Press Release
November 18, 2014

By: Senator Francis G. Escudero
Chairman, Committee on Finance

"FY 2015 National Budget: Walking a Tightrope"

As the year draws to a close, the Congress of the Philippines is once more mandated by the Constitution to enact a national budget for the ensuing year. Section 29(1), Article VI of the Constitution provides that "No money shall be paid out of the Treasury except in pursuance of an appropriation by law." And so today I rise to sponsor, as Chairman of your Committee on Finance, the General Appropriations Bill for Fiscal Year 2015.

Mr. President, distinguished colleagues ... much has been said about the vaunted legislative power of the purse. Still a question begs to be asked -- is such power of the purse a FACT or a MYTH? Does this power actually reside in the hands of Congress? Why the veritable tug of war with the Executive branch for the privilege ofholding the purse-strings?

And why the need for a tightrope balancing act in the execution of the FY 2015 national budget, particularly with respect to the Supreme Court decision on the controversial Disbursement Acceleration Program?

First ... the facts.About a year ago, the legislative mill almost grinded to a halt when the Supreme Court decision on the unconstitutionality of the Priority Development Assistance Fund (PDAF) or the pork barrel system radically altered the budget landscape. Declared as unconstitutional by the High Court were the following, and I quote:

a) the entire 2013 PDAF Article;

b) all legal provisions of past and present Congressional Pork Barrel Laws, such as the previous PDAF and CDF Articles and the various Congressional Insertions which authorize/d legislators - whether individually or collectively organized into committees - to intervene, assume or participate in any of the various post-enactment stages of the budget execution, such as but not limited to the areas of project identification, modification and revision of project identification, fund release and/or fund realignment, unrelated to the power of congressional oversight;

c) all legal provisions of past and present Congressional Pork Barrel Laws, such as the previous PDAF and CDF Articles and the various Congressional Insertions which confer/red personal, lump-sum allocations to legislators from which they are able to fund specific projects which they themselves determine;

d) all informal practices of similar import and effect, which the Court similarly deems to be acts of grave abuse of discretion amounting to lack or excess of jurisdiction; and

e) the phrase (1) "and for such other purposes as may be hereafter directed by the President" under Section 8 of Presidential Decree No. 910 and (2) "to finance the priority infrastructures development projects" under Section 12 of Presidential Decree No. 1869, as amended by Presidential Decree No. 1993, for both failing the sufficient standard test in violation of the principle of non-delegability of legislative power.

Mr. President, barely half a year after the controversial Supreme Court decision scrapping the pork barrel system in the national budget, the equally contentious jurisprudence on the Disbursement Acceleration Program, a.k.a. the infamous DAP, emerged out of the hallowed chambers of the highest court in the land.

The 92-page court en banc decision penned by Justice Lucas P. Bersamin ruled that there are three (3) acts and practices under the DAP which are deemed "UNCONSTITUTIONAL for being in violation of Section 25(5), Article VI of the 1987 Constitution and the doctrine of separation of powers."

First. The withdrawal of unobligated allotments from the implementing agencies, including the declaration of the withdrawn unobligated allotments and unreleased appropriations as savings prior to the end of the fiscal year, without complying with the statutory definition of savings contained in the General Appropriations Acts (GAA).

Second. The cross-border transfer of the savings of the Executive to augment the appropriations of other offices outside the Executive.

Third.The funding of projects, activities, and programs that were not covered by any appropriation in the GAA. The law prohibits the augmentation of a non-existent program, activity, or project with an appropriation in terms of specific allotment classes, either Personal Services, Maintenance and other Operating Expenses, and/or Capital Outlays within the subject GAA.

Apart from these three acts, the Court further declared VOID "the use of unprogrammed funds despite the absence of a certification by the National Treasurer that the revenue collections exceeded the revenue targets for non-compliance with the conditions provided in the relevant GAAs."

To be sure Mr. President, this landmark decision will significantly alter the budget landscape if Congress is to make the 2015 GAA compliant with the Supreme Court decision. After all, this controversial ruling upheld the legislative power of the purse by clipping thepower of the President to unilaterally realign savings in the national budget to any item, whether in the executive, legislative, or judiciary, sans any legislative imprimatur.

Adjustments will have to be made by Congress to correct and rectify things, and certain processes will have to be implemented to hasten and facilitate the implementation of projects without violating the Supreme Court decision, and yet without impairing the Executive branch's need for flexibility in the budget execution phase --- just like treading a veritable tightrope, if I may say so. If and when these adjustments are effected, Mr. President, only then can weperhaps say that the legislative power of the purse is a myth no more.

The President's Budget: Toward Inclusive and Sustained Development

Quoting the Department of Budget and Management verbatim, "The Aquino administration crafted this proposed P2.606 trillion National Budget for 2015 anchored on the premise that no one, especially the poor and vulnerable, should be left behind. Through this Budget, the government intensifies its investments in priority programs and projects that seek to achieve Inclusive and Sustained Development."

The President's proposed budget for FY 2015 under the National Expenditure Program amounts to P2.606 trillion, reflecting an increase of P341.372 billion or 15.07% higher than the Fiscal Year 2014 budget. It is anchored on a real GDP projection of 7-8%, an inflation rate of 2-4%, 364-day T-Bill rate of 2-4%, and a foreign exchange rate of P42-45 to a dollar.

Total Revenues amounting to P2.337 trillion will finance the proposed 2015 national budget, representing a Revenue Effort of 16.5% and a growth rate of 15.8%. Tax Revenues, in particular, is targeted at P2.194 trillion, representing a Tax Effort of 15.5%.

The Revenue Program for 2015 includes incremental revenues of P50.63 billion from R.A. No. 10351 or the Sin Tax Reform Law of 2012.

In terms of the distribution by sector, the biggest share of 37.1% is allotted for Social Services, which has registered the highest increase among the sectors for the past four consecutive years due to the substantial increases for the Conditional Cash Transfer Program and the increasing allocation for education. Economic Services, with a share of 26.9%, constitutes the 2nd highest portion, 48% of which will be allotted for the sub-sector of communications, roads and other transport.

General Public Services will acquire the next highest share at 16.2%, followed by Debt Burden which will obtain 15.3% of the total budget. Although the Defense Sector will get the lowest share at 4.4%, it will reflect the highest percentage increase at 29% inclusive of an additional P25.988 billion for the General Headquarters, AFP and AFW-Wide Service Support units for its modernization program and an additional P9.497 billion to be sourced from the Miscellaneous Personnel Benefits Fund (MPBF).

The House-approved Budget

The House of Representatives approved on third and final reading House Bill 4968appropriating a P2.606 trillion national budget last October 29,2014, taking into consideration some of the errata submitted by the DBM which consisted of realignments within and among agencies amounting to P43,645,148,000.

A comparative analysis of the General Appropriations Bill (GAB) will similarly show that a total of P19,827,233,000 was realigned within and among the agencies.Total New Appropriations still stands at P1.862trillion, at exactly the same level as the FY 2015 NEP.

A major contention in the Supreme Court decision on the Disbursement Acceleration Program (DAP) is the definition of Savings. Taking off from the definition in the FY 2015 NEP, the House of Representatives defined Savings as portions or balances of any programmed appropriations in the GAA which have not been released or obligated due to four instances, to wit:

a) Discontinuance or abandonment of the program, activity, or project (P/A/P) as a result of natural or man-made calamities that hindered the agency from implementing the said P/A/P at any time during the validity of the appropriations;

b) Non-commencement of the P/A/P or the inability of the agency to obligate a released appropriation within the first semester of the year;

c) Decreased cost due to improved efficiency during the implementation or after the completion of the P/A/Ps; and

d) Difference between the approved budget for the contract and the contract bid price. Savings may also result from unused compensation and related costsarising from unfilled, vacant or abolished position, non-entitlement to allowance and benefits, and leaves of absences without pay.

Augmentation, on the other hand, is defined as the act of filling up a deficiency in any existing P/A/P of an agency or office from savings in other items of the said agency's appropriations, and therefore, a non-existent P/A/P cannot be funded by augmentation from savings.

Other significant special and/or general provisions amended or created by the House include the following:

  • Special provisions of lump sum funds which states that savings from the said funds are deemed the savings of the Executive Branch were amended to make it available to all three branches of the government including Constitutional Offices;

  • Special Provisions on unfilled positions, which provide that the unexpended amount for unfilled positions will revert to the unappropriated surplus for those agencies with fiscal autonomy, were deleted.

  • The Validity of the MOOE and Capital Outlays were extended to another year.

  • Special Provision on the Provision and Maintenance of Basic Educational Facilities was amended to reflect changes in the distribution of the appropriations and the inclusion of an amount for the annual payment of school buildings constructed by the NHA. Likewise, the said provision also allows the DepEd to deduct a 0.5% engineering and administrative overhead on the project cost.

  • Social Pensions for indigent Senior Citizens was amended by deleting the condition that they should be registered in the NHTS-PR as validated by the LGUs.

Senate Amendments

After conducting a series of budget hearings, technical working group meetings and consultations with the various agencies or departments, Mr. President, Your Committee on Finance now proposes Total New Appropriations of P1,862,824,653,000.00, the same level as the National Expenditure Program and the House-approved budget. Realignments within and between agencies, however, amount to P91,821,325,000.00, P37.921 billion from Programmed New Appropriations and P53.9 billion from Unprogrammed Appropriations.

The major budgetary increases consist of the following:

  • Increase of P19 billion for the Rehabilitation and Reconstruction Program to cover past disasters including Yolanda, Glenda and Mario;

  • Increase of P3.636 billion for the Department of Education, particularly for a Feeding Program, the Quick Response Fund, and Chalk Allowance;

  • Realignment of P2.670 billion under the Information and Communications Technology Office for Free Wifi Internet in public places, to be sourced from the Digitization Empowerment Program;

  • Restoration of the House cut on DPWH amounting to P242.6 million under MFO 3 or "Maintenance and Construction Services of Other Infrastructures" and the restoration of P1.318 billion underMFO 1 or "National Road Network Services."In addition, anIncrease of P1.130 billion will be provided for the Quick Response Fund of the DPWH to bring it to P2 billion;

  • Reallocation/Restoration of P1 billion for the Philippine Children's Medical Center particularly for Hospital Modernization, to be sourced from their budget for Land Acquisition pending the Department of Justice's opinion on the land swap transaction between the DOJ and the NHA;

  • Additional P816.229 million for the Philippine Crop Insurance Service which will now total P2 billion;

  • Increase of P715.36 million for the Enterprise Information System Plan (IT for e-courts) of the Supreme Court.

An accompanying Special Provision in the Supreme Court budget provides that ... "all non-recurring appropriations herein such as, but not limited to, foreign-assisted projects and locally-funded projects, shall not form part of the Judiciary's appropriation that may not be reduced by Congress under Section 3, Article VIII of the Constitution";

  • Increase of P500 million for the Quick Response Fund of the Department of Health;

  • Increase of P421.5 million for the Bureau of Customs for Workplace Modernization and various equipment to counter the perennial problem of smuggling;

  • Additional budget of P362.472 million for the Department of National Defense as Buildings Outlay for the National Defense College of the Philippines as well as for Force Sustainment or Enhancement of the various Engineering Brigades of the Philippine Army, Philippine Air Force, and the Philippine Navy.

  • Increase of P300 million for the Modernization Program and Faculty Development of the Philippine Normal University;

  • Increase of P108.907 million for Jail Facilities under the Bureau of Jail Management and Penology to be sourced from the cut in Monitoring and Evaluation Cost of PAMANA and the Grassroots Participatory Program of the DILG-OSEC;

  • Realignment of P2.915 billion in the budget of the Department of Social Welfare and Development, specifically from the PantawidPamilya Pilipino Program and the KALAHI-CIDSS projects to Social Pension for Indigent Senior Citizens which will benefit 460,647 senior citizens at a total cost of P2.770 billion in line with R.A. No. 9994 or the Expanded Senior Citizens Act of 2010. Additional funding of P50 million will also be provided for theComprehensive Project for Street Children, Street Families and Indigenous Peoples-especially Badjaos, as well as an additional P95 million for Protective Services for Individuals and Families in Difficult Circumstances.

  • Increase of P15 million for the National Commission on Muslim Filipinos for the Hajj Travel Assistance and Endowment Administration Services;

Proposed Special and General Provisions

Mr. President, foremost among the proposed special and general provisions proposed by the committee is Sec. 68 on the Meaning of Savings. It is defined as the portions or balances of any released appropriations in the GAA which have not been obligated, whereas the House-approved bill does not require that the funds be released to be declared as savings, only that such funds have not been obligated.

The Senate general provision also states that savings may result from non-commencement of the P/A/P or the inability of the agency to obligate its released allotment and implement it within the period when the appropriation is valid, whereas the House version qualifies that savings also result from non-commencement of a P/A/P, meaning the inability of the agency to obligate an allotment within the first semester of the year. In the same manner, the Senate provision demands more fiscal responsibility from agencies by adding the provisoin Sec. 68 that "Programmed appropriations which have not been released or allotments not obligated due to the fault of the agency concerned shall not be considered savings and shall revert to the General Fund."

In compliance with the Supreme Court ruling on the Disbursement Acceleration Program, a new general provision on the "Meaning of Augmentation" is proposed by the committee in Sec. 69 which states that savings cannot be used to augment a non-existent P/A/P through the use of an appropriation not otherwise authorized in the subject GAA, and that the existence of an appropriation for an allotment class, whether for Personal Services, MOOE, or Capital Outlays, in a P/A/P is necessary for purposes of augmentation.

Other notable special and general provisions are as follows:

  • Deletion of Special provisions under special purpose funds which allow savings from the said funds to be made available to the Executive, Legislative, and Judicial branches of the government including Constitutional offices, in compliance with the Supreme Court decision prohibiting the cross-border transfer of savings from the Executive to the other branches of government;

  • Amendment in the Quick Response Fund (QRF) provisions of several agencies which prohibit the use of QRF for pre-disaster activities or any other purpose not authorized in the GAA, except to procure insurance policies that will cover the repair, rehabilitation, reconstruction and/or replacement of hospitals and health centers and facilities, ports, airports, rails, and schoolbuildings damaged by natural and man-made calamities and other catastrophes.

  • Amended Special Provision on the Local Government Support Fund providing the amount of P100 million to cover any deficiency in the Internal Revenue Allotment (IRA) share of the local government units (LGUs) in view of valid adjustments, changes, modifications or alterations in any of the factors affecting the computation of the IRA which occurred, including final and executor court decisions made effective during the year;

  • Detailed listing of the Farm-to-market road projects under the Department of Agriculture in Volume II-A of the GAA;

  • New Special Provision under the DepEd on the Preservation and Restoration of the existing GabaldonSchoolbuildings to promote the country's cultural heritage;

  • New Special Provision under the Department of Health on the National Health Insurance Program, allocating the sum of P37.060 billion to cover the full premium subsidy of the health insurance premium for the following: a) Indigent Families under the NHTS-PR of the DSWD; b) Existing 2014 Poor and Low Income Enrolees, other than the Indigent Families under the NHTS-PR of DSWD, enrolled under the National Health Insurance Program (NHIP) whose enrolment have been validated and renewed for 2015; c) Indigent Elected and Appointed Barangay Officials, which shall include the Punong Barangay, Members of the Sangguniang Barangay, Barangay Secretary, Barangay Treasurer, Barangay Health Workers and Barangay Tanod; and d) Senior Citizens;

  • The use of the Special Vehicle Pollution Control Fund under DOTC-OSEC, particularly the amount of P2.532 billion for air pollution control of LTO as well as the repair, rehabilitation and maintenance of the Metro Rail Transport which is considered as a pollution-free transport system;

  • Earmarking P15 million as financial assistance for the indigent Muslim Filipinos to enable them to participate in the annual celebration of the Hajj as part of the education and cultural enrichment program of the government;

  • New General Provision stipulating that the Monitoring and Evaluation Expenses of the agencies mandated to implement or oversee the implementation of programs and projects shall not exceed three percent (3%) of the project or program cost.

  • Amended General Provision setting a one-year Availability of Appropriations for the Fiscal Year 2015 GAA, i.e., until December 31, 2015.

  • Again in keeping with the Supreme Court ruling on Augmentation, the committee proposed the insertion of the following statement in Sec. 70 entitled "Rules in the Realignment of Allotment Classes and Reprioritization of Items of Appropriations which states that: "In all cases of realignment, the existence of an appropriation in the Object of Expenditure and Allotment Class is necessary for realignment."

  • Insertion of the phrase "Unless otherwise provided in a Subsequent Law" in Sec. 84 stipulating that the requirements of ARMM shall be provided in the implementation of nationwide programs;

  • A new General Provision on Reportorial Requirements stating that such shall be posted in the website of agencies for at least three (3) years;

  • Amendment in the Miscellaneous Personnel Benefits Fund and thePension and Gratuity Fund, requiring the DBM to submit, within the first quarter, to Congress the amounts allocated to the Judicial Branch, Legislative Branch, Constitutional Commissions, and the Ombudsman, and that in no case shall releases to the said offices exceed the amount submitted to Congress;

  • Amended provision under the Unprogrammed Fund earmarking P472.485 million to cover the terminal leave benefits of the Philippine Postal Corporation (Philpost) employees when they were still under the defunct Bureau of Post;

  • A new Special Provision under the Unprogrammed Fund providing appropriation cover for the release of funds previously deposited in the Bureau of Treasury for the Implementation of Remedies, including safeguard measures pursuant to R.A. No. 8800, the Safeguard Measures Act of 2000.


Mr. President, distinguished colleagues, adhering to the separation of powers of the three branches of government where the infamous DAP is concerned is akin to a tightrope balancing act, for admittedly, the DAP has its advantages and disadvantages. Despite being declared by the Supreme Court as unconstitutional and void with respect to four acts or practices, the program was, after all, instrumental in arresting our flagging economic growth by stimulating public spending radically through the national budget and allowing the Executive the needed spending flexibility in their day-to-day operations.

Still the Constitution tells us emphatically that the power of the purse belongs to Congress. It is hoped that with these proposed amendments in the Fiscal Year 2015 national budget, Congress will adhere to the ruling of the highest Court in the land and regain its Constitutionally-mandated control over the purse strings.

Indeed Mr. President, it's either walking the tightrope or plunging to the depths of national despair, eroding the recent credit rating gains that have won us plaudits in the eyes of the international community.

Thank you, Mr. President.

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