Jyznareth C. Tapia Law 1-D

Araullo vs. Executive Secretary

Facts: On September 25, 2013, Sen. Jinggoy Ejercito Estrada delivered a privilege speech in the Senate of the Philippines to reveal that some Senators, including himself, had been allotted an additional P50 Million each as incentive for voting in favor of the impeachment of Chief Justice Renato C. Corona. Responding to Sen. Estrada's revelation, Secretary Florencio Abad of the DBM issued a public statement entitled Abad: Releases to Senators Part of Spending Acceleration Program explaining that the funds released to the Senators had been part of the DAP, a program designed by the DBM to ramp up spending to accelerate economic expansion. Abad clarified that the funds had been released to the Senators based on their letters of request for funding; and that it was not the first time that releases from the DAP had been made because the DAP had already been instituted in 2011 to ramp up spending after sluggish disbursements had caused the growth of the gross domestic product (GDP) to slow down. The revelation also prompted Maria Carolina Araullo, Chairperson of the Bagong Alyansang Makabayan, and several other concerned citizens to file various petitions with the Supreme Court questioning the validity of the DAP.

Among their contentions was: DAP is unconstitutional because it violates the constitutional rule which provides that no money shall be paid out of the Treasury except in pursuance of an appropriation made by law. But Secretary Abad argued that the DAP is based on certain laws particularly the General Appropriations Act (GAA) (savings and augmentation provisions thereof), Sec. 25(5), Art. VI of the Constitution (power of the President to augment), Secs. 38 and 49 of Executive Order 292 (power of the President to suspend expenditures and authority to use savings, respectively).

Issue:Whether or not the DAP violates Sec. 29, Art. VI of the 1987 Constitution, which provides: No money shall be paid out of the Treasury except in pursuance of an appropriation made by law.

Whether or not the DAP, and all other executive issuances allegedly implementing the DAP, violate Sec. 25(5), Art. VI of the 1987 Constitution, specifically:

a. Whether or not the cross-border transfers of the savings of the Executive to augment the appropriations of other offices outside the Executive is unconstitutional;

b. Whether or not the funding of projects, activities and programs that were not covered by any appropriation in the General Appropriations Act is unconstitutional;

c. Whether or not the withdrawal of unobligated allotments from the implementing agencies, and the declaration of the withdrawn unobligated allotments and unreleased appropriations as savings prior to the end of the fiscal year is unconstitutional.

Ruling:DAP did not violate Sec. 29, Art. VI of the 1987 Constitution DAP was not an appropriation measure; hence no appropriation law was required to adopt or to implement it.

No law was necessary for the adoption and implementation of the DAP because of its being neither a fund nor an appropriation, but a program or an administrative system of prioritizing spending; and that the adoption of the DAP was by virtue of the authority of the President as the Chief Executive to ensure that laws were faithfully executed. In such actions, the Executive did not usurp the power vested in Congress under Section 29(I), Article VI of the Constitution.

However: DAP, and all other executive issuances allegedly implementing the DAP, violated Sec. 25(5), Art. VI of the 1987 Constitution Sec. 25(5), Art. VI of the 1987 Constitution provides: 5) No law shall be passed authorizing any transfer of appropriations; however, the President, the President of the Senate, the Speaker of the House of Representatives, the Chief Justice of the Supreme Court, and the heads of Constitutional Commissions may, by law, be authorized to augment any item in the general appropriations law for their respective offices from savings in other items of their respective appropriations

The transfer of appropriated funds, to be valid under Section 25(5), supra must be made upon a concurrence of the following requisites, namely:

(1) There is a law authorizing the President, the President of the Senate, the Speaker of the House of Representatives, the Chief Justice of the Supreme Court, and the heads of the Constitutional Commissions to transfer funds within their respective offices;(2) The funds to be transferred are savings generated from the appropriations for their respective offices; (3) The purpose of the transfer is to augment an item in the general law for their respective offices.

As to the first requisite: The General Appropriation Act (GAA) of 2011 and 2012 lacked valid provisions to authorize transfers of funds under the DAP; hence transfers under the DAP were unconstitutional. And although the GAA of 2013 had provision for such transfer, it however lacked other the requisites.

As to the second requisite: There were no savings from which funds could be sourced for the DAP. The funds used in the DAP -the unreleased appropriations and withdrawn unobligated allotments -were not actual savings within the context of Section 25(5), supra, and the relevant provisions of the GAAs.

Savings should be understood to refer to the excess money after the items that needed to be funded have been funded, or those that needed to be paid have been paid pursuant to the budget. There could be savings only when the PAPs for which the funds had been appropriated were actually implemented and completed, or finally discontinued or abandoned. Savings could not be realized with certainty in the middle of the fiscal year; The funds for slow-moving PAPs could not be considered as savings because such PAPs had not actually been abandoned or discontinued yet. At this point, the Supreme Court also discussed that there is no executive impoundment in the DAP. Impoundment of funds refers to the Presidents power to refuse to spend appropriations or to retain or deduct appropriations for whatever reason. Impoundment is actually prohibited by the GAA unless there will be an unmanageable national government budget deficit (which did not happen). Nevertheless, theres no impoundment in the case at bar because whats involved in the DAP was the transfer of funds.

As to the third requisite: Cross-border augmentations from savings were prohibited by The Constitution. The phrase respective offices used in Section 25(5), supra refers to the entire Executive, with respect to the President; the Senate, with respect to the Senate President; the House of Representatives, with respect to the Speaker; the Judiciary, with respect to the Chief Justice; the Constitutional Commissions, with respect to their respective Chairpersons.

Those transfers of funds, which constituted cross-border augmentations for being from the Executive to the COA and the House of Representatives, are graphed as follows:

The Disbursement Acceleration Program: The plain text of Section 25 (5), supra disallowing cross-border transfers was disobeyed. Cross-border transfers, whether as augmentation, or as aid, were prohibited under Section 25 (5), supra.Other issues The funding of projects, activities and programs that were not covered by any appropriation in the General Appropriations Act is unconstitutional. No funds from savings could be transferred under the DAP to augment deficient items not provided in the GAA The Supreme Court conclude that the "savings" pooled under the DAP were allocated to PAPs that were not covered by any appropriations in the pertinent GAAs:

a. Disaster Risk, Exposure, Assessment and Mitigation (DREAM) project under the Department of Science and Technology (DOST) covered the amount of Pl.6 Billion;

b. Aside from this transfer under the DAP to the DREAM project exceeding by almost 3 00 the appropriation by Congress for the program Generation of new knowledge and technologies and research capability building in priority areas identified as strategic to National Development the Executive allotted funds for personnel services and capital outlays. The Executive thereby substituted its will to that of Congress;

c. Philippine Council for Industry, Energy and Emerging Technology Research and Development (DOST-PCIEETRD) for Establishment Of the Advanced Failure Analysis Laboratory, which the appropriation code and the particulars -Research and Management Services -appearing in the SARO did not correspond to the program specified in the GAA.

Other issues Whether or not the withdrawal of unobligated allotments from the implementing agencies, and the declaration of the withdrawn unobligated allotments and unreleased appropriations as savings prior to the end of the fiscal year is unconstitutional. Sourcing the DAP from unprogrammed funds despite the original revenue targets not having been exceeded was invalid. Unprogrammed funds from the GAA cannot be used as money source for the DAP because under the law, such funds may only be used if there is a certification from the National Treasurer to the effect that the revenue collections have exceeded the revenue targets. In this case, no such clear certification was secured before unprogrammed funds were used.The requirement that revenue collections must exceed revenue target should be understood to mean that the revenue collections must exceed the total of the revenue targets stated in the BESF. Moreover, to release the unprogrammed funds simply because there was an excess revenue as to one source of revenue would be an unsound fiscal management measure because it would disregard the budget plan and foster budget deficits.