Wednesday, July 16, 2014

Pres. Aquino's 6-point speech defending DAP already answered in Supreme Court's decision

Pres. Noynoy Aquino made a speech yesterday in defense of the Disbursement Acceleration Program or DAP (see Official Gazette).  He made seven points:
  1. Is it not right that funds that had been otherwise left unused were utilized for programs that had proven effective, so that targets can be met and the benefits to the people can ensue at the soonest possible time? Another advantage of this system: Projects that were temporarily suspended for a given year would not have to compete for funding with the other finished projects in the following year. This is clearly a win-win situation.
  2. Our aim is to not prolong the implementation of projects. The Cabinet agreed, regarding their respective funds: Use it or lose it. If you cannot use the funds allotted for this year, clearly, those are savings. We are given the chance to extend, at the soonest possible time, those benefits that have immediate impact on our Bosses. In this way, benefits that may have been delayed are replaced by other benefits. Let us also remember that the government is at a deficit: We have to borrow funds for our projects. If we allow funds to go unused, then we would be paying interest for nothing. The people clearly have nothing to gain from this setup. 
  3.  The Supreme Court’s decision questions our use of savings, and raises concerns on when we can use unprogrammed funds. They want savings declared only at the 31st of December of each year. If that were the case, when would the government be free to utilize these funds? Following their logic on savings, projects that could have been funded in the middle of the current year would have to be delayed until the following year.We also have a list of projects that would only be funded if government experiences a windfall in earnings, which are referred to as unprogrammed funds. With the Supreme Court’s decision, benefits would be delayed, because it would take until March of the following year to fulfill all the requirements regarding these funds; on top of this, it would all then have to go through another four to six months of bidding and procurement. If you file a report in March, it would be September of the following year by the time all of these processes are done. All in all, almost two years would have passed before the benefits of funds would redound to the people.
  4. It is not only my conscience that dictates the efficient spending of funds; various provisions of the law that is our country’s Administrative Code clearly allow for the use of savings. For example, let us now read Book VI, Chapter 5, Section 39 of the 1987 Administrative Code of the Philippines: “—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…” As you can see, this law openly gives the President the power to transfer savings to other projects. It does not limit the transfer to only one department or branch of government. In other words: We did not transgress the law when we implemented DAP. In fact, we were surprised to find that the Supreme Court decision did not take into account our legal basis for DAP. How can they say that our spending methods are unconstitutional when they did not look into our basis? Even until now, Section 39 of the Administrative Code is in effect, along with its other sections.
  5. This becomes even more worrisome when we take into account the “operative fact doctrine,” which the Supreme Court also mentioned in its decision. This is simple. When a Supreme Court declares as unconstitutional any law or edict by the Executive, only those projects yet to be implemented under said law are deemed prohibited. The declaration does not include completed projects if this means stripping our citizens of benefits. This is only natural because it is not right to destroy bridges that have already been built, or to demolish houses that have already been bestowed to families of informal settlers. Likewise, this doctrine also recognizes that implementors do not have to be held accountable as long as the edict was carried out “in good faith.” But in their decision, the judges immediately presume the absence of good faith, which would then have to be proven through trial. What happened to the principle of “innocent until proven guilty?”
  6. There are also those who say that DAP and PDAF are the same thing. Excuse me. DAP is different from PDAF. With PDAF, the corrupt funneled government funds into fake NGOs, money then allegedly divided among themselves. It’s clear that with DAP the people’s money was never stolen—the funds were used for the benefit of Filipinos. And not for later, not soon; but—now: Programs that could be implemented immediately were implemented immediately.
The Supreme Court already made its decision regarding these points:

1.  Funds that had been otherwise left unused

The problem with DAP is that it defines the middle of the year, June 30, as the cut-off date to determine whether funds were used or unused: unused funds will then go to savings.  The Supreme Court ruled that the cut-off date should not be June 30 but December 31, the end of the fiscal year:
It is relevant to remind at this juncture that the balances of appropriations that remained unexpended at the end of the fiscal year were to be reverted to the General Fund. This was the mandate of Section 28, Chapter IV, Book VI of the Administrative Code....The Executive could not circumvent this provision by declaring unreleased appropriations and unobligated allotments as savings prior to the end of the fiscal year. (Supreme Court's Decision on DAP, p. 67)
2. Use it or lose it

In DAP, if a government agency has not spent his budget appropriation by June 30, the Executive will treat it as savings and use this money at its own discretion.  The Supreme Court do not agree on the legality of this practice:
The petitioners accuse the respondents of forcing the generation of savings in order to have a larger fund available for discretionary spending. They aver that the respondents, by withdrawing unobligated allotments in the middle of the fiscal year, in effect deprived funding for PAPs with existing appropriations under the GAAs.155
The respondents belie the accusation, insisting that the unobligated allotments were being withdrawn upon the instance of the implementing agencies based on their own assessment that they could not obligate those allotments pursuant to the President’s directive for them to spend their appropriations as quickly as they could in order to ramp up the economy.156
We agree with the petitioners (Supreme Court's Decision on DAP, p. 64)
The Supreme Court further said:
The assertions of the petitioners are upheld. The withdrawal and transfer of unobligated allotments and the pooling of unreleased appropriations were invalid for being bereft of legal support. Nonetheless, such withdrawal of unobligated allotments and the retention of appropriated funds cannot be considered as impoundment. (Supreme Court's Decision on DAP, p. 65)
 3. Unprogrammed funds

Unprogrammed funds are funds that are not appropriated in the national budget.  One source of these funds is when the revenue collections exceed the original revenue targets.  What this definition means is the source of controversy, as explained by the Supreme Court:
 The present controversy on the unprogrammed funds was rooted in the correct interpretation of the phrase “revenue collections should exceed the original revenue targets.” The petitioners take the phrase to mean that the total revenue collections must exceed the total revenue target stated in the BESF, but the respondents understand the phrase to refer only to the collections for each source of revenue as enumerated in the BESF, with the condition being deemed complied with once the revenue collections from a particular source already exceeded the stated target. (Supreme Court's Decision on DAP, p. 80)
The court reasoned that if the government only based its claim that its revenue collection exceeded its targets from a single agency, such as "dividends from the shares of stock held by the Government in government-owned and controlled corporations," (see p. 81) this does not yet constitute the phrase "original revenue targets" for this phrase must be taken for the government as a whole. That is:
The revenue targets stated in the BESF were intended to address the funding requirements of the proposed programmed appropriations. In contrast, the unprogrammed funds, as standby appropriations, were to be released only when there were revenues in excess of what the programmed appropriations required. As such, the revenue targets should be considered as a whole, not individually; otherwise, we would be dealing with artificial revenue surpluses. The requirement that revenue collections must exceed revenue target should be understood to mean that the revenue collections must exceed the total of the revenue targets stated in the BESF. Moreover, to release the unprogrammed funds simply because there was an excess revenue as to one source of revenue would be an unsound fiscal management measure because it would disregard the budget plan and foster budget deficits, in contravention of the Government’s surplus budget policy.202
We cannot, therefore, subscribe to the respondents’ view.
(Supreme Court's Decision on DAP, p. 82-83)
4. President's power to transfer savings--even to another branch of government

According to the Supreme Court, "The third requisite for a valid transfer of funds is that the purpose of the transfer should be “to augment an item in the general appropriations law for the respective offices.” The term “augment” means to enlarge or increase in size, amount, or degree."  This is seen for example in the 2013 GAA:
Section 52. Use of Savings. The President of the Philippines, the Senate President, the Speaker of the House of Representatives, the Chief Justice of the Supreme Court, the Heads of Constitutional Commissions enjoying fiscal autonomy, and the Ombudsman are hereby authorized to use savings in their respective appropriations to augment actual deficiencies incurred for the current year in any item of their respective appropriations. (Supreme Court's Decision on DAP, p. 68)
 Two of the projects funded by DAP that are not part of the GAA are DREAM (Disaster Risk, Exposure, Assessment and Mitigation) project of DOST and the Establishment of the Advanced Failure Analysis Laboratory of DOST-PCIEERD. The Supreme Court says that this should not have happened:
It is the President who proposes the budget but it is Congress that has the final say on matters of appropriations.180 For this purpose, appropriation involves two governing principles, namely: (1) “a Principle of the Public Fisc, asserting that all monies received from whatever source by any part of the government are public funds;” and (2) “a Principle of Appropriations Control, prohibiting expenditure of any public money without legislative authorization.”181To conform with the governing principles, the Executive cannot circumvent the prohibition by Congress of an expenditure for a PAP by resorting to either public or private funds.182 Nor could the Executive transfer appropriated funds resulting in an increase in the budget for one PAP, for by so doing the appropriation for another PAP is necessarily decreased. The terms of both appropriations will thereby be violated. (Supreme Court's Decision on DAP, p. 72)
 The transfer of savings by the Executive to another branch of government, such as Congress, is also not allowed.  These are called cross-border transfers or augmentations.  One example is when the Executive gave 43 million to add to the 207 million budget by the House of Representatives to build the e-Library.  Another example is when the Executive gave funds for information technology equipment by the Commission on Audit. (Supreme Court's Decision on DAP, p. 75)  Thus, the Supreme Court says:
Regardless of the variant characterizations of the cross-border transfers of funds, the plain text of Section 25(5), supra, disallowing cross-border transfers was disobeyed. Cross-border transfers, whether as augmentation, or as aid, were prohibited under Section 25(5), supra.
 (Supreme Court's Decision on DAP, p. 77)
Section 5(5), supra, mentioned here is from the 1987 Philippine Constitution, Article VI, Section 5(5):
(5) 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.
 5. Operative fact doctrine and assumption of good faith

The Supreme Court explains the doctrine of operative fact as follows:
The doctrine of operative fact recognizes the existence of the law or executive act prior to the determination of its unconstitutionality as an operative fact that produced consequences that cannot always be erased, ignored or disregarded. In short, it nullifies the void law or executive act but sustains its effects. It provides an exception to the general rule that a void or unconstitutional law produces no effect.208 But its use must be subjected to great scrutiny and circumspection, and it cannot be invoked to validate an unconstitutional law or executive act, but is resorted to only as a matter of equity and fair play.209 It applies only to cases where extraordinary circumstances exist, and only when the extraordinary circumstances have met the stringent conditions that will permit its application.
We find the doctrine of operative fact applicable to the adoption and implementation of the DAP. Its application to the DAP proceeds from equity and fair play. The consequences resulting from the DAP and its related issuances could not be ignored or could no longer be undone. (Supreme Court's Decision on DAP, p. 87)
In this sense, the President is righ in saying that:
"Only those projects yet to be implemented under said law are deemed prohibited. The declaration does not include completed projects if this means stripping our citizens of benefits. This is only natural because it is not right to destroy bridges that have already been built, or to demolish houses that have already been bestowed to families of informal settlers. "
But what irked the President is the Supreme Court's presumption of being guilty of being liable--criminal, civil, administrative, etc--on the part of the part of the implementors of DAP which includes Abad, the architect of DAP, and the President, its implementor:
Nonetheless, as Justice Brion has pointed out during the deliberations, the doctrine of operative fact does not always apply, and is not always the consequence of every declaration of constitutional invalidity. It can be invoked only in situations where the nullification of the effects of what used to be a valid law would result in inequity and injustice; 212 but where no such result would ensue, the general rule that an unconstitutional law is totally ineffective should apply. 
In that context, as Justice Brion has clarified, the doctrine of operative fact can apply only to the PAPs that can no longer be undone, and whose beneficiaries relied in good faith on the validity of the DAP, but cannot apply to the authors, proponents and implementors of the DAP, unless there are concrete findings of good faith in their favor by the proper tribunals determining their criminal, civil, administrative and other liabilities.
(Supreme Court's Decision on DAP, p. 90)
6. DAP and impounding of appropriated funds

The key term here impoundment of funds.  The Court declared that the implementors of DAP did not impound money but only transferred them, though the act of transfer may be unconstitutional as discussed earlier:
The assertions of the petitioners are upheld. The withdrawal and transfer of unobligated allotments and the pooling of unreleased appropriations were invalid for being bereft of legal support. Nonetheless, such withdrawal of unobligated allotments and the retention of appropriated funds cannot be considered as impoundment.
According to Philippine Constitution Association v. Enriquez:159“Impoundment refers to a refusal by the President, for whatever reason, to spend funds made available by Congress. It is the failure to spend or obligate budget authority of any type.” Impoundment under the GAA is understood to mean the retention or deduction of appropriations. The 2011 GAA authorized impoundment only in case of unmanageable National Government budget deficit...
The withdrawal of unobligated allotments under the DAP should not be regarded as impoundment because it entailed only the transfer of funds, not the retention or deduction of appropriations. (Supreme Court's Decision on DAP, p. 65-66)
CONCLUSION

All the 6 main points raised by the President in his speech were already answered by the Supreme Court, with 13-0 against DAP and only one abstained.  But the President does not believe in the Court's interpretation: he stands by what he believes is right and he will not back down.  It's a duel to death for DAP:
My message to the Supreme Court: We do not want two equal branches of government to go head to head, needing a third branch to step in to intervene. We find it difficult to understand your decision. You had done something similar in the past, and you tried to do it again; there are even those of the opinion that what you attempted to commit was graver, if we were to base it on your decision. Abiding by the principle of “presumption of regularity,” we assumed that you did the right thing; after all, you are the ones who should ostensibly have a better understanding of the law. And now, when we use the same mechanism—which, you yourselves have admitted, benefit our countrymen—why is it then that we are wrong? We believe that the majority of you, like us, want only the best for the Filipino people. To the honorable justices of the Supreme Court: Help us help our countrymen. We ask that you review your decision, this time taking into consideration the points I have raised tonight. The nation hopes for your careful deliberation and response. And I hope that once you’ve examined the arguments I will submit, regarding the law and about our economy, solidarity will ensue—thus strengthening the entire government’s capability to push for the interests of the nation.
The President has thrown the gauntlet.  I'll comment on this in another post. 
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