhilEd would mean the transfer of the funds of FAPE amounting to P277 million as of May 31, 2022 as well as the assets and liabilities of PEAC amounting to P567 million as of May 31, 2022.

The DepEd programs presently being managed by PEAC and lodged in the DepEd budget such as the Educational Service Contracting (ESC) of P9.3 billion in School Year 2021-2022, the Senior High School Voucher Program of P20.3 billion in School Year 2021-2022, and the Teachers Salaries’ Subsidy of P793 million in School Year 2021-2022 will now be lodged in PhilEd.

The present Board of Trustees of the Fund which consists of the Secretary of Education as Chairman with the Director-General of the National Economic and Development Authority, the three Presidents of the Association of Christian Schools, Colleges and Universities (ACSCU), the Catholic Educational Association of the Philippines (CEAP) and the Philippine Association of Colleges and Universities (PACU) shall also constitute the proposed Board of Trustees of the PhilEd.

The management team of PEAC will be the incoming management team of PhilEd.

Interestingly, PhilHealth, in addition to premiums collected from members as well as subsidies from local governments who have enrolled indigents in the program, receives a share of the “sin taxes” collected from Tobacco and Sugar Sweetened Beverage. The justification for this is that tobacco smokers and sugar sweetened beverage drinkers impose an additional burden on the healthcare system of the Filipinos and so must contribute to their health services. In Fiscal Year 2022, this amounted to P74 billion.

Moreover, under the Universal Health Care Law, PhilHealth receives 50% of the government share from the income of the Philippine Amusement Gaming Corp. (PAGCOR) as well as 40% of the Charity Fund of the Philippine Charity Sweepstakes Office (PCSO). In 2022, this amounted to P188 billion.

In like manner, in addition to the school vouchers funded under the Expanded Government Assistance to Students and Teachers in Private Education Act, we suggest that PhilEd be allocated a share of the taxes imposed on our extractive industries. This is based on the argument that the depletion of our natural resources can only be justified if the taxes collected will enhance our human resources.

Like PhilHealth, PhilEd could also be mandated to receive a percentage from the collection of documentary stamps which have recently been raised.

Finally, PhilEd can be given access to the Special Education Funds of the local school boards of the Local Government.

Congress enacted Republic Act 7875, known as “The National Health Insurance Act of 1995,” which created PhilHealth. We are hoping some members of Congress would file a Universal Education Financing Law which would create PhilEd.

Dr. Victor S. Limlingan is a retired professor of AIM and a fellow of the Foundation for Economic Freedom. He is presently chairman of Cristina Research Foundation, a public policy adviser and Regina Capital Development Corp., a member of the Philippine Stock Exchange.