OFFICE OF THE SOLICITOR GENERAL

FOR IMMEDIATE RELEASE

July 18, 2014

Ref.: Solicitor General Francis H. Jardeleza +63917 531 5027

Palace asks SC to reconsider DAP ruling

Malacaang asked the Supreme Court (SC) on Friday to reconsider parts

of its July 1 decision that declared specific acts and practices under the Aquino

administration's Disbursement Acceleration Program (DAP) unconstitutional.

Through its legal team led by Solicitor General Francis Jardeleza and retired SC Justice Vicente Mendoza, the Palace said the DAP, an economic stimulus facility designed to accelerate public spending, should be afforded the

presumption of constitutionality and good faith.

The President and his alter egos, in implementing a decidedly successful program, deserve to be afforded the traditional constitutional presumptions that apply to most other forms of public actions, especially the presumption of good

faith, the Palace said in a 52-page motion for reconsideration.

In the motion for reconsideration, the high court was specifically asked to

declare that:

1. Withdrawn obligated allotments and unreleased appropriations under the DAP are savings;

2. Cross-border transfers under the DAP are constitutional;

3. The President augmented items with appropriation cover under the DAP;

4. The use of the Unprogrammed Fund under the DAP complied with the conditions provided in the relevant General Appropriations Acts (GAAs);

5. Regardless of the nullification of certain acts and practices under the DAP and/or National Budget Circular No. 541, the operative fact

doctrine does not operate to impute bad faith to authors, proponents and implementers who continue to enjoy the presumption of innocence

and regularity in the performance of official functions and duties.

Apart from the presumption of constitutionality and good faith, the

Executive Department wanted the SC to apply other fundamental norms of constitutional litigation and basic fairness in resolving the governments appeal, such as the recognition of institutional competence and the value of bureaucratic

practices, the understanding of the constitutional role of the Executive in managing the economy, the acknowledgment of the constitutional authority of

Congress to define savings, the shared role of the political departments in preparing the budget and the constitutionally-designed minimal role of the Supreme Court on these matters.

In its motion, the Executive maintained that the use of savings and unused

funds that were pooled under the disbursement mechanism was legal and within President Benigno Aquino IIIs authority to augment funds or appropriation under Article VI, Section 25(5) of the Constitution.

It said the government, through the Department of Budget and

Management (DBM) headed by Secretary Florencio Butch Abad, had properly interpreted relevant portions in the GAAs involving the legislative parameters for accumulating savings.

The Executive argued that mechanisms used to incur savings under the

DAP had existed in one form or another throughout all administrations under

the 1987 Constitution and in the absence of any prohibition, it is the essence of sound management to stop the flow of scarce resources from projects that are failing and not moving, and to reallocate them into projects that have higher

chances of success.

No malice could be attributed to these mechanisms, which represent the Executives contemporaneous interpretation of the budget which it helped prepare with Congress. This interpretation was validated repeatedly, year after

year, through budget deliberations before Congress, it said.

At the same time, the Aquino administration objected to insinuations that bad faith attended the formulation of the DAP.

With all due respect, the Honorable Courts decision redefines existing administrative practice and potentially assigns malice post facto. Prior to this decision, respondents had the right to rely on the contemporaneous

administrative interpretation of the law, deemed adopted in subsequent enactments of the GAA, it pointed out.

The government dismissed the notion that the DBM engaged in a policy of

accumulating savings so that President Aquino may have funds for augmentation.

It said that if the Aquino administration was bent on accumulating

savings, it should have not passed the budget on time and let the previous

appropriation be automatically reenacted pursuant to Article VI, Section 25(7) of the Constitution.

Under a reenacted budget, all items representing appropriations for a completed work or activity like a P5-billion airport and a P10-billion expressway

are automatically converted into savings and are immediately available for use by the President on the first day of the year, it explained.

Thus, by the sheer fact of doing nothing, a President immediately generates savings to the tune of the total amount of all appropriations for the

funded projects and activities of the previous GAA, it said.

This strategy of generating savings through budget reenactment was

employed by the previous administration, which had either a partially or fully reenacted budget for the entire duration of its term, according to the motion.

And just for purposes of comparison, the overall savings of the Arroyo administration during the last three years of its term amounted to P117.5 billion

in 2007, P178.7 billion in 2008, and P268.3 billion in 2009, while the Aquino administrations overall savings amounted to P46.6 billion in 2010, P67.5 billion in 2011, P65.6 billion in 2012, and a preliminary figure of P57.8 billion in 2013.

It pointed out that the timely passage of the budget is an important fact that attests to the demonstrated intent of the President and Secretary Abad to

engage in disciplined spending, that is, according to a program embedded in the GAA and therefore consistent with the wishes of Congress.

Considering the advantages afforded to a President by a reenacted budget and the limited flexibility afforded by a programmed expenditure under a timely

enacted budget, not to mention the great effort required of the entire government machinery to complete the NEP (National Expenditure Program), one wonders

why a President would even pass a budget on time, if at all.

And yet, the Aquino administration, through Secretary Abad, has never failed to pass the budget on time. This is not only a mark of good faith; it is, more important, also an unmistakable sign of full and diligent compliance with the Constitution. A judgment constrained by this important context will find it

difficult to assign malice to the current practice of passing budgets on time that

has in fact substantially reduced the flexibility of the President and his economic managers.

At the same time, the Executive maintained that savings from withdrawn

unobligated allotments and unreleased appropriations may be used to augment other appropriations to fund priority projects of the President pursuant to Book VI, Chapter 5, Section 39 of the Administrative Code.

Contrary to the observation of the high court, the Executive said all DAP

applications had appropriation cover.

On the issue of cross-border transfer of savings, it said the President had

the authority to transfer savings to other branches of government pursuant to his constitutional powers under Article VI, Section 25(5) of the 1987 Charter, which prohibits transfer of appropriations but not of savings.

The Constitution, it said, does not prevent the President from transferring

savings of his department to another department upon the latters request, provided it is the recipient department that uses such funds to augment its own appropriation.

In such a case, the President merely gives the other department access to

public funds but he cannot dictate how they shall be applied by that department

whose fiscal autonomy is guaranteed by the Constitution, the Executive said.

In its motion, the Executive cited that in relation to the DAP, the President made available to the Commission on Audit and House of Representatives the savings of his department upon their request for funds, but it was those

institutions that applied such savings to augment items in their respective appropriations.

There were also some documentary evidence showing that the SC itself had approved the allocation of amounts from its savings to augment an item

within the Executive and sought funds from the Executive for transfer to the Judiciary.

In July 2012, the SC earmarked its existing savings of P1.865 billion to augment the P100-million budget for the Manila Hall of Justice that was an item

in the 2012 budget of the Department of Justice (DOJ), which is within the Executive Department.

The high court, in March 2013, also requested the DBM to transfer P100 million in the budget of the DOJ for the Manila Hall of Justice to the Judiciary, which it intended to utilize to fund the construction of the Malabon City Hall of

Justice.

This means that the P100-million allocation will be taken away from the Manila Hall of Justice, which has an item in the 2012 GAA under the Executive,

and used instead to fund the construction of the Malabon Hall of Justice, which has no item in the 2012 or the 2013 GAA.

However, when petitions were filed against the DAP and while they were

being heard, Chief Justice Maria Lourdes Sereno, in a letter dated Dec. 23, 2013,

informed the DBM that the SC was withdrawing its request to realign the P100 million intended for the Manila Hall of Justice to the budget of the judiciary.

The Executive also argued that the high tribunal erred in ruling that the revenue collections must exceed the total of the revenue targets stated in the

Budget of Expenditures and Sources of Financing (BESF) before expenditures under the Unprogrammed Fund in the GAA could be made.

A revenue surplus is not a condition precedent for the release of the Unprogrammed Fund, it argued, adding that the 2011, 2012 and 2013 GAAs

only require that revenue collections from each source of revenue enumerated in the budget proposal must exceed the corresponding revenue target.

If we are to follow the Honorable Courts interpretation, this would effectively deprive millions of Filipinos access to funds for reconstruction and rehabilitation, the Executive warned. #