Maria Carolina Araullo vs Benigno Aquino III

When President Benigno Aquino III took office, his administration noticed the sluggish growth of the
economy. The World Bank advised that the economy needed a stimulus plan. Budget Secretary
Florencio “Butch” Abad then came up with a program called the Disbursement Acceleration Program
(DAP).

The DAP was seen as a remedy to speed up the funding of government projects. DAP enables the
Executive to realign funds from slow moving projects to priority projects instead of waiting for next
year’s appropriation. So what happens under the DAP was that if a certain government project is being
undertaken slowly by a certain executive agency, the funds allotted therefor will be withdrawn by the
Executive. Once withdrawn, these funds are declared as “savings” by the Executive and said funds will
then be reallotted to other priority projects. The DAP program did work to stimulate the economy as
economic growth was in fact reported and portion of such growth was attributed to the DAP (as noted
by the Supreme Court).

Other sources of the DAP include the unprogrammed funds from the General Appropriations Act (GAA).
Unprogrammed funds are standby appropriations made by Congress in the GAA.

Meanwhile, in September 2013, Senator Jinggoy Estrada made an exposé claiming that he, and other
Senators, received Php50M from the President as an incentive for voting in favor of the impeachment of
then Chief Justice Renato Corona. Secretary Abad claimed that the money was taken from the DAP but
was disbursed upon the request of the Senators.

This apparently opened a can of worms as it turns out that the DAP does not only realign funds within
the Executive. It turns out that some non-Executive projects were also funded; to name a few: Php1.5B
for the CPLA (Cordillera People’s Liberation Army), Php1.8B for the MNLF (Moro National Liberation
Front), P700M for the Quezon Province, P50-P100M for certain Senators each, P10B for Relocation
Projects, etc.

This 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.”

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Secretary Abad argued that the DAP is based on certain laws particularly the 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).

Issues:

I. Whether or not the DAP violates the principle “no money shall be paid out of the Treasury except in
pursuance of an appropriation made by law” (Sec. 29(1), Art. VI, Constitution).

II. Whether or not the DAP realignments can be considered as impoundments by the executive.

III. Whether or not the DAP realignments/transfers are constitutional.

IV. Whether or not the sourcing of unprogrammed funds to the DAP is constitutional.

V. Whether or not the Doctrine of Operative Fact is applicable.

HELD:

I. No, the DAP did not violate Section 29(1), Art. VI of the Constitution. DAP was merely a program by the
Executive and is not a fund nor is it an appropriation. It is a program for prioritizing government
spending. As such, it did not violate the Constitutional provision cited in Section 29(1), Art. VI of the
Constitution. In DAP no additional funds were withdrawn from the Treasury otherwise, an appropriation
made by law would have been required. Funds, which were already appropriated for by the GAA, were
merely being realigned via the DAP.

II. No, there is no executive impoundment in the DAP. Impoundment of funds refers to the President’s
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, there’s no impoundment in the case
at bar because what’s involved in the DAP was the transfer of funds.

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III. No, the transfers made through the DAP were unconstitutional. It is true that the President (and even
the heads of the other branches of the government) are allowed by the Constitution to make
realignment of funds, however, such transfer or realignment should only be made “within their
respective offices”. Thus, no cross-border transfers/augmentations may be allowed. But under the DAP,
this was violated because funds appropriated by the GAA for the Executive were being transferred to
the Legislative and other non-Executive agencies.

Further, transfers “within their respective offices” also contemplate realignment of funds to an existing
project in the GAA. Under the DAP, even though some projects were within the Executive, these
projects are non-existent insofar as the GAA is concerned because no funds were appropriated to them
in the GAA. Although some of these projects may be legitimate, they are still non-existent under the
GAA because they were not provided for by the GAA. As such, transfer to such projects is
unconstitutional and is without legal basis.

On the issue of what are “savings”

These DAP transfers are not “savings” contrary to what was being declared by the Executive. Under the
definition of “savings” in the GAA, savings only occur, among other instances, when there is an excess in
the funding of a certain project once it is completed, finally discontinued, or finally abandoned. The GAA
does not refer to “savings” as funds withdrawn from a slow moving project. Thus, since the statutory
definition of savings was not complied with under the DAP, there is no basis at all for the transfers.
Further, savings should only be declared at the end of the fiscal year. But under the DAP, funds are
already being withdrawn from certain projects in the middle of the year and then being declared as
“savings” by the Executive particularly by the DBM.

IV. No. 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 certification was
secured before unprogrammed funds were used.

V. Yes. The Doctrine of Operative Fact, which recognizes the legal effects of an act prior to it being
declared as unconstitutional by the Supreme Court, is applicable. The DAP has definitely helped
stimulate the economy. It has funded numerous projects. If the Executive is ordered to reverse all
actions under the DAP, then it may cause more harm than good. The DAP effects can no longer be
undone. The beneficiaries of the DAP cannot be asked to return what they received especially so that
they relied on the validity of the DAP. However, the Doctrine of Operative Fact may not be applicable to
the authors, implementers, and proponents of the DAP if it is so found in the appropriate tribunals (civil,
criminal, or administrative) that they have not acted in good faith.

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Greco Belgica vs Executive Secretary Paquito Ochoa

This case is consolidated with G.R. No. 208493 and G.R. No. 209251.

The so-called pork barrel system has been around in the Philippines since about 1922. Pork Barrel is
commonly known as the lump-sum, discretionary funds of the members of the Congress. It underwent
several legal designations from “Congressional Pork Barrel” to the latest “Priority Development
Assistance Fund” or PDAF. The allocation for the pork barrel is integrated in the annual General
Appropriations Act (GAA).

Since 2011, the allocation of the PDAF has been done in the following manner:

a. P70 million: for each member of the lower house; broken down to – P40 million for “hard projects”
(infrastructure projects like roads, buildings, schools, etc.), and P30 million for “soft projects”
(scholarship grants, medical assistance, livelihood programs, IT development, etc.);

b. P200 million: for each senator; broken down to – P100 million for hard projects, P100 million for soft
projects;

c. P200 million: for the Vice-President; broken down to – P100 million for hard projects, P100 million for
soft projects.

The PDAF articles in the GAA do provide for realignment of funds whereby certain cabinet members may
request for the realignment of funds into their department provided that the request for realignment is
approved or concurred by the legislator concerned.

Presidential Pork Barrel

The president does have his own source of fund albeit not included in the GAA. The so-called
presidential pork barrel comes from two sources: (a) the Malampaya Funds, from the Malampaya Gas
Project – this has been around since 1976, and (b) the Presidential Social Fund which is derived from the
earnings of PAGCOR – this has been around since about 1983.

Pork Barrel Scam Controversy

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Ever since, the pork barrel system has been besieged by allegations of corruption. In July 2013, six
whistle blowers, headed by Benhur Luy, exposed that for the last decade, the corruption in the pork
barrel system had been facilitated by Janet Lim Napoles. Napoles had been helping lawmakers in
funneling their pork barrel funds into about 20 bogus NGO’s (non-government organizations) which
would make it appear that government funds are being used in legit existing projects but are in fact
going to “ghost” projects. An audit was then conducted by the Commission on Audit and the results
thereof concurred with the exposes of Luy et al.

Motivated by the foregoing, Greco Belgica and several others, filed various petitions before the Supreme
Court questioning the constitutionality of the pork barrel system.

ISSUES:

I. Whether or not the congressional pork barrel system is constitutional.

II. Whether or not presidential pork barrel system is constitutional.

HELD:

I. No, the congressional pork barrel system is unconstitutional. It is unconstitutional because it violates
the following principles:

a. Separation of Powers

As a rule, the budgeting power lies in Congress. It regulates the release of funds (power of the purse).
The executive, on the other hand, implements the laws – this includes the GAA to which the PDAF is a
part of. Only the executive may implement the law but under the pork barrel system, what’s happening
was that, after the GAA, itself a law, was enacted, the legislators themselves dictate as to which projects
their PDAF funds should be allocated to – a clear act of implementing the law they enacted – a violation
of the principle of separation of powers. (Note in the older case of PHILCONSA vs Enriquez, it was ruled
that pork barrel, then called as CDF or the Countrywide Development Fund, was constitutional insofar as
the legislators only recommend where their pork barrel funds go).

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This is also highlighted by the fact that in realigning the PDAF, the executive will still have to get the
concurrence of the legislator concerned.

b. Non-delegability of Legislative Power

As a rule, the Constitution vests legislative power in Congress alone. (The Constitution does grant the
people legislative power but only insofar as the processes of referendum and initiative are concerned).
That being, legislative power cannot be delegated by Congress for it cannot delegate further that which
was delegated to it by the Constitution.

Exceptions to the rule are:

(i) delegated legislative power to local government units but this shall involve purely local matters;

(ii) authority of the President to, by law, exercise powers necessary and proper to carry out a declared
national policy in times of war or other national emergency, or fix within specified limits, and subject to
such limitations and restrictions as Congress may impose, tariff rates, import and export quotas,
tonnage and wharfage dues, and other duties or imposts within the framework of the national
development program of the Government.

In this case, the PDAF articles which allow the individual legislator to identify the projects to which his
PDAF money should go to is a violation of the rule on non-delegability of legislative power. The power to
appropriate funds is solely lodged in Congress (in the two houses comprising it) collectively and not
lodged in the individual members. Further, nowhere in the exceptions does it state that the Congress
can delegate the power to the individual member of Congress.

c. Principle of Checks and Balances

One feature in the principle of checks and balances is the power of the president to veto items in the
GAA which he may deem to be inappropriate. But this power is already being undermined because of
the fact that once the GAA is approved, the legislator can now identify the project to which he will
appropriate his PDAF. Under such system, how can the president veto the appropriation made by the
legislator if the appropriation is made after the approval of the GAA – again, “Congress cannot choose a
mode of budgeting which effectively renders the constitutionally-given power of the President useless.”

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d. Local Autonomy

As a rule, the local governments have the power to manage their local affairs. Through their Local
Development Councils (LDCs), the LGUs can develop their own programs and policies concerning their
localities. But with the PDAF, particularly on the part of the members of the house of representatives,
what’s happening is that a congressman can either bypass or duplicate a project by the LDC and later on
claim it as his own. This is an instance where the national government (note, a congressman is a national
officer) meddles with the affairs of the local government – and this is contrary to the State policy
embodied in the Constitution on local autonomy. It’s good if that’s all that is happening under the pork
barrel system but worse, the PDAF becomes more of a personal fund on the part of legislators.

II. Yes, the presidential pork barrel is valid.

The main issue raised by Belgica et al against the presidential pork barrel is that it is unconstitutional
because it violates Section 29 (1), Article VI of the Constitution which provides:

No money shall be paid out of the Treasury except in pursuance of an appropriation made by law.

Belgica et al emphasized that the presidential pork comes from the earnings of the Malampaya and
PAGCOR and not from any appropriation from a particular legislation.

The Supreme Court disagrees as it ruled that PD 910, which created the Malampaya Fund, as well as PD
1869 (as amended by PD 1993), which amended PAGCOR’s charter, provided for the appropriation, to
wit:

(i) PD 910: Section 8 thereof provides that all fees, among others, collected from certain energy-related
ventures shall form part of a special fund (the Malampaya Fund) which shall be used to further finance
energy resource development and for other purposes which the President may direct;

(ii) PD 1869, as amended: Section 12 thereof provides that a part of PAGCOR’s earnings shall be
allocated to a General Fund (the Presidential Social Fund) which shall be used in government
infrastructure projects.

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These are sufficient laws which met the requirement of Section 29, Article VI of the Constitution. The
appropriation contemplated therein does not have to be a particular appropriation as it can be a general
appropriation as in the case of PD 910 and PD 1869.

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PHILCONSA VS ENRIQUEZ

Facts:

House Bill No. 10900, the General Appropriation Bill of 1994 (GAB of 1994), was passed and
approved by both houses of Congress on December 17, 1993. As passed, it imposed conditions and
limitations on certain items of appropriations in the proposed budget previously submitted by the
President. It also authorized members of Congress to propose and identify projects in the “pork barrels”
allotted to them and to realign their respective operating budgets.

Pursuant to the procedure on the passage and enactment of bills as prescribed by the Constitution,
Congress presented the said bill to the President for consideration and approval.

On December 30, 1993, the President signed the bill into law, and declared the same to have become
Republic Act NO. 7663, entitled “AN ACT APPROPRIATING FUNDS FOR THE OPERATION OF THE
GOVERNMENT OF THE PHILIPPINES FROM JANUARY ONE TO DECEMBER THIRTY ONE, NINETEEN
HUNDRED AND NINETY-FOUR, AND FOR OTHER PURPOSES” (GAA of 1994). On the same day, the
President delivered his Presidential Veto Message, specifying the provisions of the bill he vetoed and on
which he imposed certain conditions, as follows:

1. Provision on Debt Ceiling, on the ground that “this debt reduction scheme cannot be validly done
through the 1994 GAA.” And that “appropriations for payment of public debt, whether foreign or
domestic, are automatically appropriated pursuant to the Foreign Borrowing Act and Section 31 of P.D.
No. 1177 as reiterated under Section 26, Chapter 4, Book VI of E.O. No. 292, the Administrative Code of
1987.

2. Special provisions which authorize the use of income and the creation, operation and maintenance
of revolving funds in the appropriation for State Universities and Colleges (SUC’s),

3. Provision on 70% (administrative)/30% (contract) ratio for road maintenance.

4. Special provision on the purchase by the AFP of medicines in compliance with the Generics Drugs
Law (R.A. No. 6675).

5. The President vetoed the underlined proviso in the appropriation for the modernization of the AFP
of the Special Provision No. 2 on the “Use of Fund,” which requires the prior approval of the Congress
for the release of the corresponding modernization funds, as well as the entire Special Provision No. 3
on the “Specific Prohibition” which states that the said Modernization Fund “shall not be used for
payment of six (6) additional S-211 Trainer planes, 18 SF-260 Trainer planes and 150 armored personnel
carriers”

6. New provision authorizing the Chief of Staff to use savings in the AFP to augment pension and
gratuity funds.

7. Conditions on the appropriation for the Supreme Court, Ombudsman, COA, and CHR, the
Congress.

Issue:

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 whether or not the conditions imposed by the President in the items of the GAA of 1994: (a) for
the Supreme Court, (b) Commission on Audit (COA), (c) Ombudsman, (d) Commission on Human Rights,
(CHR), (e) Citizen Armed Forces Geographical Units (CAFGU’S) and (f) State Universities and Colleges
(SUC’s) are constitutional; whether or not the veto of the special provision in the appropriation for debt
service and the automatic appropriation of funds therefore is constitutional

Held:

The veto power, while exercisable by the President, is actually a part of the legislative process.
There is, therefore, sound basis to indulge in the presumption of validity of a veto. The burden shifts on
those questioning the validity thereof to show that its use is a violation of the Constitution.

The vetoed provision on the debt servicing is clearly an attempt to repeal Section 31 of P.D. No. 1177
(Foreign Borrowing Act) and E.O. No. 292, and to reverse the debt payment policy. As held by the court
in Gonzales, the repeal of these laws should be done in a separate law, not in the appropriations law.

In the veto of the provision relating to SUCs, there was no undue discrimination when the President
vetoed said special provisions while allowing similar provisions in other government agencies. If some
government agencies were allowed to use their income and maintain a revolving fund for that purpose,
it is because these agencies have been enjoying such privilege before by virtue of the special laws
authorizing such practices as exceptions to the “one-fund policy” (e.g., R.A. No. 4618 for the National
Stud Farm, P.D. No. 902-A for the Securities and Exchange Commission; E.O. No. 359 for the Department
of Budget and Management’s Procurement Service).

The veto of the second paragraph of Special Provision No. 2 of the item for the DPWH is
unconstitutional. The Special Provision in question is not an inappropriate provision which can be the
subject of a veto. It is not alien to the appropriation for road maintenance, and on the other hand, it
specifies how the said item shall be expended — 70% by administrative and 30% by contract.

The Special Provision which requires that all purchases of medicines by the AFP should strictly comply
with the formulary embodied in the National Drug Policy of the Department of Health is an
“appropriate” provision. Being directly related to and inseparable from the appropriation item on
purchases of medicines by the AFP, the special provision cannot be vetoed by the President without also
vetoing the said item.

The requirement in Special Provision No. 2 on the “use of Fund” for the AFP modernization program that
the President must submit all purchases of military equipment to Congress for its approval, is an
exercise of the “congressional or legislative veto.” However the case at bench is not the proper occasion
to resolve the issues of the validity of the legislative veto as provided in Special Provisions Nos. 2 and 3
because the issues at hand can be disposed of on other grounds. Therefore, being “inappropriate”
provisions, Special Provisions Nos. 2 and 3 were properly vetoed.

Furthermore, Special Provision No. 3, prohibiting the use of the Modernization fund for payment of the
trainer planes and armored personnel carriers, which have been contracted for by the AFP, is violative of
the Constitutional prohibition on the passage of laws that impair the obligation of contracts (Art. III, Sec.
10), more so, contracts entered into by the Government itself. The veto of said special provision is
therefore valid.

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The Special Provision, which allows the Chief of Staff to use savings to augment the pension fund for the
AFP being managed by the AFP Retirement and Separation Benefits System is violative of Sections 25(5)
and 29(1) of the Article VI of the Constitution.

Regarding the deactivation of CAFGUS, we do not find anything in the language used in the challenged
Special Provision that would imply that Congress intended to deny to the President the right to defer or
reduce the spending, much less to deactivate 11,000 CAFGU members all at once in 1994. But even if
such is the intention, the appropriation law is not the proper vehicle for such purpose. Such intention
must be embodied and manifested in another law considering that it abrades the powers of the
Commander-in-Chief and there are existing laws on the creation of the CAFGU’s to be amended.

On the conditions imposed by the President on certain provisions relating to appropriations to the
Supreme Court, constitutional commissions, the NHA and the DPWH, there is less basis to complain
when the President said that the expenditures shall be subject to guidelines he will issue. Until the
guidelines are issued, it cannot be determined whether they are proper or inappropriate. Under the
Faithful Execution Clause, the President has the power to take “necessary and proper steps” to carry
into execution the law. These steps are the ones to be embodied in the guidelines.

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Demetrio Demetria vs Manuel Alba

Demetrio Demetria et al as taxpayers and members of the Batasan Pambansa sought to prohibit Manuel
Alba, then Minister of the Budget, from disbursing funds pursuant to Presidential Decree No. 1177 or
the Budget Reform Decree of 1977. Demetria assailed the constitutionality of paragraph 1, Section 44 of
the said PD. This Section provides that:

“The President shall have the authority to transfer any fund, appropriated for the different departments,
bureaus, offices and agencies of the Executive Department, which are included in the General
Appropriations Act, to any program, project or activity of any department, bureau, or office included in
the General Appropriations Act or approved after its enactment.”

Demetria averred that this is unconstitutional for it violates the 1973 Constitution.

ISSUE: Whether or not Paragraph 1, Section 44, of PD 1177 is constitutional.

HELD: No. The Constitution provides that no law shall be passed authorizing any transfer of
appropriations, however, the President, the Prime Minister, the Speaker, 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.

However, paragraph 1 of Section 44 of PD 1177 unduly overextends the privilege granted under the
Constitution. It empowers the President to indiscriminately transfer funds from one department,
bureau, office or agency of the Executive Department to any program, project or activity of any
department, bureau or office included in the General Appropriations Act or approved after its
enactment, without regard as to whether or not the funds to be transferred are actually savings in the
item from which the same are to be taken, or whether or not the transfer is for the purpose of
augmenting the item to which said transfer is to be made. It does not only completely disregard the
standards set in the fundamental law, thereby amounting to an undue delegation of legislative powers,
but likewise goes beyond the tenor thereof. Indeed, such constitutional infirmities render the provision
in question null and void.

But it should be noted, transfers of savings within one department from one item to another in the GAA
may be allowed by law in the interest of expediency and efficiency. There is no transfer from one
department to another here.

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