Towards Fiscal Democracy

Freedom from Debt Coalition (FDC) Statement on 2015 Budget Deliberations

The Freedom from Debt Coalition (FDC) appeals to the 16th House of Representatives to push for crucial budget reforms in the last two years of the Aquino administration. Doing so will bring us closer to fiscal democracy and add credence to the administration’s maxim of “Tuwid na Daan”. Congress must assert its “power of the purse”, produce regular and transparent budgetary allocations, and work toward ending discretionary measures in the budget.


1. Repeal of the Automatic Appropriations Act

Photo by Rapha-el Olegario PhilRights. Check out the original post here.

Section 26(B), Book VI of the 1987 Revised Administrative Code as instituted by Executive Order (EO) 292 says that: “all expenditures for ... (b) principal and interest on public debt, ... are automatically appropriated.”

Automatic appropriation for debt severely compromises the legislative’s “power of the purse”. Since Congress cannot increase the budgetary ceiling (Article VI, Section 25-1 of the 1987 Constitution, as affirmed by Sec. 24, Book VI of EO292) only a little amount of the budget is left for Congressional reallocation. Moreover, since the executive can unilaterally contract loans (Article VII, Section 20 of the 1987 Constitution), the executive retains the option of further constraining whatever future limited fiscal space Congress may have by increasing the deficit today.

It was during the Martial Law in the Philippines that automatic appropriation for debt service was first codified, in Section 31(B) of Presidential Decree 1177 (Budget Reform Decree of 1977). In consonance with her “honor-all-debts” policy, President Corazon Aquino signed into law the Administrative Code of 1987, copying en toto Section 31(B) of PD1177 into Section 26(B) of the code. Section 31(B) of PD1177 also serves as its legal basis.

FDC enjoins Congress to reclaim its power to set budget levels by repealing this archaic provision in the budget law. The 16th Congress must take a second look at the following bills:

• House Bill 3302 [An Act Restoring To Congress The Power To Appropriate Payments On Debt Service, Reviving For The Purpose Section 6 Of Republic Act No. 4860 (Foreign Borrowing Act), And Repealing Section 7 Of Presidential Decree No. 81, Section 31 Of Presidential Decree No. 1177 And Sections 1, 2 And 3 Of Presidential Decree No. 1967] filed by Rep. Rufus B. Rodriguez
• House Bill 3460 [An Act Repealing The Automatic Appropriation For Debt Service By Amending Section 31 Of Presidential Decree No. 1177 And Section 26, Chapter 4, Book Vi Of Executive Order No. 292, Otherwise Known As The 'Administrative Code Of 1987' Which Reiterates In Toto Section 31 Of Presidential Decree No. 1177] filed by Rep. Neri  Colmenares

2. Budget Reforms to End Fiscal Dictatorship

The vast fiscal powers of the President have recently been tested by the decision of the Supreme Court on the Disbursement Acceleration Program (DAP). These powers have been exercised not only by the current administration but also by its predecessors. FDC insists that the roots of what we called as “fiscal dictatorship” are structural rather than conjunctural. As early as 2008, during the 2009 budget deliberations, FDC already informed the House of Representatives of the following key enablers of fiscal autocracy:

1. Impoundment. Section 38, Book VI of the 1987 RAC / EO292
2. Reallocation of Savings. Section 39, Book VI of the 1987 RAC / EO292. Combined with Section 38, and depending on the interpretation of “savings”, the executive may interpret this as a power to realign allocations.
3. Line-Veto. Article VI, Section 27(2) of the 1987 Constitution allows the executive to simply revert to the budget DBM endorsed to the House Committee on Appropriations and Senate Finance Committee
4. Reenacting Budgets. Article VI, Section 25(7) of the 1987 Constitution renders us vulnerable to misuse of lump-sum budgets from “savings” generated by finished programs and projects which would be receiving fresh funds from a reenacted budget.

It is high time to finally clarify the ambiguous provisions of our budget law that enable fiscal dictatorship. Specifically, we must prevent the abuse of “savings”, “deficit”, “augment”, “impoundment”, “reenacted budgets”, and other budgetary terms that only serve to clip the Congressional power of the purse. Thus, FDC lends its support to the following bills filed by Rep. Ibarra M. Gutierrez and former FDC President, Rep. Walden Bello:

• House Bill 2256 [An Act Defining The Concept Of Savings And Regulating The Process Of Augmentation By The President In Implementation Of Article Vi, Section 25(5) Of The Philippine Constitution] 
• House Bill 2257 [An Act Regulating The Power Of The President To Defer, Rescind, Or Reserve Expenditure Of Appropriations Authorized By Congress]
• House Bill 3128 [An Act Prescribing Reforms In National Government Budgeting To Conform With Article Vi, Sections 24, 25 And 29 Of The 1987 Constitution, Amending For This Purpose Pertinent Provisions Of Book Vi Of Executive Order No. 292, Otherwise Known As The Revised Administrative Code Of 1987, And For Other Purposes]

3. Congressional Audit of Public Funds

From Rappler.

Finally, FDC enjoins the 16th Congress to conduct a Congressional Audit of Public Funds, including the projects financed by the DAP, Congress’ own Priority Development Assistance Fund (PDAF), the Judiciary Development Fund (JDF) and other spending mechanisms that are not itemized in the General Appropriations Act (GAA). Moreover, there is a need to know whether irregular programs and projects had been financed through loans, and whether the creditors are complicit to the irregularities.

Towards Fiscal Democracy