3 Things You Ought to Know About the Supreme Court DAP Decision But May be Too Busy to Ask

Elpidio V. Peria
5 July 2014

The 92-page decision of the Supreme Court of the Philippines on Pnoy’s Disbursement Acceleration Program (DAP) dated 1 July 2014 is a very informative piece of ponencia that explains to those who are not faint-hearted the history and process of the Philippine budgeting system but also recent attempts by the Aquino Administration to ramp up spending in order to boost the economy. Eventually, as what the Supreme Court has found out in the nine cases filed against the DAP and their consolidated consideration of the issues raised against it, the manner in which the DAP is supposed to work is not in accord with what our Constitution has set on these matters. There are three (3) things that Filipinos who may be too busy to read the entire text may learn from that decision :

1. DAP has worked, even if only slightly

In page 36 of the ponencia, the Supreme Court cited the World Bank in its March 2012 report, which report was released after the initial implementation of the DAP, that it was “partially successful.”. The disbursements under the DAP contributed 1.3 percentage points to GDP growth by the 4th quarter of 2011 and the continued implementation of the DAP strengthened growth by 11.8% year on year while infrastructure spending rebounded from a 29% contraction to a 34% growth as of September 2013.

2. DAP is unconstitutional as it contravenes the power of the President to transfer funds within the Executive Department

DAP was characterized by the Supreme Court, based on a primer by the Department of Budget and Management, as a stimulus package intended to fast-track public spending and to push economic growth by investing on high-impact budgetary programs, activities or projects (PAPs) to be funded from the “savings” generated during the year as well as from unprogrammed funds.

For its well-intentioned aims, DAP violated mainly this particular provision of the 1987 Constitution:

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. (sec. 25, Article VI, 1987 Constitution)

With this provision as a guide, the Supreme Court found

a) The General Appropriations Act (GAA) of 2011 and 2012 lacked valid provisions to authorize transfers under the DAP; hence, the transfers of those funds in those GAAs to DAP is unconstitutional;

b) There were no savings which could be sourced for the DAP;

c) No funds from savings could be transferred under the DAP to augment deficient items not provided in the GAA;

d) Cross-border (transfers from one department of govt to another, i.e., from the Executive Department to Legislative Dept, for example) augmentations from savings are prohibited by the Constitution.

3. Due to the operative facts doctrine, things may not turn out as bad for Sec.Abad, et.al, it seems

The Supreme Court found the doctrine of operative facts applicable to this case. This operative facts doctrine, as per the Supreme Court, 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.

Applying this doctrine, the Supreme Court states in page 87 of the ponencia : “The consequences resulting from the DAP and its related issuances could not be ignored or could no longer be undone.”

What this could mean is that the recent calls for those Senators who have received DAP to return the funds are just that, mere calls or exhortations for action, but the Senators cannot be compelled to return or even undo what they may have done with the funds released through the DAP, especially so if these projects were already implemented.

Justice Brion however, as the ponencia stated, has a different view – the doctrine can only be invoked in situations where the nullification of the effects of what used to be a valid law would result in inequity and injustice, but where no such result would ensue, the general rule that an unconstitutional law is totally ineffective should apply.

What this means, the ponencia concluded, is that the doctrine of operative facts can only apply to the programs, activities and projects 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 implementers 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.

Sec. Abad as the author, and even Pnoy the proponent and the concerned DBM officials and other agency implementers should now prepare how to present their good faith defense in the appropriate criminal, civil and administrative cases that may be filed against them. What escapes understanding at this point is what could the Supreme Court have meant when it talked about “other” liabilities since the basic administrative law principle of liability is only limited to a trifecta- criminal, civil and administrative. What that “other” liability could be outside of the trifecta is something for those tribunals to ponder when they are faced with actual cases relating to the DAP.


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