The Supreme Court declared key aspects of the Disbursement Acceleration Program (DAP) unconstitutional, limiting the President’s power to transfer funds and augment appropriations. The ruling reinforces the principle that no money can be withdrawn from the Treasury without a specific appropriation made by law, emphasizing the separation of powers between the Executive and Legislative branches. This decision protects Congress’s power of the purse and clarifies the boundaries of executive spending authority, affecting how future budgets are managed and implemented.

Executive Overreach: Did the Disbursement Acceleration Program Bypass Constitutional Limits?

This case, *Maria Carolina P. Araullo, et al. vs. Benigno Simeon C. Aquino III, et al.*, examines the constitutionality of the Disbursement Acceleration Program (DAP), a fiscal policy enacted by the Executive branch during President Benigno Aquino III’s administration. At issue was whether the DAP, designed to boost economic growth through accelerated government spending, overstepped constitutional boundaries, particularly regarding the allocation of public funds and the balance of power between the Executive and Legislative branches.

The central point of contention revolves around Section 29(1) of Article VI of the 1987 Constitution, which mandates that “[n]o money shall be paid out of the Treasury except in pursuance of an appropriation made by law.” The petitioners argued that the DAP violated this provision by allowing the Executive to allocate public money from various government agencies without proper legal appropriation, thereby infringing upon Congress’s exclusive power to make laws regarding the budget. The Executive, however, defended the DAP as a legitimate exercise of presidential authority under Section 25(5) of Article VI, which permits the transfer of funds to augment appropriations within the Executive branch.

The Supreme Court meticulously reviewed the budget system of the Philippines, tracing its evolution from the American Regime to the present. The Court emphasized that under the 1987 Constitution, judicial power extends not only to settling actual controversies but also to determining whether there has been a grave abuse of discretion on the part of any branch or instrumentality of the Government. This expanded judicial power allows the Court to review the actions of the Executive branch, ensuring compliance with constitutional mandates.

The Court acknowledged the importance of executive discretion in the budget execution phase, recognizing that the President needs flexibility to adapt to changing economic circumstances. However, this flexibility is not absolute. The President’s power to transfer funds is limited by Section 25(5) of Article VI, which requires that funds to be transferred must be savings generated from appropriations within the respective offices and that the transfer must be for the purpose of augmenting an item in the general appropriations law.

The Court found that the DAP, as implemented, violated these limitations. The Court determined that unreleased appropriations and withdrawn unobligated allotments could not be considered savings unless the purposes for which the funds were appropriated had already been satisfied or the need for such funds had ceased to exist. The Court highlighted that unreleased appropriations had not even reached the agencies concerned and, therefore, could not be considered savings. Similarly, unobligated allotments could not be indiscriminately declared as savings without determining whether the projects for which they were intended had been completed, discontinued, or abandoned.

Moreover, the Court found that the DAP involved cross-border transfers of funds, where savings from the Executive branch were used to augment the appropriations of other offices outside the Executive. The Court emphasized that Section 25(5) only authorizes transfers of funds within the respective offices of 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. Transfers to other branches or constitutional commissions, even if intended to augment deficient items, are prohibited.

The Supreme Court also declared void the use of unprogrammed funds under the DAP, as the release of these funds was contingent on revenue collections exceeding revenue targets, a condition that had not been met. While recognizing the importance of expenditure as a policy instrument for economic growth, the Court stressed that the Executive’s implementation of the DAP must be consistent with the Constitution and relevant laws.

Despite these findings of unconstitutionality, the Court applied the doctrine of operative fact, recognizing that the implementation of the DAP had produced consequences that could not be ignored. The doctrine nullifies the void law or executive act but sustains its effects. The Court reasoned that invalidating all actions taken under the DAP would be impractical and burdensome, particularly considering the positive economic results that had been achieved. However, the doctrine of operative fact does not extend to validating unconstitutional acts or absolving those responsible for their implementation from liability.

FAQs

What was the key issue in this case?	The key issue was whether the Disbursement Acceleration Program (DAP) and its implementing issuances violated the Constitution, specifically regarding the allocation of public funds and the separation of powers.
What did the Supreme Court decide?	The Supreme Court declared certain acts and practices under the DAP unconstitutional, including the withdrawal of unobligated allotments, cross-border transfers of savings, and funding of projects without proper appropriations.
What is the doctrine of operative fact?	The doctrine of operative fact recognizes that actions taken under a law or executive act before it is declared unconstitutional may have consequences that cannot be ignored, effectively validating those past actions.
Why did the Court apply the doctrine of operative fact in this case?	The Court applied the doctrine to prevent undue burden and disruption, recognizing that the DAP’s implementation had produced some positive results and that undoing these effects would be impractical and unfair.
What is the significance of Section 25(5), Article VI of the Constitution?	This provision limits the power of certain government officials to transfer appropriations, requiring that funds must be savings and used to augment existing items within their respective offices.
What are unprogrammed funds, and what are the rules for their use?	Unprogrammed funds are standby appropriations released only when revenue collections exceed targets; the Court found that the DAP’s use of these funds was invalid because this condition was not met.
What does the ruling mean for the President’s power to manage the budget?	The ruling limits the President’s flexibility in managing the budget, emphasizing that he must comply with the Constitution and relevant laws when transferring funds or augmenting appropriations.
How does this case relate to the earlier PDAF case?	Both cases involve challenges to the Executive and Legislative branches’ handling of public funds and highlight the importance of maintaining the separation of powers.

The Supreme Court’s decision in *Araullo v. Aquino III* underscores the importance of adhering to constitutional principles in fiscal management. While recognizing the need for executive flexibility, the Court firmly reinforced the boundaries set by the Constitution, ensuring that public funds are allocated and spent in accordance with the law. This ruling serves as a vital precedent for future budget management practices, promoting greater transparency and accountability in government spending.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Araullo v. Aquino III, G.R. No. 209287, July 01, 2014