Institutionalizing slush funds

Amid revelations of how lottery proceeds meant for charity were being dispensed by the past administration to purchase vehicles for the use of some bishops, the main goal of the ongoing Senate hearings has been snowed under. This goal goes into the very heart of what the government’s role should be, and what purposes should inform policy making. There are two questions for the Senate inquiry: (1) What is the nation’s policy on gambling and other games of chance? (2) Should the government be running gambling operations?

The existing policy, if I understand it correctly, may be summarized thus: (1) Gambling is not prohibited but it is to be strictly regulated and subjected to specific laws and licensing requirements. Accordingly, the state shall clamp down on all illegal gambling activities. (2) The government is authorized to operate casinos through its own company, the Philippine Amusement and Gaming Corp. (Pagcor), and to conduct lottery draws for charity through the Philippine Charity Sweepstakes Office.

If the goal of the hearings is to review current policy and practice, the two questions above may usefully be separated. We may allow gambling as part of an economic strategy. But, conscious of its harmful social consequences, the state limits its scale, strictly regulates its operations, and conscientiously monitors its outcomes. This is what they do in Singapore. Gambling is not treated as just another economic enterprise. It is permitted only on a limited basis because of its connections to leisure and tourism, but it is not encouraged.

But, it is one thing for government to allow regulated gambling, and another for the government itself to actually run casinos and conduct regular lottery draws. The latter practice can easily undermine the moral basis of a policy of highly regulated gambling. As we have seen, the state cannot hope to wage a determined campaign against the old illegal numbers game of jueteng that is popular among the common folk, while it operates the most lucrative gambling joints in the country.

Some people thought that if the PCSO could run a parallel lottery, it might kill jueteng. That was the main justification for lotto and the Small Town Lottery (STL). Well, jueteng did not die. It flourished even more in the shadow of STL. As expected, the jueteng operators and their dummies cornered the franchises for the new STL, sharing their bet collectors or cobradores with the government-sponsored lottery. Thereafter, jueteng vanished from the radar screen of law-enforcement. In a rather roundabout way, jueteng thus acquired a legal cover without surrendering its autonomy. Instead of shrinking, betting in lotteries has expanded, further feeding the gambling habits of the desperately poor.

Government today has itself become so addicted to gambling that it cannot imagine ever giving it up. The same reason that keeps the nation’s gambling lords and syndicates active in the business despite the countless individuals they have to bribe along the way is exactly what motivates the government to retain its unusual role as the country’s biggest gambling operator. It is all about money—or, as the government prefers to call it, additional revenue—and the diffused political clout this brings to both the gambling lords and the politicians. (In places like Pampanga, it is useless to ask who is the operator and who is the regulator because the distinction between gambling lord and politician has disappeared altogether.)

The crux of the matter is the nature of what one might call “gray” money—money whose quantity and use the Bureau of Internal Revenue or the Commission on Audit cannot properly monitor. In politics, this resource is referred to as “slush funds”—money set aside to buy votes or bribe public officials. Its source is typically illegal, but it need not be. The important thing is that its accumulation and use are not subject to accounting scrutiny.

Nowhere is this more manifest than in the existing practice (since 2007) of sharing a portion of the net proceeds from the STL with the police, the local government officials, and the congressional representatives of districts in which the STL operates. The payment of these shares, according to PCSO general manager Ferdinand Rojas II, is not coursed through the PCSO but is done directly by the private STL operators. This alone immediately suggests that such funds are not strictly accounted for, if they are at all liquidated. It has long been known that this sharing practice exists in jueteng. What are these funds for? The police say they are used in the campaign against jueteng. The local officials say they are used for charity. They look like feudal tithes to me. If they are for law enforcement, why take them out of charity? If they are for charity, why aren’t they coursed through the proper government agencies? The only conclusion we can draw from all this is that in putting up its own jueteng operation supposedly to kill the illegal operators, the government has ended up serving as the friendly double for the other.

Some thoughtful people believe that the STL could have succeeded if it offered bigger prizes and better odds for bettors. But, for this strategy to work, one would have to assume the cooperation of the police, the local officials, and the congressmen. The STL would have to match the largesse dispensed to the latter by the jueteng lords. But, precisely, that will not happen unless their shares of the proceeds are treated like slush funds, free from government accounting.