DAP Motion for Reconsideration

8/12/2019 DAP Motion for Reconsideration

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REPUBLIC OF THE PHILIPPINES

SUPREME COURTMANILA

EN BANC

MARIA CAROLINA P.ARAULLO, et al.,

Petitioners,

-versus-

BENIGNO SIMEON C. AQUINOIII, et al.,

Respondents.x------------------------------------------x

G.R. No. 2092871

MOTION FOR RECONSIDERATION

Great cases like hard cases make bad law. For great cases are called great not by reason of

their real importance in shaping the law of the future but because of some accident of

immediate interest which appeals to the feelings and distorts the judgment. These immediate

interests exercise a kind of hydraulic pressure which makes what previously was clear seem

doubtful, and before which even well settled principles of law will bend.2

- Oliver Wendell Holmes, Jr.

1 Consolidated with Augusto L. Syjuco, Jr. v. Florencio B. Abad, et al. (G.R. No. 209135),Manuelito R. Luna v. Secretary Florencio B. Abad, et al.(G.R. No. 209136),Jose Malvar Villegas, Jr.v. The Honorable Executive Secretary Paquito N. Ochoa, Jr., et al. (G.R. No. 209155), Philippine

Constitution Association (PHILCONSA), et al. v. The Department of Budget and Management and/orHon. Florencio B. Abad (G.R. No. 209164), Integrated Bar of the Philippines (IBP) v. SecretaryFlorencio B. Abad of the Department of Budget and Management (DBM) (G.R. No. 209260), GrecoAntonious Beda B. Belgica, et al. v. President Benigno Simeon C. Aquino III, et al. (G.R. No. 209442),Confederation for Unity, Recognition and Advancement of Government Employees (COURAGE), et al. v.His Excellency Benigno Simeon C. Aquino III, et al. (G.R. No. 209517), Volunteers Against Crimeand Corruption (VACC) v. Hon. Paquito N. Ochoa, Jr., et al. (G.R. No. 209569).2Northern Securities Co. v. United States, 193 U.S. 197, 400 (1904).


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MOTION FOR RECONSIDERATIONAraullo, et al. v. Aquino, et al.Page 2 of 52

In a democratic system of government, it is an imperative that the great

departments recognize their proper place in the scheme of things, conscious ofthe need to respect constitutional boundaries and institutional prerogatives.

Respondents respectfully move for a reconsideration of the Honorable

Courts Decision so that it may apply fundamental norms of constitutional

litigation and basic fairnessthe presumption of constitutionality and good faith, 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.

Respondents seek reconsideration as a testament to their commitment to

the rule of law. We therefore ask this Honorable Court to take a second look

and reflect deeply on the strength of our arguments for a reversal.

The President and his alter egos, in implementing a decidedly successfulprogram, deserve to be afforded the traditional constitutional presumptions

that apply to most other forms of public actions, especially the presumption of goodfaith.

Respondents, by counsel, respectfully state:

1. On 04 July 2014, the Office of the Solicitor General received thisHonorable Courts Decision dated 01 July 2014, the dispositive portion of

which reads:

WHEREFORE, the Court PARTIALLY GRANTS the petitionsfor certiorari and prohibition; and DECLARES the following acts andpractices under the Disbursement Acceleration Program, National Budget

Circular No. 541 and related executive issuances UNCONSTITUTIONALfor being in violation of Section 25(5), Article VI of the 1987 Constitution

and the doctrine of separation of powers, namely:

(a) 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 andwithout complying with the statutory definition of savings contained in the

General Appropriations Acts;

(b) The cross-border transfers of the savings of the Executive to

augment the appropriations of other offices outside the Executive; and


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(c) The funding of projects, activities and programs that were not

covered by any appropriation in the General Appropriations Act.

The Court further DECLARES VOID the use of unprogrammed

funds despite the absence of certification by the National Treasurer that therevenue collections exceeded the revenue targets for non-compliance with

the conditions provided in the relevant General Appropriations Acts.

SO ORDERED.

2. This reconsideration seeks a reversal of the majority decision ofthis Honorable Court with a view to (1) highlighting certain contextual matters

in the consideration of the issues and (2) presenting errors that led to

inaccurate conclusions.

SUMMARY OF ARGUMENTS

I. PRELIMINARY CONSIDERATIONS

A. THE ISSUES WERE MISCHARACTERIZED AND

UNNCESSARILY CONSTITUTIONALIZED.

B. THE DBM DID NOT ENGAGE IN A POLICY OF

ACCUMULATING SAVINGS SO THAT THE PRESIDENT

MAY HAVE FUNDS FOR AUGMENTATION.

C. THE BUDGET IS A COMPROMISE BETWEEN THE

POLITICAL DEPARTMENTS THAT IS REVISITED

ANNUALLY.

II. SUBSTANTIVE ARGUMENTS

A. THE EXECUTIVE DEPARTMENT PROPERLYINTERPRETED SAVINGS UNDER THE RELEVANT

PROVISIONS OF THE GAA.

1. WITHDRAWN UNOBLIGATED ALLOTMENTS ARE

SAVINGS.

2. UNRELEASED APPROPRIATIONS UNDER DAP

ARE SAVINGS.


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3. SAVINGS FROM WITHDRAWN UNOBLIGATED

ALLOTMENTS AND UNRELEASEDAPPROPRIATIONS MAY BE USED FOR

AUGMENTATION.

B. ALL DAP APPLICATIONS HAVE APPROPRIATION

COVER.

C. THE PRESIDENT HAS AUTHORITY TO TRANSFER

SAVINGS TO OTHER DEPARTMENTS PURSUANT TO

HIS CONSTITUTIONAL POWERS.

D. 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.

E. THE OPERATIVE FACT DOCRINE WAS WRONGLY

APPLIED.

III. PROCEDURAL ARGUMENTS

A. WITHOUT AN ACTUAL CASE OR CONTROVERSY,

ALLEGATIONS OF GRAVE ABUSE OF DISCRETION ON

THE PART OF ANY INSTRUMENTALITY OF THE

GOVERNMENT CANNOT CONFER ON THIS

HONORABLE COURT THE POWER TO DETERMINE

THE CONSTITUTIONALITY OF THE DAP AND NBC NO.541.

B. PETITIONERS ACTIONS DO NOT PRESENT AN

ACTUAL CASE OR CONTROVERSY AND THEREFORE

THIS HONORABLE COURT DID NOT ACQUIREJURISDICTION.

C.

PETITIONERS HAVE NEITHER BEEN INJURED NORTHREATENED WITH INJURY AS A RESULT OF THE

OPERATION OF THE DAP AND THEREFORE SHOULD

HAVE BEEN HELD TO HAVE NO STANDING TO BRINGTHESE SUITS FOR CERTIORARI AND PROHIBITION.


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authority to define the term savings. Respondentsfully agree that Article VI,

Section 25(5) is not a self-executing provision, and that it must have animplementing law for it to be operative. This is, in fact, consistent with the

governments position in its Memorandum, where it was contended thatquestions of interpretation of the implementing law are problems of

statutory interpretation, not constitutional law.5

6. Except for the so-called cross-border transfers, the issuespresented in these cases have nothing to do with the Constitutions definition

of savingsbecause there is nonebut with the Congress definition as it

appears in the various GAAs. This is evident in the majority opinion of this

Honorable Court which, quite understandably, focused entirely on the

provisions of the various GAAs concerned as they relate to the definition ofsavings as portions or balances of any programmed appropriationfree from

any obligation or encumbrance....

7. Given this clarification of concepts, the relevant discussion onwhether the Executive properly accumulated savings is a matter of statutory

interpretation involving the question of administrative compliance with theparameters set by the GAA, not by the Constitution.6

8. The Courts interpretation of savings is not a statement of a constitutional rulebut merely an (unnecessary) interpretation of an act of Congress. If at all, anyadministrative non-compliance with the Congress definition of savings cannot

trigger a declaration of unconstitutionality. To this extent, the dispositive

portion of the Decision relative to (a) is, with all due respect, erroneous.

Respondents acts pursuant to their interpretation of a statute cannot be

declared unconstitutional.

5The fact is that Congress has not expressed disagreement with the way the Executive hascomplied with the definition of savings found in the General Provisions of the GAA. From2010 to 2013, the legislature has used the same set of definitions. In the absence of suchdisagreement between the Executive and Congress, this Honorable Court has no occasion toexercise its powers to allocate constitutional boundaries. Any dispute regarding thedefinition of savings is merely a statutory and not a constitutional issue. We should notunnecessarily constitutionalize questions that are patently consigned by the Constitution tothe judgment of our political branches. Respondents Memorandum, par. 54, pp. 21-22.6Article VI, Section 25(5) of the Constitution textually commits to Congress the authorityto define the term savings. It left no judicially discoverable and manageable standards forconstraining this authority of Congress. Pursuant to this constitutional authority, Congress

has defined savings in every relevant GAA. Congress, not this Honorable Court, is the institution constitutionally-empowered to check whether the Presidents accumulation ofsavings is consistent with the definition in the GAA. If Congress disagrees with the way thePresident accumulates savings, this can be remedied through the political process: it canexpress that disagreement by conducting legislative inquiries in the exercise of its oversightfunction or redefining the term savings in the exercise of its law-making powers. Theremedy, therefore, lies with Congress, not before the Supreme Court. RespondentsMemorandum, par. 53, p. 21.


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The DBMs interpretation of the GAA is

entitled to a heavy presumption of validity.

9.

The DBM is the agency institutionally competent to determinecompliance with the GAA, as it correctly did in this case, given that it is the

agency that prepares the National Expenditure Program (NEP) and actually

works with Congress to prepare the GAA. It is the DBM, based on its expertise

and institutional competence, that has the undeniable administrative know-how

to interpret the GAA because of its role in the drafting of the NEP. Any

question on the interpretation of non-constitutional terms in the GAA, especially in the

absence of disagreement with Congress, should naturally be resolved in favor of recognizing the

interpretive competence of those who not only helped write the document but also implement

such document.

The Courts interpretation of savings is not a

constitutional rule, and can be overturned by

legislation.

10. The Honorable Courts current interpretation of savings cannotcreate a permanent, constitutional rule. The Honorable Courts interpretation

of savings does not involve an articulation of a constitutional principle, but isonly an interpretation of the GAA that may legitimately be overturned through

the legislative process. This point is easy to demonstrate.

11. Suppose the Congress, pursuant to its authority under Article VI,Section 25(5) of the Constitution, decided to redefine savings in any of the

following ways

a)

Any allotment for any work, activity, or purpose for whichthe appropriation is authorized, which has not been

obligated notwithstanding the lapse of 6 months; and

b) Any appropriations balances arising from unfilled positions

shall not constitute savings and revert to the NationalTreasury; provided, that 25% of such appropriations

balances may be treated as savings.

12.

Hypothetical situation (a) entirely wipes out the HonorableCourts analysis in the present cases, as it eliminates the concept of savings

from completion or final discontinuance or abandonment of the work.

On the other hand, hypothetical situation (b) redefines the concept of

unreleased appropriations and overturns the practice of accumulating savings


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even of the Honorable Court, as held in Sanchez v. Commission on Audit7which

allows the Chief Justice to accumulate savings from unfilled positions in thejudiciary.8 Congress, under Article VI, Section 25(5), can even completely do

away with the concept of savings by simply withdrawing the authorization touse savings in the GAA, thereby rendering academic all debate about what

constitutes savings.

13. In sum, and properly characterized, the important questions inthese cases are

(1) Whether the government properly interpreted the relevant

portions of the GAA involving the legislative parameters foraccumulating savings;

(2) Whether the President properly augmented items with

appropriation covers;

(3) Whether the President can transfer savings to the otherdepartments, upon the latters request; and

(4) Whether releases from the Unprogrammed Fund are valid.

Issues (1) and (4) are questions of statutory interpretation. Issue (2) is

essentially a factual question involving a scrutiny of the 116 DAP projects.

Issue (3) is a constitutional question to which respondents have an answer

based on the text, history, structure of the Constitution, and the demonstrated

practice of the Honorable Court.

B.

THE DBMDID NOT ENGAGE IN A POLICY OFACCUMULATING SAVINGS SOTHAT THE PRESIDENT MAY HAVE FUNDS FORAUGMENTATION.

14. Much of the efforts of petitioners and the discussions of thisHonorable Court focus on the subjective question of whether there was an

overarching intent on the part of the government, through the DBM, to

generate savings that the President can use for augmentation. This context

appears to be an important point of contact among the various legal

conclusions with respect to the GAAs definition of savings and the meaning of

certain crucial clauses in NBC 541. This is an important question for whichthere is a clear, objective answer susceptible of being tested by the crucible of

facts and context, both of which demonstrate that the DBM and the President

7G.R. No. 127545, 23 April 2008.8Id. As a case in point, the Chief Justice himself transfers funds only when there areactual savings,e.g., from unfilled positions in the Judiciary. Emphasis in the original.


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not only acted in good faith but also did what was right, consistent with the

traditional prerogatives of their offices.

15.

First. Re-enacted budgets and automatic accumulation of savings.All that anadministration bent on accumulating savings has to do is to not pass the budget

on time and let the previous budget get automatically re-enacted pursuant to

Article VI, Section 25(7) of the Constitution. This is because under a re-enacted

budget, all items representing appropriations for a completed work or activity

(for example, 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. 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.

16. This strategy of generating savings through re-enactment is afactual, not a theoretical, claim. The primary exemplar for this scheme is the

previous administration, which had either a partially or fully re-enacted budget

for the entire duration of its term. And just for purposes of comparison, the

overall savings of the Arroyo administration during the last three years of itsterm 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 toP46.6 billion in 2010, P67.5 billion in 2011, P65.6 billion in 2012, and apreliminary figure of P57.8 billion in 2013.

17. Second.The timely passage of the budget is an important fact thatattests to the demonstrated intent of the President and Secretary Florencio B.

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 re-enacted budget and

the limited flexibility afforded by a programmed expenditure under a timelyenacted budget, not to mention the great effort required of the entire

government machinery to complete the NEP, 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 economicmanagers.

18. Third. DAP was a response to a fiscal emergencyunder-utilization of public funds. This is another uncontested fact. It was a plan to


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inadvertently led to the slowdown in public infrastructure spending as the

review uncovered significant procedural and governance issues.13

21.

Tasked with implementing a budget he did not propose andspending on projects his department heads were not comfortable with because

of numerous irregularities, the President decided that the prudent course of

action was to stop expenditures on certain projects until he was confident that

the reforms he introduced ensured the proper use of funds.

22. If government projects were proceeding as planned, there wouldhave been no need for a program such as DAP as expenditure levels would

have been normal and not a cause for concern at the macro-economic level.This is a demonstrated fact.14

23. Fourth.There was a diminishing use of the DAP, starting with thedownward shift in 2012 and 2013, and a total disuse by the last quarter of 2013.

This belies the claim that there was intent to accumulate savings so that the

President may use them for discretionary spending. Even before the variouspresent petitions were filed, DAP had already become operationally dead. We

invite the Honorable members of the Court to look at the numbers: from

P75.1 billion in 2011, P53.2 billion in 2012, to P16 billion in 2013.

24. Fifth. The mechanisms used to realize savings under the DAPhave existed in one form or another throughout all administrations under the

1987 Constitution. In the absence of any specific constitutional 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. This is the fundamental idea behind the

Presidents power to augment under Article VI, Section 25(5) of theConstitution.

13Id.14Id. 1. Weak government spending pulled down growth in 2011. Public constructioncontracted by almost 30 percent in 2011 despite efforts to revive infrastructure spending inthe fourth quarter (Q4). The decline was most pronounced in Q2 2011 with a 51 percentdrop in spending compared to the same period in 2010. Current expenditures (i.e., personnelservices, maintenance and other operating expenditures) contracted by eight percent in Q1

2011 but slowly recovered in the next three quarters, growing by five percent for full year2011.

2. Compared to programmed expenditures, disbursement was lower by ninepercent in 2011. Total disbursement at PHP 1.558 trillion was only 91 percent ofprogrammed expenditure for the year and 82 percent of total available appropriations(Figure 4.1). The deterioration in spending performance was most pronounced ininfrastructure and other capital expenditures where only 66 percent of the full-yearprogrammed expenditure was disbursed as of December. Emphasis in the original.


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25. No malice could be attributed to these mechanisms, whichrepresent the Executives contemporaneous interpretation of the budgetwhich

it helped prepare with Congress. This interpretation was validated repeatedly,

year after year, through budget deliberations before Congress.

Where a statute has received a contemporaneous and practical

interpretation and the statute as interpreted is re-enacted, the practical

interpretation is accorded greater weight than it ordinarily receives, and is

regarded as presumptively the correct interpretation of the law. The rule here

is based upon the theory that the legislature is acquainted with the

contemporaneous interpretation of a statute, especially when made by an

administrative body or executive officers charged with the duty of

administering or enforcing the law, and therefore impliedly adopts the

interpretation upon re-enactment.15

26. Respondents strongly object to any suggestion that bad faithattended the formulation of the DAP, made years before the Courts

unprecedented decision in these cases. With all due respect, the Honorable

Courts decision redefines existing administrative practice and potentiallyassigns malicepost 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.

27. To be sure, the particular mechanisms used by the Aquinoadministrationthe withdrawal of unobligated allotments and use of

appropriations balancesare much more benign than the practice of previousadministrations of imposing reserves on government agencies including, in

some instances, members of the Constitutional Fiscal Autonomy Group(CFAG), through a Reserve Control Account at the beginning of the year. Such

a practice results in the automatic reduction of appropriations of the agency

concerned, regardless of any proof of inability to use their allotments or thepresence of an appropriations balance.

28. Theories linking DAP to pork-barrel type discretionary spendingdo not account for the bureaucratic hurdles, the frequent review exercises

conducted in order to identify projects for realignment and augmentation. The

determination of slow-moving projects, the identification of high-impact

alternatives, the laying down of a process and timeline for withdrawal of

allotments are at odds with the notion that the DAP was a scheme to generate

savings. This evaluation is especially true considering another, easier method is available

the repeated re-enactment of the budget.

15Laxamana v. Baltazar, G.R. No. L-5955, 19 September 1952.


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29. The Court held: Contrary to the respondents insistence, thewithdrawals were upon the initiative of the DBM itself.16This conclusion is

mistaken. The reality is, as was pleaded by respondents in their Comment, the

withdrawal actually occurs upon the instance of the head of agency, as was thecase of Secretary Abaya.17 Another fact is undeniable: if the departmentsecretary declares that his unobligated allotments can be used or obligated, then

the DBM cannot and will not withdraw the unobligated allotment. This is

because, as is obvious from context, the problem of the President and DBM

was low levels of spending borne by inability of the agencies to obligate their

allotment, which affected the expenditure program of the government to the

detriment of the economy.This is why the determinative slogan was Use it or

lose it.A reasonable mind would consider these facts as important to support

the conclusion that money unspent in one place should be treated as savings soit may be spent somewhere else.

30. The Constitution does not prevent the pooling of savings. The HonorableCourt seems to have reservations with the idea of pooling savings. This fear is

ungrounded. The Constitution does not require a one-to-one correspondence

between savings from one item and augmentation in another. In addition, the

pooling of savings is simply a virtual tally or accounting of the total savings on

any given time so the Executive (or even the Supreme Court for that matter)

may determine how much savings are available for augmentation purposes.Because all savings may be used for augmentation purposes, it necessarily

follows that all savings may be pooled.

C.THE BUDGET IS A COMPROMISE BETWEEN THE POLITICAL DEPARTMENTS

THAT IS REVISITEDANNUALLY.

31.

The augmentation provision of the Constitution and the laws implementingsuch constitutional authority are meant to respond to the reality that budgets are prepared a

year in advance of their implementation. There are therefore a lot of occurrences

during implementation year that may not have been anticipated by theExecutive when it prepared the NEP, and by the Congress, when it passed the

GAA. Under the Constitution, the flexibility of the President in the form of his

power to augment responds to this gap between planned expenditure and the

necessities of the moment.

32.

Any argument justifying Court intervention based on the need toprotect Congressional control over the budget, without more, is misplaced. In

the first place, Congress, as the real party in interest, has never objected to the

16Decision, p. 64.17See Comment, pars. 52 and 55, pp. 21-22.


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Executives interpretation of the GAA and has not seen it fit to invoke the

Courts boundary-setting function. Second, citing Congress power of thepurse does not take into account that the President is not a mere spectator in

budget legislation. By constitutional design, the enactment of the nationalbudget differs from ordinary legislation in that (1) it is initiated through a

proposal from the President instead of any member of Congress; (2) it is only

effective for one year; and (3) it is subject to the Presidents line-item veto.

33. We strongly object to the notion that the President colluded withCongress, or that he undermined the Congress power of the purse and that

Congress allowed its prerogatives to be undermined. The constitutional

requirement of an annual exercise between the two political branches simply

reflects the fact that the political departments, not the judiciary, are those incharge of running the government and managing the economy.

34. Each annual budget represents a compromise on varied andconflicting priorities. If Congress disagrees with the way the Executive

implemented the GAAs savings requirement, then it can always impose a more

restrictive language in the next budget cycle, hold public hearings and makeexecutive officials explain. If an agency erred in releasing or accepting

allotments, Congress may respond directly against the agencys appropriation.Far from Congress colluding with the Executive, its inaction or silence in suchinstances effectively amounts to a positive ratification of executive action.

Neither can we ascribe ignorance on the part of Congress which regularly

receives information on how public funds are spent through the NEP. The

lengthy process that precedes the passage of the GAA is proof of the active

interchange between the Executive and the Legislature with respect to howpublic funds should be spent and accounted for.

II.SUBSTANTIVE ARGUMENTS

A.THE EXECUTIVE DEPARTMENT PROPERLY INTERPRETED

SAVINGS UNDER THE RELEVANT PROVISIONS OFTHE GAA.

1.

WITHDRAWN UNOBLIGATEDALLOTMENTS ARE SAVINGS.

35. The Honorable Court held that withdrawn unobligated allotmentsunder the DAP are not savings because though they are free from any

obligation or encumbrance, thewithdrawal of the unobligated allotments waspredicated on whether the allotments pertained to slow-moving projects or


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not18thus disregarding the three enumerated instances of when savings

would be realized.19 Moreover, the quarterly withdrawal of unobligatedallotments under the Memorandum for the President dated 20 May 2013

violated the period of availability of appropriations in the GAA.

36. With due respect, this is not correct. Withdrawn unobligatedallotments are savings because they are already portions or balances of [ ]

programmed appropriations free from any obligation or encumbrance which

arestill available after thefinal discontinuance or abandonment of the

work, activity or purpose for which the appropriation is authorized. Under

Book VI, Chapter 5, Section 38 of the Administrative Code,20the President has

the authority to stop the further expenditure of funds allotted for slow-

moving projects to uphold the public interest of maximizing limited publicfunds. As this country cannot afford to waste money, it is commonsensical to

use limited funds for fast-moving projects which are better able to absorb

them.

37. Book VI, Chapter 5, Section 38 of the Administrative Code is anexpress legislative authorization for the President to permanently stop furtherexpenditures from allotments given to agencies based on the Presidents

judgment that the public interest so requires. This is (1) a reasonable readingof the Administrative Code in relation to the GAA; (2) consistent with the roleof the President as chief economic manager; and (3) consistent with what an

ordinary citizen understand as savingsthe money that remains if the original

purpose is fulfilled or defeated. If Congress wanted to grant the President the

power to stop funding items in the GAA based on a broad public interest

standard, this Honorable Court cannot withhold or limit that power.21 ThePresident faithfully executes the laws under Article VII, Section 17 of the

Constitution, and such power necessarily includes the ability to interpret the

power granted to him by Congress in a manner that is both reasonable andpractical.

38. The net effect of the Presidents exercise of his authority under Book VI,Chapter 5, Section 38 of the Administrative Code is the final discontinuance or

18Decision, p. 61.19Id., at 60.20Section 38. Suspension of Expenditure of Appropriations. Except as otherwise provided in the

General Appropriations Act and whenever in his judgment the public interest so requires,the President, upon notice to the head of office concerned, is authorized to suspend orotherwise stop further expenditure of funds allotted for any agency, or any other expenditureauthorized in the General Appropriations Act, except for personal services appropriationsused for permanent officials and employees.21Congress does not intend to repeal, but in fact affirms Book VI, Chapter 5, Section 38 ofthe Administrative Code which was issued by President Corazon Aquino in the exercise ofher legislative powers.


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abandonment of a project which results in unobligated portions or balances of appropriations.

Thus, withdrawn unobligated allotments are savings under the GAA. These arefunds that remain unspent and unobligated because the project has been

discontinued or abandoned. These are also funds that are unused and free fromany obligation or encumbrance. As such, the President can either use them to

augment items in the GAA under Article VI, Section 25(5) of the Constitution

and Book VI, Chapter 5, Section 39 of the Administrative Code or retain themso that they may be reverted to the National Treasury (following Book VI,

Chapter 4, Section 28 of the Administrative Code) at the end of the year or the

end of validity of the appropriation, i.e, one, two, or three years. For the

Honorable Court to declare that they should only go to the National Treasury

would be to violate the authorization given by Congress to the President to use

such savings if he deems proper.

39. To require that savings may only be incurred at or near the end ofthe year (or the validity of the appropriation) and then mandate that all year-

end savings must go to the National Treasury is to operationally defeat the

Presidents power to augment. If savings can only be declared near the end of

any given year, such as November, this would mean that the President will have

to allow public funds to be idle and languish for months while some projects

are not moving and then hurriedly augment from November to December,

after which time what is left is reverted to the National Treasury. The conceptbehind having an Administrative Code is to provide legislative sanction for the

exercise of administrative discretion so as to empower executive officials with

authority to act effectively given their knowledge of what happens on the

ground.

40. There is no requirement that the Executive should generatesavings only so that they may be reverted to the General Fund at the end of the

fiscal year. Book VI, Chapter 4, Section 28 of the Administrative Code providesno such requirement and does not incorporate such a policy. For the

Honorable Court to declare that they should only go to the National Treasury

would be to violate the authorization given by Congress to the President to use

such savings as he deems proper. Such declaration would also intrude into the

Presidents prerogative to decide, as the economic manager of this country,

whether to adopt fiscal austerity or stimulus measures.

41. The lifespan of an appropriation (one, two or three years) simply

represents the maximum period for using the authorization of Congress tospend for such work, activity or project. It is logically independent of the

authorization to the Executive under Book VI, Chapter 5, Section 38 of the

Administrative Code to suspend or stop further expenditure if the public

interest so requires. The lifespan of an appropriation does not convert theExecutive into an automaton, blindly implementing projects that cannot be


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completed. The function of Book VI, Chapter 5, Section 38 of the

Administrative Code is to allow the Executive to exercise managerialprerogatives because those in the Executive are the ones familiar with the

terrain of implementing projects and activities authorized by Congress. This isalso the point of Justice Del Castillo when he said that [i]t does not follow that

the [lifespan of the appropriation] prevents the President from finally

discontinuing or abandoning such work, activity or purpose, through theexercise of the power to permanently stop further expenditure, if the public

interest so requires, under the second phrase of Section 38 of the

Administrative Code.22

2.

UNRELEASEDAPPROPRIATIONS UNDER DAPARE SAVINGS.

42. The Honorable Court held that unreleased appropriations underthe DAP are not savings because for savings to accrue, the appropriations mustfirst be released or allotted to an agency. However, the Court also said that

if an agency has unfilled positions in its plantilla and did not receive an

allotment and NCA for such vacancies, appropriations for such positions,

although unreleased, may already constitute savings for that agency under the

second instance

23

(i.e.savings from appropriation balances arising from unpaidcompensation and related costs pertaining to vacant positions and leaves of

absence without pay). This is a misunderstanding of fact and incompatible with

the Honorable Courts own practice.

43. Appropriations need not be released to the agencies before theycan be considered savings precisely because Personal Services appropriations

for unfilled positions are not released to the agencies until and unless these

positions are filled for the proper and optimal use of public funds and a request

by the department is submitted to the DBM. As per express definition in theGAA, these are already savings. As an exception, unfilled positions for CFAG

are released simplybecause of their fiscally autonomous status.

44. Thus, whether in the Executive or the CFAG, (which includes theHonorable Court), it is not the status of appropriations as released or unreleased that makes

them available for use as savings, but the fact that the allocations for positions under Personal

Services are vacant or unfilled and therefore unspent. We reiterate the basic concept

money unspent is savings is what animates the entire augmentationframework of the Executive and Congress. The explanation is simple, if you

did not hire anyone for three months, the salary of that unhired employee is

22Concurring and Dissenting Opinion, Associate Justice Del Castillo, p. 21.23Decision, p. 60.


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savings whether the appropriation is with the DBM or another agency, or the

Honorable Court.

45.

Under the DAP, unreleased appropriations mostly pertain toappropriations for personnel services arising from unfilled positions from the

plantillaof government offices. To reiterate, under the Honorable Courts own

ruling in this case and in Sanchez v. Commission on Audit,24 the unreleased

appropriations under the DAP are savings because they pertain to

appropriation balances arising from unpaid compensation and related costs

pertaining to vacant positions and leaves of absence without pay.

46.

It is incorrect to generalize and rule that appropriations must firstbe released before there can be savings. Nowhere in the Constitution, the

GAA or in any other law is the release of appropriations a precondition for

the generation of savings. This Honorable Court itself has held that

appropriation balances from unfilled positions and leaves of absence without

pay are savings although unreleased. To hold, on one hand, that release of

appropriations is a prerequisite for the generation of savings, and on the other,

that appropriation balances from unfilled positions and leaves of absencewithout pay are savings although unreleasedis contradictory.

3.SAVINGS FROM WITHDRAWN UNOBLIGATEDALLOTMENTS AND

UNRELEASEDAPPROPRIATIONS MAY BE USED FORAUGMENTATION.

Sections 38 and 39 of the Administrative

Code and the GAA are the operative

augmentation clauses.

47. Since the withdrawn unobligated allotments and unreleasedappropriations under the DAP are savings, the President is authorized under

the GAA to use such savings to augment an appropriation, with a program,

activity or projectwhich upon implementation or subsequent evaluation of

needed resources, is determined to be deficient. The GAA, in relation to

Article VI, Section 25(5) of the Constitution, authorizes the President to fund

his priority or fast-moving projects in the GAA by augmenting deficient

appropriations.

24 In Sanchez v. COA, supra note 7, the Honorable Court expressly recognized the use ofappropriations for personnel services for incurring savings when it declared that the ChiefJustice himself transfers funds only when there are actual savings, e.g., from unfilledpositions in the Judiciary.


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48. Book VI, Chapter 5, Section 39 of the Administrative Codeauthorizes the President to approve the use of savings to cover any deficit in

any other item of the regular appropriations.It reads:

Section 39.Authority to Use Savings in Appropriations to Cover Deficits. - Except as

otherwise provided in the General Appropriations Act, any savings in the

regular appropriations authorized in the General Appropriations Act for

programs and projects of any department, office or agency, may, with the

approval of the President, be used to cover a deficit in any other item of the

regular appropriations: provided, that the creation of new positions or

increase of salaries shall not be allowed to be funded from budgetary savings

except when specifically authorized by law: provided, further, that whenever

authorized positions are transferred from one program or project to another

within the same department, office or agency, the corresponding amountsappropriated for personal services are also deemed transferred, without,

however increasing the total outlay for personal services of the department,

office or agency concerned.

49. Book VI, Chapter 5, Section 39 of the Administrative Code is thestanding authority issued by Congress to the President to augment deficient

items. This is supplemented by the relevant provisions of the GAA which,

apart from providing the authority to augment, also defines savings.

50. The Presidents exercise of his authority to stop the furtherexpenditure of funds for slow-moving projects is anchored on his reasonable

determination of public interest.This broad standard is an ordinary form of

delegation by Congress to the Executive, found in many statutes,25 which is

usually indicative of an understandable recognition by Congress of the need to

provide the Executive as much leeway as possible in making judgments basedon facts on the ground.

51. Article VI, Section 25(5) of the Constitution, and Book VI, Chapter 5,Sections 38 and 39 of the Administrative Code constitute a coherent whole providing a

framework for which the economic managers of the nation may pull various levers in the form

of authorization from Congress to efficiently steer the economy towards the specific and general

purposes of the GAA.With respect, the Decision of this Honorable Court impairs

this coherent framework.

25R.A No. 7875, as amended by R.A. 10606; R.A. No. 10173; R.A. No. 10071.


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B.ALL DAP APPLICATIONS HAVE APPROPRIATION COVER.

The Court overlooked the basic distinctionbetween an item and an allotment class.

52. The Honorable Court generalized: savings pooled under theDAP were allocated to PAPs [Program, Activity and Project] that were notcovered by any appropriations in the pertinent GAA.26It cited the DREAM

project and the Establishment of the Advanced Failure Analysis Laboratory as

examples of augmentation without proper appropriation cover. In support of

this conclusion, it held that the failure of the GAAs to set aside any amountsfor an expense categorysufficiently indicated that Congress purposely did not seefit to fund, much less implement, the PAP concerned.27

53. These are incorrect statements. The Honorable Court mixed twoimportant and entirely distinct concepts: item and allotment class. In Gonzales v.

Macaraig,28 the Honorable Court defined an item as referring to (1) the

particulars, the details, the distinct and severable parts . . . of the bill; (2) anindivisible sum of money dedicated to a stated purpose; and (3) a specific

appropriation of money. An allotment class, on the other hand, refers to theexpense category of the item, such as Personal Services, Maintenance and

Other Operating Expenses, and Capital Outlay.

54. What Article VI, Section 25(5) of the Constitution requires is thatthe augmentation by the President and other constitutional officers shall be for

any itemin the general appropriations law for their respective offices.29Whatis actually augmented is the item, and not an allotment class or expensecategory. Thus, the litmus test for whether or not an augmentation has anappropriation cover is the presence or absence of an item in the GAA. This is

because it is the item, not the allotment class, that has the description of thePAPs which the President then augments. As long as there is a certain sum of

money set apart for an item, the specified program, activity or project can beaugmented, regardless of its allotment class. In the case of the DREAM

project, that item is the Generation of new knowledge and technologies and

research capability building in priority areas identified as strategic to NationalDevelopment.

26Decision, p. 69.27Id., at 70. Italics supplied.28G.R. No. 87636, 19 November 1990.29Italics supplied.


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55. That Congress did not set any amount for a specific allotmentclass within an item does not amount to a lack of intent on the part ofCongress to fund the PAP concerned. This is because there is no constitutional

requirement for Congress to create allotment classes within an item in the firstplace, and Congress could very well remove allotment classes altogether

without impairing the Constitution so long as the item is retained. What isrequired in the GAA is for Congress to create items (in broad or particularterms) to comply with the line-item veto of the President. Again, this is basic

constitutional law.

56. In fact, just to demonstrate how the Honorable Court did notdistinguish between an item and an allotment class, and how easily the

Congress may again overturn the Honorable Courts ruling on this point, allthat Congress and the DBM need to do in the next budget cycle is to ensurethat every allotment class within an item will have at least P1 funding in order

that the President may augment every allotment class in the GAA.

57. The Constitution does not limit the amount of augmentation by the President.The Honorable Court also makes salient the fact that some augmentations

under the DAP exceeded many times over the items original appropriations, as

some augmentations proved considerable. Sheer magnitude of augmentationalone, however, is not a ground to declare the DAP or any other augmentationunconstitutional.30There is nothing in the Constitution or in the law that limits

the power to augment in terms of percentage or amount, save for the conditionthat it shall come from savings in other items of their respective

appropriations.31 The deliberations in the Constitutional Commission are

clear:

MR. SARMIENTO. I have one last question. Section 25, paragraph (5)

authorizes the Chief Justice of the Supreme Court, the Speaker of the Houseof Representatives, the President, the President of the Senate to augment any

item in the General Appropriations Law. Do we have a limit in terms of percentageas to how much they should augment any item in the General Appropriations Law?

MR. AZCUNA. The limit is not in percentage but from savings. So it is only to theextent of their savings.32

58. It is, in fact, possible that a P1 appropriation for a particular itemmay be augmented with P1 Billion, so long as the P1 Billion is part of the

savings from their respective appropriations. This Honorable Court has no

30Concurring and Dissenting Opinion of Associate Justice Del Castillo, p. 37.31CONST., Article VI, Section 25(5).32IIRECORD OF THE CONSTITUTIONAL COMMISSION, p. 111, 22 July 1986. Italics supplied.See also Concurring and Dissenting Opinion of Associate Justice Del Castillo, p. 37.


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constitutional authority to set a limit on how much the President can augment

an item.

59.

The nullification of all 116 augmentation exercises on the basis of supposederrors in two SAROs is a sweeping generalization which is factually ungrounded. TheHonorable Court found that: [a]side from this transfer under the DAP to the

DREAM project exceeding by almost 300% the appropriation by Congress forthe 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 therebysubstituted its will to that of Congress.33It cited SARO No. E-11-02253 dated22 December 201134 which allotted P43,504,024 for personnel services,

P1,164,517,589 for maintenance and other operating expenses, andP391,978,387 for capital outlays. The Court found this to be in conflict withthe 2011 GAA which appropriated an amount only for maintenance and otheroperating expenses, but nothing for personnel services and capital outlay.

60. The Honorable Courts finding is based on an incorrect factualbasis. The SARO it cited is no longer valid as there was a modification under asubsequent SARO. Under SARO No. E-11-02386 dated 29 December 2011,35

issued only seven days after the issuance of SARO No. E-11-02253, personnelservices in the amount of P43,504,024 and capital outlays in the amount ofP391,978,387, or a total amount of P435,482,411, were realigned to

maintenance and other operating expenses. Thus, the augmentations under theallotment classes personnel services and capital outlays were actually allotted to

maintenance and other operating expenses.

61. A simple cross-reference with respondents Evidence Packet 7would have avoided the Honorable Courtsmisappreciation of facts. Page 66 of

this evidence packet clearly shows that the amounts previously allotted topersonnel services and capital outlays for the DREAM project under SARO

No. E-11-02253 were transferred to maintenance and other operating expensesunder SARO No. E-11-02386.

62. The Honorable Court also found that the Establishment of theAdvanced Failure Analysis Laboratory project of the Philippine Council forIndustry, Energy and Emerging Technology Research and Development(PCIEETRD) did not have an appropriation cover because the appropriationcode and the particulars appearing in the said SARO did not correspond to the

program specified in the GAA.36 It cited SARO No. E-11-02254 dated 22

33Decision, p. 70.34Attached as Annex A.35Attached as Annex B.36Decision, p. 71.


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December 2011 where the particulars for the project were indicated as

Development, integration and coordination of the National Research Systemfor Industry, Energy and Emerging Technology and Related Fields. However,

the program specified in the 2011 GAA corresponding to the appropriationcode in the SARO (A.02.a)is Research and Management Activities.

63. This invalidation is unwarranted. What the President did was toaugment an item Research and Management Services by allotting P300

million for the Establishment of the Advanced Failure Analysis Laboratory.

This is a correct augmentation exercise because the project (Establishment ofthe Advanced Failure Analysis Laboratory) clearly and reasonably falls underthe item Research and Management Services.

64. The fact remains that a PAP with an appropriation cover haslegislative authorization. Any mistake in the wording of the SARO cannotnegate this. The validity of a certain appropriation neither depends on noraffected by mistakes in the SARO, the same being merely a budget document

created for the purpose of efficiency. We also cannot impute any malice orcorrupt motive to the error, which benefits no one. What matters is that thereis an item (Research and Management Services) which can be augmented

with a project (Establishment of the Advanced Failure Analysis Laboratory)that is reasonably connected to it.

65. Moreover, the discrepancy in the particulars in the SARO and theprogram specified in the GAA can be fully explained. In the middle of 2011, inthe implementation of their rationalization plan, the Philippine Council forIndustry and Energy Research and Development (PCIERD) and the Philippine

Council for Advanced Science and Technology Research and Development(PCASTRD), were consolidated to form the Philippine Council for Industry,

Energy and Emerging Technology Research and Development (PCIEETRD),pursuant to E.O. No. 366, s. 2004. Thus, PCIERD and PCASTRD still had

separate budgets in the 2011 GAA where the item Research andManagement can be found under PCIERD. When the SARO was issued on22 December 2011, PCIERD and PCASTRD were already merged into

PCIEETRD. Thus, the particulars appearing in the SARO as Development,integration and coordination of the National Research System for Industry,Energy and Emerging Technology and Related Fields referred to the

consolidated functions of both agencies as reflected in the 2012 NEP which

already mentions PCIEETRD. This is another error that could have beenclarified had the Honorable Court granted respondents plea to subject the 116

augmentations to a full trial instead of deciding their validity en masse withinsufficient facts.


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66. The Courts ruling that the savings pooled under the DAP wereallocated to PAPs that were not covered by any appropriations in pertinentGAAs, therefore, with the foregoing clarifications, cannot hold. On the

contrary, a careful perusal of the documentary evidence presented by thegovernment will sufficiently show the existence of appropriation covers for all

DAP-augmented projects. This is likewise clearly reiterated in the governmentsMemorandum:

67. A big part of petitioners presentation hinges on the claim

that the Executive Department invented non-existent appropriations. This

claim is irresponsible. It is refuted by respondents submissions consisting of:

(a) a list of fifteen (15) DAP applications, with corresponding SAROs and

appropriation covers, composed of projects identified in respondents

Consolidated Comment and those questioned by the petitioners in their

pleadings or during the oral arguments; and (b) a list of all DAP applications

per department/agency, with corresponding SARO numbers and

appropriation covers.

68. As shown by respondents submissions, it is the standardpractice of the DBM to itemize the details of each and every allotment thus:

a) The particular office of the government concerned;b) The PAP code or the programs, activities or projects code

under the relevant GAA;c) The SARO number of the document;d) The date of issuance of the SARO;e) The original amount of the appropriation under the relevant

GAA;f) The amount of augmentation involved; andg) The specific page of the GAA where the item may be found.

69. This unfailing adherence to particularity has a two-fold

function: (1) to ensure proper record-keeping and easy access to the history

of every specific allocation and release of funds; and (2) to provide detailed

compliance with the constitutional requirements with respect toaugmentations. The built-in PAP code, for instance, corresponds to an item

of appropriation in the GAA and ensures that all disbursements have

appropriation covers.

67. Given that respondents have clearly shown that the twoaugmentation exercises used by this Honorable Court to declare all the 116

projects under DAP as augmentations without appropriation cover are in fact

correct augmentation exercises, this Honorable Court can make the proper

clarifications.


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C.THE PRESIDENT HAS AUTHORITY TO TRANSFER SAVINGS

TO OTHER DEPARTMENTS PURSUANT TO HIS

CONSTITUTIONAL POWERS.

68. The Honorable Court stated that the plain text of Section 25(5)disallowing cross-border transfers was disobeyed. Cross-border transfers,

whether as augmentation, or as aid, were prohibited under Section 25(5).37

This is not consistent with a reasonable reading of the text, history, and

structure of the Constitution. A reasonable reading of the constitutional

provision leads to an alternative interpretations that justifies the transfer of

savings to other departments under limited conditions.

69. The Executives reading of Article VI, Section 25(5) of theConstitution justifies the transfer of savings to other departments. It is

grounded on the text of the Constitution, the practice of past presidents, and

consistent with the role of a Chief Executive.

70. Article VI, Section 25(5) of the Constitution provides:

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.

71. The first clause prohibits the transfer of appropriations. As anexception, the second clause allows constitutional officers to use savings to

augment items in their respective appropriations. This authority was put inplace to give these officers some flexibility in executing their own budgets to

enable them to respond to various circumstances.

72. Appropriations and savings are two different, independent constitutionalconcepts.An appropriation is defined as an authorization made by law or other

legislative enactment, directing payment out of government funds under

specified conditions or for specified purposes.38Appropriations usually come

in the form of items in the budget particularized in the form of PAPs. They

exist from the time of the passage of the GAA, and remain valid for the periodprovided for by law. Savings, on the other hand, are appropriations balances,

as defined by Congress pursuant to its authority under Article VI, Section

37Id., at77.38ADMINISTRATIVE CODE, Book VI, Chapter 1, Section 2(1).


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25(5). They therefore exist only when the requirements under the general

provisions of the GAA are met. The moment an appropriation incurs a balance, itsconstitutional character may be qualitatively altered into savingsfunds that can be used for

purposes other than the original appropriation.

73. While Article VI, Section 25(5) prohibits the transfer ofappropriations, it does not prohibit the transfer of savings. At the same

time, while the second clause allows unilateral, intra-departmental

augmentations, it prohibits unilateral, inter-departmental augmentations. Thus,

the President may use savings to unilaterally augment items in the Executive

department, but he cannot, on his own, ascertain the existence of a deficiency

in an item of appropriation in another department, and augment that

deficiency.

74. The Constitution does not prevent the President fromtransferring 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 beapplied by that department whose fiscal autonomy is guaranteed by the

Constitution.

75. We submit that this is an instance of a benign and necessaryinteraction between interdependent departments, grounded in our

constitutional tradition. In fact, Presidents under the 1987 Constitution have,

from time to time, assisted other departments of government with the use of

savings from the Executive department. Respondents have previously attached

as part of their Evidence Packets, evidence of such cross-border transfers over

the years, including those to the judiciary.

76. It is in this manner that the so-called cross-border transfersshould be understood. In relation to the DAP, the President made available to

the Commission on Audit (COA) 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. In any case, these

augmentations had the effect of even empowering institutions of government

that have oversight functions over the Executive.

77. This understanding of the Constitution is not exclusive to thepolitical branches of government. Documentary evidence exists to show that

the Supreme Court itself has (1) approved the allocation of amounts from its

savings to augment an item within the Executive and (2) sought funds from the


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Executive for transfer to the Judiciary. These practices validate respondents

theory of benign and necessary interdepartmental augmentations.

78.

On 17 July 2012, when Justice Antonio T. Carpio was ActingChief Justice, the Supreme Court en bancissued a Resolution in A.M. No. 12-7-

14-SC,39which reads:

The Court Resolved to APPROVE the allocation, from existing

savings of the Court, of the following amounts for the construction of

courthouses:

1. Manila Hall of Justice (120 courts) P1,865,000,000.002. Cebu Court of Appeals Building 266,950,000.003.

Cagayan de Oro Court of Appeals Building 251,270,000.00TOTAL P2,383,220,000.00

The foregoing amounts are hereby set aside and earmarked for the

construction costs of the said buildings.

79. As can be gleaned from the above Resolution, the Supreme Courtearmarked its existing savings of P1.865 billion to augment the P100 million

budget for the Manila Hall of Justice, which is an item (B.I.d.Civil Works

and Construction Design for the Manila Hall of Justice)

40

in the 2012 budgetof the Department of Justice-Office of the Secretary, which is within the

Executive Department. This is an example of the benign and necessary

interaction between interdependent departments. Obviously, the Supreme

Court has an interest in the construction of Halls of Justice, and no one can say

that this cross-border augmentation was a means by which the judiciary tried to

co-opt the Executive.

80. Moreover, on 05 March 2013, the Supreme Court en bancissued a

Resolution in A.M. No. 13-1-4-SC,41the dispositive portion of which reads:

WHEREFORE, the Court hereby requests the Department ofBudget and Management to approve the transfer of the amount of One

Hundred Million Pesos (P100,000,000.00) which was included in the DOJ-

JUSIP budget for Fiscal Year 2012 for the Manila Hall of Justice to the

budget of the Judiciary, subject to existing budgeting policies and procedures,

to be used for the construction of the Malabon Hall of Justice.

81.

In the above Resolution, the Supreme Court requested the DBMto transfer the 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

39Attached as C.402012 GAA, p. 610.41Attached as Annex D.


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the Malabon 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 2012GAA 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.

82. When the petitions were filed and while they were being heard,Chief Justice Sereno, in a letter dated 23 December 2013,42informed the DBM

that the Supreme Court was withdrawing its request to realign the P100 million

intended for the Manila Hall of Justice to the budget of the Judiciary. These

two instances show both cross-border transfers on the part of the Supreme

Court(a) the augmentation of an item in the Executive from funds in the

Judiciary; and (b) the transfer of funds from the Executive to the Supreme

Court, whether or not for purposes of augmentation.

83. With all due respect, this is by no means a disapprobation of theHonorable Court. But it does serve to highlight the fact that the Honorable

Courts practice was based on an understanding of the constitutional provision

that coincides with the governments.

84. To be sure, the changes to the 1987 Constitution were made to

prevent one department from co-opting the other departments by transferringfunds to them in exchange for concessions or political favors. In this case, the

fact that the transfers were few and far between and made only under the mostexigent of circumstances and upon the request of other departmentsshows that the

President has not committed the evil the Constitution seeks to eradicate and

that he has remained true to the policy of Article VI, Section 25(5) of the

Constitution.

85.

This practice of cross-border transfers was not begun byPresident Aquino, as in fact Presidents under the 1987 ConstitutionFidel V.

Ramos, Joseph E. Estrada, and Gloria Macapagal-Arroyohave, from time to

time, transferred savings to the other departments. This history of transfers

forms part of Annex B of the governments Compliance dated 14 February

2014.

86. The President, informed by the long-standing practice of his predecessors, andreinforced by his own reasonable reading of the constitutional provision, made the decision to

transfer savings of the Executive Department to the other departments. These transfers werenot made haphazardly and were only approved after careful consideration of the needs of the

government. Far from being a violation of the Constitution, much less a culpable violation of

the Constitution, this is a reasonable reading of the text of the Constitution, informed by

42Attached as Annex E.


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previous presidential, legislative and judicial exercises, and impelled by the need to respond to

the requests of other departments.

D.THE 2011, 2012 AND 2013 GAAS ONLY REQUIRE THAT

REVENUE COLLECTIONS FROM EACH SOURCE OF REVENUEENUMERATED IN THE BUDGET PROPOSAL MUST EXCEED

THE CORRESPONDING REVENUE TARGET.

87. The Honorable Court ruled that revenue collections must exceedthe total of the revenue targets stated in the Budget for Expenditures and

Sources of Financing (BESF) before expenditures under the UnprogrammedFund can be made.43This is incorrect not only because this is not what those

who wrote the itemthe DBMintended, which intention was ratified by

Congress over the years, but also because such interpretation defeats the

purpose of creating the Unprogrammed Fund.

88. This interpretation is incorrect, for a simple reason: everybodyknows that the governments total revenue collections have never exceeded the

total original revenue targets. Certainly, the governmentthe Executive and

the Legislaturewould never have created the Unprogrammed Fund as arevenue source if, apart from newly-approved loans for foreign-assisted project,

it would have never been available for use.The effect of the Honorable Courts

interpretation is to effectively nullify the Unprogrammed Fund for the years

2011 to 2013. Certainly, the Executive would not have proposed billions of pesos44underthe Unprogrammed Fund in the NEP, and Congress would not have provided for said

appropriation in the GAA, with the intention that it can never be implemented.

89.

Because we are not interpreting the Constitution with respect tothe meaning of the Unprogrammed Fund, with respect, it is incorrect for the

Honorable Court to reject the interpretation placed by those who actually

wrote the item for the Unprogrammed Fund. What is the purpose to be served

in nullifying the intention of the authors of the Unprogrammed Fund, which

intention was effectively ratified by Congress over the course of several years?

In the absence of a violation of the Constitution, this Honorable Court should

not reject the Executive departments reading of the provisions of the

Unprogrammed Fund which it co-authored with Congress.

90. The text is clear: excess revenue collections refer to the excess ofactual revenue collections over estimated revenue targets, not the difference

43Decision, p. 82.44 P66,908,492,000 under the 2011 GAA; P152,821,845,000 under the 2012 GAA; andP117,548,371,000 under the 2013 GAA.


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between revenue collections and expenditures. The 2011, 2012 and 2013 GAAs

only require that revenue collections from each sourceof revenueenumerated in thebudget proposal must exceed the corresponding revenue target.

91. To illustrate, under the 2011 BESF, the estimated revenues to becollected from dividends from shares of stock in government-owned and

controlled corporations is P5.5 billion. By 31 January 2011, the National

Government had already collected dividend income in the amount of P23.8

billion.45 In such case, the difference between the revenues collected (P23.8

billion) and the revenue target (P5.5) becomes excess revenue which can be

used to fund the purposes under the Unprogrammed Fund.

92. The provisions of the Unprogrammed Fund under the relevantGAAS provide

2011 GAA

Special Provision(s)

1. Release of Fund. The amounts authorized herein shall be releasedonly when the revenue collections exceed the original revenue targets

submitted by the President of the Philippines to Congress pursuant to Section22, Article VII of the Constitution, including savings generated from

programmed appropriations for the year: PROVIDED, That collections

arising from sources not considered in the aforesaid original revenue targets

may be used to cover releases from appropriations in this Fund: PROVIDED,

FURTHER, That in case of newly approved loans for foreign-assisted

projects, the existence of a perfected loan agreement for the purpose shall be

sufficient basis for the issuance of a SARO covering the loan proceeds:

PROVIDED, FURTHERMORE, That if there are savings generated fromthe programmed appropriations for the first two quarters of the year, the

DBM may, subject to the approval of the President, release the pertinent

appropriations under the Unprogrammed Fund corresponding to only fifty

percent (50%) of the said savings net of revenue shortfall: PROVIDED,

FINALLY, That the release of the balance of the total savings from

programmed appropriations for the year shall be subject to fiscal

programming and approval of the President.

2012 GAA


1. Release of the Fund. The amounts authorized herein shall be releasedonly when the revenue collections exceed the original revenue targetssubmitted by the President of the Philippines to Congress pursuant to Section

22, Article VII of the Constitution: PROVIDED, That collections arising

from sources not considered in the aforesaid original revenue targets may be

45SeeCertification dated 04 March 2011 signed by Department of Finance UndersecretaryGil S. Beltran.


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used to cover releases from appropriations in this Fund: PROVIDED,

FURTHER, That in case of newly approved loans for foreign-assisted

projects, the existence of a perfected loan agreement for the purpose shall be

sufficient basis for the issuance of a SARO covering the loan proceeds.

2013 GAA


1. Release of the Fund. The amounts authorized herein shall be releasedonly when the revenue collections exceed the original revenue targetssubmitted by the President of the Philippines to Congress pursuant to Section

22, Article VII of the Constitution, including collections arising from sources

not considered in the aforesaid original revenue targets, as certified by the

BTr: PROVIDED, That in case of newly approved loans for foreign-assisted

projects, the existence of a perfected loan agreement for the purpose shall besufficient basis for the issuance of a SARO covering the loan proceeds.46

93. Apart from the fact that the Honorable Courts interpretationwould render much of the Unprogrammed Fund useless, the text of the special

provision referring to the Unprogrammed Fund supports the governments

intention and interpretation: (1) if the provision was meant to refer to aggregate

amounts, it would have used the word total or the phrase only when the

revenue collection exceeds the original revenue target;(2) the phrase original

revenue targetsclearly indicates a plurality of revenue targets with which the

revenue collections must be matched.

94. The impracticality of the interpretation espoused by the Honorable Court isfurther highlighted by the fact that the actual total revenue collections cannot be determined

before the close of the fiscal year.The Bureau of Treasury (BTr) has to reconcile first

its estimated revenue collections with the actual revenues collected by the Bureau

of Internal Revenue, Bureau of Customs, and other agencies, as of December

31. Thereafter, the BTr prepares a cash operations report, which issubsequently audited by COA. Thus, the BTr cannot issue a certification that

the actual total revenue collections exceed the total of the revenue targets

before the cash operations report is approved by COA. This process, which

obviously cannot be started until after December 31, is usually completed

around March of the next fiscal year, in which case, even if by some miracle thetotal revenue collections are found to exceed the total of the revenue targets,

the excess revenue collections can no longer be released as they are deemed

reverted to the unappropriated surplus of the General Fund and are no longer

available for expenditure except by subsequent legislative enactment.

46Emphasis supplied.


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95. It is a general rule of statutory construction that a law should notbe so construed as to produce an absurd result.47An interpretation should, if

possible, be avoided under which a provision being construed is defeated,

nullified, destroyed, emasculated, repealed, or rendered insignificant,meaningless, inoperative, or nugatory.48 As recognized in the decision, theUnprogrammed Fund functions as a standby appropriation to support

additional expenditures for certain priority PAPs.49It is included in the GAA

to provide ready cover so as not to delay the implementation of the PAPs

should new or additional revenue sources be realized during the year. 50 By

providing for the Unprogrammed Fund in the GAA, Congress has allowed the

Executive flexibility to use additional funds brought about by good fiscal

management or some contingent event, without need of returning to Congress

to obtain authorization to spend such funds. The GAA should therefore bereasonably construed to give effect to such legislative intent and avoid an

absurd result. This is the DBMs intention when it proposed the language of

the Unprogrammed Fund. The Congress approved such language.

96. A revenue surplus is not a condition precedent for the release of revenuecollections from sources not originally considered in the budget proposal. In general,expenditures under the Unprogrammed Fund are authorized if there are:

a)

Revenue collections in excess of the original revenue targetsin the budget proposal submitted by the President toCongress;

b) Revenue collections from sources not originally consideredin the budget proposal; and

c) Newly-approved loans for foreign-assisted projects that wereobtained.

97. The above items are independent of one another. Thus, a revenuesurplus is not a condition precedent for the release of revenue collections

from sources not originally considered in the budget proposal. Likewise, these

revenue collections from sources not originally considered in the budget

proposal should not be taken into account in determining if the revenue

collections exceed the original revenue targets.

98. Under the 2011 and 2012 GAAs, the phrase collections arising

from sources not considered in the aforesaid original revenue targets may be

47Lim v. The Insular Collector of Customs, G.R. No. L-11759, 16 March 1917.48 Civil Service Commission v. Department of Budget and Management, G.R. No. 158791, 22 July2005.49Decision, p. 82.50Id.


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used to cover releases from appropriations in this Fund is contained in a

proviso, making it a separate and distinct condition from the phrase revenue

collections exceed the original revenue targets submitted by the President of

the Philippines to Congress. As correctly pointed out by Justice Del Castillo

These provisos should be reasonably construed as exceptions to the general

rule that revenue collections should exceed the original revenue targets

because of the plain meaning of the word provided and the tenor of the

wording of these provisos. Further, in both the 2011 and 2012 GAA

provisions, the phrase may be used to cover releases from appropriations in

this Fund in the first provisois essentially of the same meaning as the phrase

shall be sufficient basis for the issuance of a SARO covering the loan

proceeds in the secondprovisobecause, precisely, the SARO is the authority

to incur obligations. In other words, both phrases pertain to theauthorization to release funds under the Unprogrammed Fund when the

conditions therein are met even if the revenue collections do not exceed the

original revenue targets.51

The various provisions in the GAA confirm Justice Del Castillos position that

the word PROVIDED operates to introduce an exception.

99. Under the 2013 GAA, the phrase collections arising fromsources not considered in the original revenue targets is no longer contained

in a proviso

1. Release of the Fund. The amounts authorized herein shall be released

only when the revenue collections exceed the original revenue targets

submitted by the President of the Philippines to Congressincluding

collections arising from sources not considered in the original revenue

targets52

100. The Honorable Court finds this as an explicit mandate that theadditional revenues from sources not considered in the BESFs must be taken

into account in determining if the revenue collections exceeded the original

revenue targets.53

101. With due respect, the interpretation espoused by the HonorableCourt leads to the conclusion that the revenue targets should be considered as a

wholea consequence, which, as previously discussed, could not have been

intended by the Executive and Congress.

51Concurring and Dissenting Opinion of Associate Justice Del Castillo, p. 43.52Italics supplied.53Decision, p. 80.


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102. Although under the 2013 GAA the phrase collections arisingfrom sources not considered in the original revenue targets is no longercontained in a proviso, it remains distinct from the phrase revenue collections

exceed the original revenue targets submitted by the President of thePhilippines to Congress This is because the word including pertains tothe amounts authorized, such that the amounts authorized under the

Unprogrammed Fund includecollections arising from sources not considered in

the original revenue targets. This is a reasonable construction that will

effectuate the intention of both the Executive and Congress and avoid an

absurd result.

103. Finally, if only to finally settle the issues (1) whether a revenuesurplus is a condition precedent for the release of revenues from sources notoriginally considered, and (2) whether revenues from sources not originally

considered are an independent source of funding for the Unprogrammed Fund,

we invite the Honorable Courts attention to the 2014 GAA


1. Release of the Fund. The amounts authorized herein shall bereleased only when the revenue collections exceed the original revenue

targetssubmitted by the President of the Philippines to Congress pursuantto Section 22, Article VII of the Constitution, as certified by the BTr:

PROVIDED, That in case of newly approved loans for foreign-assistedprojects, the existence of a perfected loan agreement for the purpose shall be

sufficient basis for the issuance of a SARO covering the loan proceeds:

PROVIDED, FURTHER, That the release of Unprogrammed Fund shall be

subject to Section 63 of the General Provisions of this Act.

Implementation of this provision shall be subject to guidelines to be

jointly issued by the DBM, DOF and BTr.

. 4. Reconstruction and Rehabilitation Program. The amount of Eighty

Billion Pesos (P80,000,000,000) appropriated herein for Reconstruction and

Rehabilitation Program shall be released in accordance with a rehabilitation

plan and shall be subject to Section 63 of the General Provisions of this Act:

PROVIDED, That collections arising from sources not considered inthe aforesaid original revenue targets, proceeds from grants, loans for therepair and rehabilitation of calamity stricken areas, and subject to the

approval of the President, savings generated from the programmed

appropriations in this Act may be released to cover the appropriations herein

provided.

54

104. Clearly, under the present GAA, collections arising from sourcesnot considered in the aforesaid original revenue targets are an independent

54Emphasis supplied.


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source of funding for the release of the Unprogrammed Fund and do not

depend on the existence of a revenue surplus. If we are to follow theHonorable Courts interpretation, this would effectively deprive millions of

Filipinos access to funds for reconstruction and rehabilitation.

E.THE OPERATIVE FACT DOCTRINE WAS WRONGLY APPLIED.

105. Since the start of the controversy in late 2013, the DBM has beenreleasing information to the public on the legal bases and policy justifications

for the DAP. During the proceedings before this Honorable Court,

respondents, which include the DBM and the Office of the President,demonstrated the legal and constitutional bases of DAP through its

Consolidated Comment dated 07 November 2013, and have offered, at their

own instance, factual information on the application of DAP despite the

palpable insufficiency of the petitions.

106. The DBM and the Office of the President necessarily interpretapplicable laws in implementing the budget. They are government agencies

which have the institutional competence in interpreting these laws informed as

they are by the knowledge of implementing the budget. Even an incorrect legalinterpretation by these agencies does not warrant a penalty, because they are

presumed to have adopted the interpretation which best aids their

responsibility of executing the budget.

107. This Honorable Court itself stated in the decision that thedoctrine of operative fact is resorted to only as a matter of equity and fair

play.55In Planters Products, Inc. v. Fertiphil Corporation,56this Court held that this

doctrine nullifies the effects of an unconstitutional law by recognizing that theexistence of a statute prior to a determination of its unconstitutionality is an

operative fact and may have consequences which cannot always be ignored.

This is because [i]t wou

Documents

DAP Motion for Reconsideration