Lessons Drawn from Commotion over Regional Holiday Allowance
Overall, the state has allocated Rp 35.7 trillion for the Lebaran holiday allowance plus the 13th salary for officials/civil servants and pensioners, which marks an increase of 69 percent from last year.
Hardly ever causing serious problems in the past, the Lebaran holiday allowance (THR) for civil servants has sparked a public controversy this year. Overall, the state has allocated Rp 35.7 trillion for the THR plus the 13th salary for officials/civil servants and pensioners, which marks an increase of 69 percent from last year.
People have been protesting in a number of regions to express their objection to the issuance of new regulations with financial, administrative and even legal implications.
The issuance of Government Regulation (PP) No. 18 of 2018, PP No 19/2018 and Home Ministry Circular No. 903/3387/SJ in May was not only considered late (and rushed), but also created difficulties for local governments and caused public losses. The issues of a legal umbrella and legislative procedures in the regions as well as uncertainty about budgetary resources and the magnitude of additional new spending have emerged as crucial points of debate.
Substance and communication
Despite the defensive stance of the Home Ministry and the Finance Ministry, at least the following two points still need to be brought to the attention of the central government and local governments.
The first one deals with the substance of the policy, especially concerning the components of the holiday allowance. For many years the holiday allowance for state civil servants was equal to the basic salary (based on the last month\'s salary) plus an inherent allowance (position and family).
This is also stated in Law No. 15/2017 on the 2018 state budget (APBN) (part of the calculation for the basic allocation in general allocation funds, which amounts to almost Rp 195 trillion) and the Home Ministry Regulation No. 33/2017 on guidelines for regional budgets (APBD) in 2018.
Until the enactment of APBD 2018 in various regions in the November-December period of 2017, such THR schemes and formulas are set by local governments in their APBD bylaws.
Thus, all regions are to allocate the holiday allowance. If a region neglects to do so, the fault lies with the local government, and it indicates weakness in the supervision of the regional budget (RAPBD) by the central government. This, for example, occurred in Surabaya, Rembang and Aceh Singkil. The majority of other regions have allocated the holiday allowance in their regional budgets, but they did not include new components introduced in the new regulations issued in May.
At this point, the root of the problem is the central government. The performance allowance (tukin) as a new component was a follow-up that came long after the regional budget regulation had been passed, even halfway through the implementation. If the performance allowance for civil servants at the central government level can be smoothly accommodated through Ministry of Finance Regulation No. 54/PMK.05/2018 issued in May 2018, the same is not true in the regions.
The administrative system, bureaucratic procedures and local financial legal umbrella are not flexible and adaptive to the sudden changes in activity posts or their budget items.
The central government failed to anticipate two difficulties in the regions. First, the allocation of expenditure for a new activity post clearly requires adjustment from the planning side (local development plan) to the budgeting side (amended APBD). Procedurally, the involvement of the regional legislative councils is crucial in the discussion until its approval, even though the Home Minister stated it would be enough to report to the DPRD leadership after the amendment is made, because this addition applies only at the level of deciphering the APBD.
Making allocations without planning is clearly maladministration and may even become a case for the Supreme Audit Agency (BPK) that could have serious legal implications.
Second, the new component is not only large but also burdens local governments with the trouble to find sources for the spending post. If the small-scale city administration of Yogyakarta is required to seek additional performance allowance funds of around Rp 33 billion, one can imagine the burden of big regencies/provinces that have tens of thousands of civil servants. Meanwhile, with regard to funding sources, the options of budget shifting, rescheduling of activities or the use of available cash can only be used during emergencies (Article 28 Paragraph 4 of Law No. 17/2003).
If austerity measures in public spending, such as on official travel or meetings, are synonymous with reducing the enjoyment of officials and if the results fail to cover the large amounts required, then a shortcut is taken by cutting the number of projects (capital expenditure, goods and services), which will cause disadvantages for the public.
Besides the substantive matters, the second takeaway from this situation pertains to political communication. This case again proves the flawed central-regional relations in the era of autonomy. Communication issues become a verbal expression of (mis)management by the government even in managing its own affairs.
The government’s management of decentralized governance itself is still centralized. Deliberation room for negotiating issues with serious implications for the regions is not provided and the regions are given few options for the adaptation of policies. Controversial negotiations are taking place in the public sphere, with the central government and some regions exchanging criticism through the mass media, culminating in a decision to allow regions of weak fiscal capacity to stick to the old scheme.
The May regulation package is no longer interpreted as a form of state attention to allow civil servants to have a good gettogether with their families and travel to their hometowns. The holiday allowance also loses its formal message as an incentive instrument for civil servants to improve their performance, and it is less enthusiastically received for its multiplier effect on people’s purchasing power and economic activity.
Moreover, the holiday allowance is suspected of being political candy to rally civil servants’ support in these politically charged years, as a reflection of budget policy attached to the political interests of the ruling regime (Irene S Rubin, The Politics of Budgeting, 2013).
Work to be done
Lebaran has passed, but the THR case still leaves work to be done. In the short term, it is urgent to review the THR components. It looks awkward to allocate a holiday allowance as big as the take home pay, in 2018, not to mention the 13th salary that still has to be paid in the next few days.
Looking at the regional fiscal profile, in which only 19 percent of the APBD is allocated for capital expenditure (the public), this central government policy will hardly be viewed favorably by the public and as such may be politically counterproductive.
Adopting performance allowance components is not a common practice, and it is difficult to find a comparative reference in other countries or the private sector. The draft budgets, which are passed long before the start of a given fiscal year, definitely cannot accommodate dynamic performance incentives. This is different to salary and inherent allowances (position/family): between the plan and its realization there is only a weak link of control variables that can be adjusted to bring it roughly in line with the draft budget.
Furthermore, in the long run, the fundamental task of reforming the structure of civil servant pay has to be a national policy. Until more than 70 years of the age of this republic a single remuneration system has not yet been created so that the salary gap based on hierarchy of positions and facilities/performance-based allowances seem to have no pattern.
Regional differences generate jealousy and employee migration and open loopholes for rent-seeking practices and corruption (Indrayana, Stop Corrupt Payroll, Kompas, 7/6/2018). All of this necessitates an open dialogue between the central government and regional administrations, with policy sequences that are gradual, systematic and not haphazard in nature.
Robert Endi Jaweng, Executive Director, Regional Autonomy Watch (KPPOD)