Regarding Operating Expenses in the General National Budget for 2.026.

Operating expenses are part of the total expenditure of the General National Budget (PGN). Within the PGN for 2.026, according to official sources, they amount to $366 billion (b), which is 66% of total expenditures. The remainder, or the other 34%, is made up of debt service (18%) and investment (16%).

These operating expenses grew 11% compared to 2.025, but it is necessary to examine their composition to observe the official payroll.

Indeed, the largest item in operating expenses is transfers, which amount to $276 billion, followed by personnel expenses at $62 billion, and together they account for 94% of these expenses.

First, it should be noted that personnel expenses are much lower than the main component mentioned above, which is transfers, and that these latter are composed of several expenditures, as follows. Of a total of $276 billion, the transfers are broken down as follows: 1/ $88 billion is allocated to the general participation system; 2/ $87 billion is allocated to pensions; 3/ $51 billion is allocated to healthcare; and 4/ $49 billion is allocated to public higher education, the teacher benefits fund, and court decisions and conciliations.

In turn, of the 1/ $88 billion allocated to public education in the country's departments, $50 billion is allocated to these territories, $20 billion is also allocated to healthcare, mainly for the subsidized system, and $5 billion is allocated to drinking water. Another $3 billion goes to Fonpet, the territorial pension fund.

Of the $87 billion allocated to pensions, the following are divided into: Colpensiones $36 billion, Fomag teachers $14 billion, FOPEP $16 billion (including Cajanal, Telecom, Foncolpuertos, and ISS), and the defense and police sectors $20 billion.

Of the $51 billion allocated to health, the transfers are the main component of operating expenses (not personnel expenses) and are directed to three areas: the general participation system, pensions, and health. The general participation system consists of transfers to the country's departments for education, health, and water, and in pensions, the transfers to Colpensiones for payments stand out. Additionally, and no less important, there are other transfer resources that also go to health.

As mentioned at the beginning of this note, personnel expenses are $62 billion lower than the $276 billion transfers (which were already explained above), both of which belong to operating expenses. However, it is worth examining these personnel expenses further. Indeed, $29 billion of that amount goes to defense and police, 26% to justice, interior, and the prosecutor's office, and 31% to the other public administration bodies. However, if the payroll financed by transfers to departments is added to this total, because a portion of these is used to pay territorial payroll, $51 billion must be added, bringing the personnel payroll, including departments, to $113 billion.

This $113 billion of the total payroll corresponds to 1.142.590 positions, of which 667.192 correspond to the central government payroll, including the executive branch, defense and police, the prosecutor's office, and others. And 475.428 are personnel hired by the country's departments, primarily in public education, within the framework of their constitutional autonomy. These positions in territorial entities are primarily teachers and their administrative staff, totaling 426.000, and health positions total 48,000.

For their part, positions in the national government and other entities are distributed as follows: defense and police, totaling 480.313 positions* ; prosecutor's office, 27.162; judicial branch, 38.186; Congress of the Republic, 890; Presidency, 1.818; Ministry of Finance, 2.,447; Ministry of Justice, 21.829, among other ministries.

The monetary value of the payroll for territorial entity officials paid with transfers is $51 billion (out of a total transfer of $276 billion), of which $41 billion goes to education, $4 billion to health, and $6 billion to universities.

The payroll for central government and other related officials is $62 billion, of which $31.5 billion goes to Defense and the Police, followed by the judicial branch at $9 billion, the Attorney General's Office at $6 billion, the Ministry of Finance at $4 billion, the Comptroller's Office at $3 billion, and the Ministry of Justice at $2 billion.

Some observations on the above are as follows. Within the operating expenses that reach $366 billion **, the total payroll corresponds to $113 billion (only a third), therefore, other components such as pensions ($87 billion) and public works in education and health ($166 billion), both national and territorial, account for the remaining expenses.

Another aspect to review is that entities with large staff and budgets, such as the Attorney General's Office, the Comptroller's Office, the Judiciary, and the Ministries of Finance and Justice, must be examined to determine their staffing requirements for efficiency in their functions due to the high cost of their payrolls.

For their part, the Presidency and Congress of the Republic, with payrolls of $0.3 billion and $0.8 billion respectively, have a lower level of personnel expenditures compared to the entities mentioned in the previous paragraph. Therefore, it is important to keep in mind the null effect that a reduction in positions or the payroll of its members in those two entities would have on the PGN.***

Regarding Defense and the Police, it should be noted that this is the State's main payroll and has a force of approximately 480,000. Therefore, increasing the force, if required by the country, would be done through a greater allocation of contracts whose value could be deducted from other PGN expenditure items, such as investment, and not through increases in total expenditures.

The $36 billion Colpensiones pensions paid from the National Public Administration (PGN) are not the only ones; teachers' pensions (FOMAG) are also paid from the PGN: $14 billion, FOPEP (FOPEP) $16 billion (including Cajanal, Telecom, Foncolpuertos, and ISS), and defense and police sectors are also paid from the PGN: $20 billion.

With the pension reform only those of Colpensiones are modified not the others and there it is proposed to increase the mandatory contributions for contributions to Colpensiones up to 2.3 minimum wages and thus in the long term lower the requirements of the PGN and also because those who contribute to private funds for the rest of the salaries above 2.3 minimum will retire not as those of Colpensiones do for now (including the transition period) who receive the average of the salaries of the last 10 years regardless of what they contributed in contributions, in a percentage that can reach 80% as a maximum (monthly payments paid through the PGN) but outside the transition period they will receive in the future what corresponds to them according to what they saved in private funds from contributions above those 2.3 minimum wages together with the contributions of the part less than 2.3 minimum wages that they will make to Colpensiones (according to various calculations the monthly payment is equivalent to between 40% and 60% of the average salary for the last 10 years), monthly payments that are jointly paid from private funds and Colpensiones (which will be deposited in a fund created at the Bank of the Republic) to Colpensiones through the transfer of resources from private funds so that Colpensiones is the payer.

The other pensions mentioned above, such as teaching and defense pensions, which are also paid through the PGN, amount to more than those currently paid by Colpensiones. However, some changes are pending regarding contributions, if not timing, since some of them are pensionable after 20 years of service at any age.

This note sought to explain the composition of operating expenses and their allocation within the total payroll, pensions, and public works in health and education. It was also intended to send messages about possible reductions in positions in some public entities and the lesser impact this would have on others. But it is also worth noting, on the other hand, the required increase in defense and police personnel, which must be financed by the National Public Prosecutor's Office (PGN). Finally, the objective was to briefly demonstrate the lower long term impact on PGN expenditures of the pension modifications contemplated in various aspects of the pension reform.

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*Police officers 155.030, soldiers 198.191, civilians 20.297, police auxiliaries 37.095, and officers 64.764.

** As mentioned at the beginning of this note, the total expenditure contemplated in the PGN is $557 billion, of which $366 billion corresponds to operating expenses, $102 billion to debt service, and $89 billion to investment.

***Regardless of other considerations, salary reductions in these entities are necessary to balance other revenues.