Budget flexibility, discretion; president's power
Congress cannot anticipate all issues and needs that may come into play once
the budget reaches its execution stage. Executive discretion is necessary at
that stage to achieve a sound fiscal administration and assure effective
budget implementation. The heads of offices, particularly the President,
require flexibility in their operations under performance budgeting to enable
them to make whatever adjustments are needed to meet established work goals
under changing conditions. (Budget Operations Manual (Revised Edition) 1968,
Office of the President, Budget Commission.) In particular, the power to
transfer funds can give the President the flexibility to meet unforeseen
events that may otherwise impede the efficient implementation of the programs,
activities and projects (PAPs) set by Congress in the General Appropriations
Act (GAA). (G.R. No. 209287, July 01, 2014)
Congress has traditionally allowed much flexibility to the President in
allocating funds pursuant to the GAAs, particularly when the funds are grouped
to form lump sum accounts. It is assumed that the agencies of the Government
enjoy more flexibility when the GAAs provide broader appropriation items. This
flexibility comes in the form of policies that the Executive may adopt during
the budget execution phase. The Disbursement Acceleration Program (DAP) – as a
strategy to improve the country’s economic position – was one policy that the
President decided to carry out in order to fulfill his mandate under the
GAAs.(Fujitani and Shirck, Executive Spending Powers: The Capacity to
Reprogram, Rescind, and Impound. Harvard Law School, Federal Budget Policy
Seminar, Briefing Paper No. 8, p. 1, available at http://www.law.harvard.edu)
Denying to the Executive flexibility in the expenditure process would be
counterproductive. In Presidential Spending Power, Prof. Louis
Fisher, an American constitutional scholar whose specialties have included
budget policy, has justified extending discretionary authority to the
Executive thusly:
From 1916 until 1920, the appropriations laws set a cap on the amounts of funds that could be transferred, thereby limiting the power to transfer funds. Only 10% of the amounts appropriated for contingent or miscellaneous expenses could be transferred to a bureau or office, and the transferred funds were to be used to cover deficiencies in the appropriations also for miscellaneous expenses of said bureau or office. (G.R. No. 209287, July 01, 2014)
In 1921, the ceiling on the amounts of funds to be transferred from items under miscellaneous expenses to any other item of a certain bureau or office was removed. (G.R. No. 209287, July 01, 2014)
During the Commonwealth period, the power of the President to transfer funds continued to be governed by the GAAs despite the enactment of the Constitution in 1935. It is notable that the 1935 Constitution did not include a provision on the power to transfer funds. At any rate, a shift in the extent of the President’s power to transfer funds was again experienced during this era, with the President being given more flexibility in implementing the budget. The GAAs provided that the power to transfer all or portions of the appropriations in the Executive Department could be made in the “interest of the public, as the President may determine.” (Waldby, op. cit., pp. 321-322)
In its time, the 1971 Constitutional Convention wanted to curtail the President’s seemingly unbounded discretion in transferring funds. Its Committee on the Budget and Appropriation proposed to prohibit the transfer of funds among the separate branches of the Government and the independent constitutional bodies, but to allow instead their respective heads to augment items of appropriations from savings in their respective budgets under certain limitations. The clear intention of the Convention was to further restrict, not to liberalize, the power to transfer appropriations. Thus, the Committee on the Budget and Appropriation initially considered setting stringent limitations on the power to augment, and suggested that the augmentation of an item of appropriation could be made “by not more than ten percent if the original item of appropriation to be augmented does not exceed one million pesos, or by not more than five percent if the original item of appropriation to be augmented exceeds one million pesos.”[140] But two members of the Committee objected to the P1,000,000.00 threshold, saying that the amount was arbitrary and might not be reasonable in the future. The Committee agreed to eliminate the P1,000,000.00 threshold, and settled on the ten percent limitation.
[T]he impulse to deny discretionary authority altogether should be resisted. There are many number of reasons why obligations and outlays by administrators may have to differ from appropriations by legislators. Appropriations are made many months, and sometimes years, in advance of expenditures. Congress acts with imperfect knowledge in trying to legislate in fields that are highly technical and constantly undergoing change. New circumstances will develop to make obsolete and mistaken the decisions reached by Congress at the appropriation stage. It is not practicable for Congress to adjust to each new development by passing separate supplemental appropriation bills. Were Congress to control expenditures by confining administrators to narrow statutory details, it would perhaps protect its power of the purse but it would not protect the purse itself. The realities and complexities of public policy require executive discretion for the sound management of public funds. xxxIn contrast, by allowing to the heads of offices some power to transfer funds within their respective offices, the Constitution itself ensures the fiscal autonomy of their offices, and at the same time maintains the separation of powers among the three main branches of the Government. The Court has recognized this, and emphasized so in Bengzon v. Drilon, viz:
The expenditure process, by its very nature, requires substantial discretion for administrators. They need to exercise judgment and take responsibility for their actions, but those actions ought to be directed toward executing congressional, not administrative policy. Let there be discretion, but channel it and use it to satisfy the programs and priorities established by Congress. (Princeton University Press, 1975, pp. 261-262)
The Judiciary, the Constitutional Commissions, and the Ombudsman must have the independence and flexibility needed in the discharge of their constitutional duties. The imposition of restrictions and constraints on the manner the independent constitutional offices allocate and utilize the funds appropriated for their operations is anathema to fiscal autonomy and violative not only of the express mandate of the Constitution but especially as regards the Supreme Court, of the independence and separation of powers upon which the entire fabric of our constitutional system is based. (G.R. No. 103524, April 15, 1992)In the case of the President, the power to transfer funds from one item to another within the Executive has not been the mere offshoot of established usage, but has emanated from law itself. It has existed since the time of the American Governors-General.[134] Act No. 1902 (An Act authorizing the Governor-General to direct any unexpended balances of appropriations be returned to the general fund of the Insular Treasury and to transfer from the general fund moneys which have been returned thereto), passed on May 18, 1909 by the First Philippine Legislature,[135] was the first enabling law that granted statutory authority to the President to transfer funds. The authority was without any limitation, for the Act explicitly empowered the Governor-General to transfer any unexpended balance of appropriations for any bureau or office to another, and to spend such balance as if it had originally been appropriated for that bureau or office. (G.R. No. 209287, July 01, 2014, citing Waldby, Odell, Philippine Public Fiscal Administration, Institute of Public Administration, University of the Philippines, 1954, p. 319; and The Philippine Commission, which lasted from 1900 to 1916, comprised the Upper House of the Philippines Legislature. The Philippine Assembly, which existed from 1907 to 1916, served in its time as the Lower House of the Philippine Legislature)
From 1916 until 1920, the appropriations laws set a cap on the amounts of funds that could be transferred, thereby limiting the power to transfer funds. Only 10% of the amounts appropriated for contingent or miscellaneous expenses could be transferred to a bureau or office, and the transferred funds were to be used to cover deficiencies in the appropriations also for miscellaneous expenses of said bureau or office. (G.R. No. 209287, July 01, 2014)
In 1921, the ceiling on the amounts of funds to be transferred from items under miscellaneous expenses to any other item of a certain bureau or office was removed. (G.R. No. 209287, July 01, 2014)
During the Commonwealth period, the power of the President to transfer funds continued to be governed by the GAAs despite the enactment of the Constitution in 1935. It is notable that the 1935 Constitution did not include a provision on the power to transfer funds. At any rate, a shift in the extent of the President’s power to transfer funds was again experienced during this era, with the President being given more flexibility in implementing the budget. The GAAs provided that the power to transfer all or portions of the appropriations in the Executive Department could be made in the “interest of the public, as the President may determine.” (Waldby, op. cit., pp. 321-322)
In its time, the 1971 Constitutional Convention wanted to curtail the President’s seemingly unbounded discretion in transferring funds. Its Committee on the Budget and Appropriation proposed to prohibit the transfer of funds among the separate branches of the Government and the independent constitutional bodies, but to allow instead their respective heads to augment items of appropriations from savings in their respective budgets under certain limitations. The clear intention of the Convention was to further restrict, not to liberalize, the power to transfer appropriations. Thus, the Committee on the Budget and Appropriation initially considered setting stringent limitations on the power to augment, and suggested that the augmentation of an item of appropriation could be made “by not more than ten percent if the original item of appropriation to be augmented does not exceed one million pesos, or by not more than five percent if the original item of appropriation to be augmented exceeds one million pesos.”[140] But two members of the Committee objected to the P1,000,000.00 threshold, saying that the amount was arbitrary and might not be reasonable in the future. The Committee agreed to eliminate the P1,000,000.00 threshold, and settled on the ten percent limitation.
In his Sponsorship Speech, Delegate Honesto Mendoza, the Chairman of the
Committee on Budget and Appropriations of the 1971 Constitutional Convention,
stated that it was deemed “absolutely necessary to remove the anomaly of
illegal fund transfers of public funds to projects or purposes not
contemplated by law.” (Minutes of the Meeting, Commission on Budget and
Appropriations, 1971 Constitutional Convention, November 4, 1971, p. 18;
Minutes of the Meeting, Commission on Budget and Appropriations, 1971
Constitutional Convention, January 13, 1972, p. 10.)
In the end, the ten percent limitation was discarded during the plenary of the Convention, which adopted the following final version under Section 16, Article VIII of the 1973 Constitution, to wit:
On July 30, 1977, President Marcos issued PD No. 1177, providing in its Section 44 that:
In the end, the ten percent limitation was discarded during the plenary of the Convention, which adopted the following final version under Section 16, Article VIII of the 1973 Constitution, to wit:
(5) No law shall be passed authorizing any transfer of appropriations; however, the President, the Prime Minister, the Speaker, the Chief Justice of the Supreme Court, and the heads of Constitutional Commissions may by law be authorized to augment any item in the general appropriations law for their respective offices from savings in other items of their respective appropriations.The 1973 Constitution explicitly and categorically prohibited the transfer of funds from one item to another, unless Congress enacted a law authorizing the President, the Prime Minister, the Speaker, the Chief Justice of the Supreme Court, and the heads of the Constitutional Commissions to transfer funds for the purpose of augmenting any item from savings in another item in the GAA of their respective offices. The leeway was limited to augmentation only, and was further constricted by the condition that the funds to be transferred should come from savings from another item in the appropriation of the office. (Demetria v. Alba, No. L-71977, February 27, 1987)
On July 30, 1977, President Marcos issued PD No. 1177, providing in its Section 44 that:
Section 44. Authority to Approve Fund Transfers. The President shall have the authority to transfer any fund appropriated for the different departments, bureaus, offices and agencies of the Executive Department which are included in the General Appropriations Act, to any program, project, or activity of any department, bureau or office included in the General Appropriations Act or approved after its enactment.In Demetria v. Alba, however, the Court struck down the first paragraph of Section 44 for contravening Section 16(5) of the 1973 Constitution, ruling:
The President shall, likewise, have the authority to augment any appropriation of the Executive Department in the General Appropriations Act, from savings in the appropriations of another department, bureau, office or agency within the Executive Branch, pursuant to the provisions of Article VIII, Section 16 (5) of the Constitution.
Paragraph 1 of Section 44 of P.D. No. 1177 unduly over-extends the privilege granted under said Section 16. It empowers the President to indiscriminately transfer funds from one department, bureau, office or agency of the Executive Department to any program, project or activity of any department, bureau or office included in the General Appropriations Act or approved after its enactment, without regard as to whether or not the funds to be transferred are actually savings in the item from which the same are to be taken, or whether or not the transfer is for the purpose of augmenting the item to which said transfer is to be made. It does not only completely disregard the standards set in the fundamental law, thereby amounting to an undue delegation of legislative powers, but likewise goes beyond the tenor thereof. Indeed, such constitutional infirmities render the provision in question null and void. (Demetria v. Alba, No. L-71977, February 27, 1987)It is significant that Demetria was promulgated 25 days after the ratification by the people of the 1987 Constitution, whose Section 25(5) of Article VI is identical to Section 16(5), Article VIII of the 1973 Constitution, to wit:
Section 25. xxxThe foregoing history makes it evident that the Constitutional Commission included Section 25(5), supra, to keep a tight rein on the exercise of the power to transfer funds appropriated by Congress by the President and the other high officials of the Government named therein. The Court stated in Nazareth v. Villar:
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.
In the funding of current activities, projects, and programs, the general rule should still be that the budgetary amount contained in the appropriations bill is the extent Congress will determine as sufficient for the budgetary allocation for the proponent agency. The only exception is found in Section 25 (5), Article VI of the Constitution, by which 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 are authorized to transfer appropriations to augment any item in the GAA for their respective offices from the savings in other items of their respective appropriations. The plain language of the constitutional restriction leaves no room for the petitioner’s posture, which we should now dispose of as untenable. (G.R. No. 188635, January 29, 2013)
It bears emphasizing that the exception in favor of the high officials named in Section 25(5), Article VI of the Constitution limiting the authority to transfer savings only to augment another item in the GAA is strictly but reasonably construed as exclusive. As the Court has expounded in Lokin, Jr. v. Commission on Elections:
Therefore, we should interpret Section 25(5), supra, in the context of a limitation on the President’s discretion over the appropriations during the Budget Execution Phase. (G.R. No. 209287, July 01, 2014)When the statute itself enumerates the exceptions to the application of the general rule, the exceptions are strictly but reasonably construed. The exceptions extend only as far as their language fairly warrants, and all doubts should be resolved in favor of the general provision rather than the exceptions. Where the general rule is established by a statute with exceptions, none but the enacting authority can curtail the former. Not even the courts may add to the latter by implication, and it is a rule that an express exception excludes all others, although it is always proper in determining the applicability of the rule to inquire whether, in a particular case, it accords with reason and justice.
The appropriate and natural office of the exception is to exempt something from the scope of the general words of a statute, which is otherwise within the scope and meaning of such general words. Consequently, the existence of an exception in a statute clarifies the intent that the statute shall apply to all cases not excepted. Exceptions are subject to the rule of strict construction; hence, any doubt will be resolved in favor of the general provision and against the exception. Indeed, the liberal construction of a statute will seem to require in many circumstances that the exception, by which the operation of the statute is limited or abridged, should receive a restricted construction.
