The ABCs of government budgeting: Part II

CAN THE President unilaterally alter the General Appropriations Act in the guise of accelerating disbursements?

Absolutely not. His mandate is not to speed up disbursement if it will mean abandoning programs and projects that he told Congress are needed to improve the economy and society. The GAA is a contract between the President and Congress, the latter consisting of agents of the people in a representative democracy. What the President asked and what Congress authorized to implement cannot be unilaterally altered by him. Worse, he cannot simply change, revise, dilute and throw away programs, projects and activities that Congress authorized him to implement and replace these with his own programs, projects and activities. That’s usurpation of the congressional power of the purse, which effectively changes the balance of power enshrined in the Constitution.

When the representatives of the people, the members of Congress, prefer A to B while the President prefers B to A and B is chosen, then the choice of one individual wins. This is called ‘dictatorship’.

New spending for programs and projects not part of the GAA -- for example, the P750 million budgetary assistance for the province of Quezon, the P4.5 million for the purchase of additional train cars for Metro Rail Transit (MRT), P8.9 billion worth of assistance for the ARMM to implement the Comprehensive Peace and Development Peace and Development and the P30-billion budgetary support for the Bangko Sentral ng Pilipinas -- are clearly unconstitutional. The Constitution provides: "No money shall be paid out of the Treasury except in pursuance of an appropriation made by law."

But why can’t the President withdraw the SARO (the authority to enter into contracts) from slow-moving projects?

First, withdrawing the SARO already issued violates his contract with Congress ( and indirectly with the people, his ‘bosses’). For some appropriations, the life of the SARO is two years. For example, appropriations for capital outlays and maintenance and other operating expenditures authorized in 2011 won’t lapse until end of 2012. Why withdraw the SARO only after six months of its issuance? Contracting out takes time. Look at the Department of Transportation and Communications. After more than three years of the Aquino administration, it has successfully bid out and awarded only one public-private partnership (PPP) project. What a dismal performance!

Second, withdrawing the SARO does not guarantee that projects will be done more quickly. An argument can be made that the withdrawal of the SARO might further delay, rather than accelerate, project implementation. Of course, in the case of budgetary assistance to local government units and government corporations like the P30 billion budgetary subsidy for BSP, disbursements is accelerated. But they do not mean the programs and projects that the President committed to do in his budget, which Congress authorized, will be done more quickly, if at all. Remember, the DPWH got an additional P5.5 billion from the Disbursement Acceleration Program I but by the end of December 2011 none had been disbursed.

Third, rather than penalize the slow-moving agency by issuing negative SAROs, in effect reducing the authorized appropriations, thus denying the agency’s potential beneficiaries the benefits of the postponed, reduced, or discontinued programs and projects, why not discipline the head of the agency instead? Suspend or fire the agency head. Why make people suffer for his or her incompetence?

Finally, the President is prohibited by law from impounding appropriations. This prohibition is as clear as sunlight. It needs no interpretation.

WHAT IS THE MEANING OF IMPOUNDMENT?
To impound means to "seize and take legal custody", to sequester, to confiscate. The President cannot impound appropriations.

Section 66 of the General Provisions of the 2011 GAA states: "Prohibition Against Impoundment of Appropriations. No appropriations authorized under this Act shall be impounded through retention or deduction, unless in accordance with the rules and regulations to be issued by the DBM: PROVIDED, That all the funds appropriated for the purposes, programs, projects and activities authorized under this Act, except those covered under the Unprogrammed Fund, shall be released pursuant to Section 33(3), Chapter 5, Book VI of E.O. No. 292."

WHAT ARE THE CONDITIONS FOR THE USE OF SAVINGS FOR AUGMENTATION?
The President may legally use savings for augmentation under the following conditions: first, savings as defined in Section 60 must come from item(s) included in the GAA; second, the item(s) to be augmented exist or included in the GAA; third, the item(s)/source of savings and the item(s) to be augmented must be within the appropriations of the authorized official; and fourth, " in no case shall a non-existent program, activity, or project, be funded by augmentation from savings or by the use of appropriations otherwise authorized in this Act".

WHAT’S THE UNPROGRAMMED FUND? CAN IT BE USED AS FUNDING SOURCE FOR THE DAP?
The use of the Unprogrammed Fund (UF) as a funding source for DAP is a mystery to me. The UF by its nature is a contingent appropriation, It is not part of the Programmed Appropriation. It may tapped only when the revenue collections exceed the original revenue targets submitted by the President, including savings from programmed appropriations for the year.

But in 2011, as in previous years, actual revenue collections were lower than the original target. The original target was P1,410,000,000, while actual collections were P1,359,942,000.

Some components of total revenues, say PAGCOR collections, were higher than target: P11.4 billion actual vs. P10.9 billion target. But for purposes of using the Unprogrammed Fund that’s irrelevant. The GAA talks of revenue collections rather collections for specific tax or non-tax sources.

One exception in the use of the Unprogrammed Fund is in the case of newly approved loans for foreign assisted projects (FAPs). If a loan agreement for FAPs was already perfected during the fiscal year, a SARO covering the loan proceeds may be issued, charged against the UF.

In 2011, total unprogrammed appropriations for "support to foreign-assisted projects" was P10.8 billion (approximately $245 million); I doubt if foreign loans for specific projects worth that much were perfected in 2011.

The author is Professor of Economics at the U.P. School of Economics and former Secretary of Budget and Management.

source:  Businessworld