FACTS:

This case involves a Motion for Reconsideration filed by the respondents and a Motion for Partial Reconsideration filed by the petitioners. The respondents argue that the decision promulgated on July 1, 2014, had procedural and substantive errors. They assert that without an actual case or controversy, allegations of grave abuse of discretion cannot confer the power to determine the constitutionality of the Disbursement Acceleration Program (DAP) and NBC No. 541. They also claim that the petitioners' actions do not present an actual case or controversy and the court did not acquire jurisdiction. Furthermore, the respondents argue that the petitioners have not been injured or threatened with injury as a result of the DAP, thus lacking standing to bring the suits. They also challenge the court's decision based solely on the abstract consideration of NBC No. 541. Substantively, the respondents maintain that the executive department properly interpreted "savings" under the relevant provisions of the General Appropriations Act (GAA). They argue that all DAP applications have appropriation cover, and the President has the authority to transfer savings to other departments pursuant to his constitutional powers. Moreover, they contend that the 2011, 2012, and 2013 GAAs only require revenue collections to exceed the corresponding revenue target, and that the operative fact doctrine was wrongly applied.

The petitioners, on the other hand, seek partial reconsideration, asserting that all moneys used for alleged augmentation of appropriation items that did not have actual deficiencies should be declared unconstitutional and illegal. The court denied the motion for reconsideration filed by the petitioners and partially granted the motion for reconsideration filed by the respondents. The court dismissed the procedural challenges raised by the respondents, as they were already addressed in the previous decision. As for the substantive challenges, the court modified certain declarations in the previous decision to clarify certain matters and dispel further uncertainty. The court emphasized its power of judicial review and the exclusive role of the judiciary in interpreting and applying laws, including the Constitution.

The case involves the Disbursement Acceleration Program (DAP) implemented by the Executive branch. The petitioners allege that there was grave abuse of discretion in the implementation of the DAP. The Court is tasked with exercising its power of judicial review to determine the constitutionality of the DAP.

The Court emphasizes that the power to augment, which is exercised through the DAP, should be strictly construed as it is an exception to the general rule that funding of Programs, Activities, and Projects (PAPs) should be limited to the amount fixed by Congress. The purpose of this strict interpretation is to keep the Executive within the limits of its prerogatives during budget execution and to prevent them from exceeding Congress' power of the purse.

The respondents argue that the withdrawn unobligated allotments and unreleased appropriations under the DAP constitute savings that can be used for augmentation. They claim that the withdrawal of unobligated allotments is authorized by Section 38, Chapter 5, Book VI of the Administrative Code, and that this provision is consistent with Section 25(5), Article VI of the Constitution. They also argue that the President's augmentation of deficient items is in accordance with Section 39.

Section 25(5), Article VI of the Constitution authorizes the President and other officials to augment items in the general appropriations law from savings in other items of their respective appropriations.

Section 38 of the Administrative Code allows the President to suspend or stop further expenditure of funds allotted for any agency when the public interest requires it. Section 39 permits the use of savings in regular appropriations to cover deficits in other items, with the approval of the President.

The Court previously ruled that unobligated allotments are considered savings, but their utilization should still comply with the relevant provisions of the General Appropriations Act (GAA). The Court clarified that the withdrawal of unobligated allotments cannot be done indiscriminately as savings and must conform to the limitations set by the GAA and the Constitution.

The case revolves around the Disbursement Acceleration Program (DAP), a government program implemented by the Department of Budget and Management (DBM) in response to various economic challenges in the country. The petitioners, a group of lawmakers, argue that the DAP is unconstitutional as it violates the separation of powers and the constitutional provisions on the use of savings.

The Supreme Court held that the DAP is partially unconstitutional. It ruled that the withdrawal of unobligated allotments by the DBM violated the definition of savings under the General Appropriations Acts (GAAs), as savings can only be declared if funds are free from any obligation or encumbrance and the purpose for which the appropriation was authorized has been completed, discontinued, or abandoned. The Court emphasized that unobligated allotments could not be declared as savings without determining if any of these instances existed.

The respondents argued that Section 38 of the Administrative Code of 1987 justified the withdrawal of unobligated allotments. However, the Court clarified that Section 38 only authorized the suspension or stoppage of further expenditures and not the withdrawal of unobligated allotments. It further explained that savings are not automatically generated when the President suspends or stops expenditure of funds; it must first be established that the funds are free from any obligation or encumbrance and the purpose for which the appropriation was authorized has been completed, discontinued, or abandoned.

The Court also emphasized that the reversion to the General Fund of unexpended balances of appropriations savings does not apply to the Constitutional Fiscal Autonomy Group (CFAG), which includes the Judiciary, Civil Service Commission, Commission on Audit, Commission on Elections, Commission on Human Rights, and the Office of the Ombudsman. These institutions enjoy fiscal autonomy, which guarantees flexibility in allocating and utilizing their resources. Imposing restrictions or constraints on their allocation and utilization of funds violates their fiscal autonomy and the Constitution.

Furthermore, Section 39 of the Administrative Code of 1987 was deemed unconstitutional as it allowed the President to approve the use of any savings in the regular appropriations to cover a deficit in any other item of the regular appropriations. The Court held that this violated the constitutional mandate that the President's authority to augment an item in the General Appropriations Act is limited to his own department and out of the savings in other items of his own department's appropriations. However, augmentations made by the Executive within its department, as long as the requisites under Section 25(5) of the Constitution are complied with, remain valid.

The case at hand emphasizes the importance of recognizing and adhering to the supremacy of the Constitution. The court cites the case of Mutuc v. Commission on Elections, which highlights that the Constitution is the fundamental law that establishes the criteria for the validity of any public act, regardless of whether it comes from the highest official or the lowest functionary. The court emphasizes that all three branches of government must obey the commands of the Constitution and observe the limits it imposes. Congress must be vigilant in not exceeding its authority, the Presidency must execute the laws as ordained by the Constitution, and the judiciary must uphold what is decreed by the fundamental law. The court also mentions the case of Biraogo v. Philippine Truth Commission of 2010, where it is reiterated that the role of the Constitution cannot be overlooked as it is through the Constitution that the fundamental powers of government are established.

ISSUES:

1. Whether or not augmentations under the Disbursement Acceleration Program (DAP) made by the Executive within its department are valid.

2. Whether or not the power to augment can be used to fund non-existent provisions in the General Appropriations Act (GAA).

3. Whether the President's power of item veto only applies to "specific appropriations of money" and not "general provisions" in the appropriation law.

4. Whether the object of augmentation should be the expense category or allotment class.

5. Whether cross-border transfers of appropriation are constitutionally impermissible.

6. Whether unprogrammed funds may only be released upon proof that the total revenues exceeded the target.

7. Whether the Court's construction of the provision on unprogrammed funds should have prospective effect.

8. Whether the misapplication of the operative fact doctrine in this case violates the presumption of good faith.

9. Can the doctrine of operative fact be applied to the PAPs (Priority Development Assistance Fund) under the DAP (Disbursement Acceleration Program) that can no longer be undone and whose beneficiaries relied in good faith on the validity of the DAP?

10. Can the doctrine of operative fact apply to the authors, proponents, and implementors of the DAP?

11. Whether the Court can sustain the motion for partial reconsideration of the petitioners in G.R. No. 209442

12. Whether the Court should nullify the projects funded by the Disbursement Acceleration Program (DAP) by virtue of the invalidation of certain acts and practices under the DAP.

RULING:

1. Augmentations under the DAP made by the Executive within its department are valid as long as the requisites under Section 25(5) of the 1987 Constitution are complied with. However, cross-border transfers under the DAP, which involve the transfer of savings from one department to another, are not valid.

2. The power to augment cannot be used to fund non-existent provisions in the GAA. Items that may be augmented by the President must contain specific appropriations of money and must be distinct and severable parts of the appropriation bill.

3. The President's power of item veto applies to "specific appropriations of money" and not just "general provisions" in the appropriation law. The Calamity Fund, Contingent Fund, and Intelligence Fund, which state a specified amount for a specific purpose, are considered "line-item" appropriations subject to item veto. The President cannot exercise his veto power over an expense category, only over specific items.

4. The object of augmentation should be the last and indivisible purpose of a program in the appropriation law, not just the expense category or allotment class. As long as there is an item in the General Appropriations Act (GAA) for which Congress has set aside a specified amount, savings may be transferred for augmentation purposes.

5. Cross-border transfers of appropriation are constitutionally impermissible. Section 25(5) of Article VI of the Constitution prohibits the transfer of appropriation, not just savings. The Court stands by its pronouncement and will not allow strained interpretations.

6. Unprogrammed funds may only be released if the total revenues exceeded the target. The Court clarifies that revenue targets should be considered as a whole, not individually, to prevent artificial revenue surpluses. While the release of unprogrammed funds must still be based on aggregate revenue collection exceeding the aggregate revenue target, it does not necessarily have to be at the end of the fiscal year. Consistent monitoring of agency performance in terms of budget utilization is required.

7. The Court's construction of the provision on unprogrammed funds is a statutory, not a constitutional, interpretation of an ambiguous phrase. Therefore, the construction should be given prospective effect.

8. The misapplication of the operative fact doctrine in this case does not violate the presumption of good faith. The doctrine does not impute bad faith to authors, proponents, and implementors of an unconstitutional act. Good faith is presumed, whereas bad faith requires the existence of facts. Holding otherwise would result in a dangerous paralysis of bureaucratic activity.

9. The doctrine of operative fact can be applied to the PAPs under the DAP that can no longer be undone and whose beneficiaries relied in good faith on the validity of the DAP.

10. The doctrine of operative fact 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.

11. The Court denies the motion for partial reconsideration filed by the petitioners in G.R. No. 209442 for lack of merit.

12. The Court partially grants the motion for reconsideration filed by the respondents and upholds the efficacy of the DAP-funded projects by applying the operative fact doctrine. The Court declares certain acts and practices under the DAP unconstitutional, namely:

13. a. The withdrawal of unobligated allotments and declaration of withdrawn unobligated allotments and unreleased appropriations as savings prior to the end of the fiscal year without complying with the statutory definition of savings.

14. b. The cross-border transfers of savings of the Executive to augment the appropriations of other offices outside the Executive.

15. The Court also declares the use of unprogrammed funds void due to non-compliance with the conditions provided in the relevant General Appropriations Acts.

PRINCIPLES:

• The Constitution is the fundamental law to which all laws must conform. No act that conflicts with the Constitution can be valid. The three branches of government must yield obedience to the commands of the Constitution. (Mutuc v. Commission on Elections)

• The Constitution is the basic and paramount law to which all other laws must conform. Constitutional doctrines must remain steadfast regardless of the situation and must not be tailored to the whims and caprices of the government and the people who run it. (Biraogo v. Philippine Truth Commission of 2010)

• An appropriation bill must contain specific appropriations of money in order for the President to exercise his power of item veto. Items must be distinct and severable parts of the appropriation bill, not general provisions of law. (Belgica v. Ochoa and Bengzon v. Secretary of Justice of the Philippine Islands)

• The President's power of item veto applies to specific appropriations of money, not just general provisions in the appropriation law.

• Augmentation should be based on the last and indivisible purpose of a program in the appropriation law, not just the expense category or allotment class.

• Cross-border transfers of appropriation are constitutionally impermissible.

• Unprogrammed funds may only be released if the total revenues exceeded the target, and revenue targets should be considered as a whole to prevent artificial revenue surpluses.

• The doctrine of operative fact applies when nullification of the effects of an unconstitutional law or act would result in inequity and injustice.

• Good faith is presumed in the performance of duties by public officers unless there are concrete findings of bad faith or lack of due diligence and prudence.

• The presumption of good faith is a matter of law and can only be overcome by concrete evidence.

• Public officers further enjoy the presumption of regularity in the performance of their functions, but the presumption can be disputed.

• Operative fact doctrine: The Court applies the operative fact doctrine to uphold the efficacy of the DAP-funded projects, despite the invalidation of certain acts and practices under the DAP.

• Unconstitutionality of certain acts and practices under the DAP: The Court declares the withdrawal of unobligated allotments, declaration of savings, and cross-border transfers of savings as unconstitutional for being in violation of Section 25(5), Article VI of the 1987 Constitution and the doctrine of separation of powers.

• Void use of unprogrammed funds: The Court declares the use of unprogrammed funds void due to non-compliance with the conditions provided in the relevant General Appropriations Acts.