The recent positive policy directions embodied in the New Thinking and One DA agenda have not yet fully translated into a shift in public expenditure patterns in the Philippine agriculture sector. One result is that agricultural growth remains low, and poverty in rural areas, where farming remains the main source of income, has stayed high. Underinvestment in public goods in agriculture, vital for inclusive growth, also drives the lack of growth. The continued bias supporting rice production has come at the expense of other agricultural products. The situation could worsen with the ongoing devolution resulting from the Mandanas Ruling of the Supreme Court unless the shift in the agriculture budget from central government to local government units (LGUs) accompanies clear changes in expenditure policies. To take full advantage of the opportunities arising from the new strategic directions and to devolve more responsibilities to LGUs, agricultural public expenditure policies must deal with challenges in three dimensions. First is the challenge of aligning expenditures with the ambition of the New Thinking. There is a need to transition away from previous and current spending patterns focused on increasing self-sufficiency through commodity-based banner programs, especially rice, towards investments in improving the overall resilience, competitiveness, inclusiveness, and sustainability of the agriculture sector. There are three ways to achieve such improvements by (a) shifting from a single-commodity and production-based approach to a more holistic and area-based planning approach; (b) focusing more on programs that fund public goods that are currently under-funded, such as research, agriculture extension and innovation systems, market information systems, infrastructure, biosecurity systems and programs supporting climate smart agriculture (CSA); (c) providing more emphasis to programs intended to overcome barriers to collective action and economies of scale. The second challenge is improving the currently low effectiveness of public spending, which is one factor behind the relatively low agricultural share in the government’s overall budget. Improving effectiveness will require correcting the problems that lead to low budget disbursement rates and the institutional and procedural shortcomings that impede the government’s ability to monitor and evaluate outcomes and make evidence-based decisions. It will also require important changes in how the government supports farmers. The reliance on support instruments that are inefficient tools for improving farmers’ competitiveness and productivity needs to change, particularly government provision of subsidized fertilizer, machinery, and other inputs. During the transition period of the rice liberalization, when support to affected rice farmers is needed, the government could implement a short-term e-vouchers system. Such a system would grow the private sector in input markets and give farmers more flexibility in managing their production decisions compared to the current subsidies. In the medium to long term, the government could consider an even more efficient mechanism and decouple support payments, which do not depend on the types of commodities or inputs. The third challenge is successfully implementing the financial and functional devolution resulting from the Mandanas Ruling. In the 1990s, the effort to devolve agricultural services did not go smoothly and was largely reversed. To avoid a similar fate with the current effort and fully realize this transfer’s potential benefits, the government must carefully consider which functions to transfer and what capacity building will be necessary for LGUs to carry out newly transferred responsibilities successfully. There will also need to be some mechanism in place to ensure that spending decisions at the local level align with the national interest and strategies.