Freedom from Debt Coalition

#11 Matimpiin St., Brgy. Pinyahan, Quezon City 1100

Tel.: +63-2-9211985 / Telefax: +63-2-9246399 / www.fdc.ph

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

Toward Fiscal Democracy

The Freedom from Debt Coalition (FDC) appeals to the 16
th
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 administrations 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

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

Automatic appropriation for debt severely compromises the legislatives 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.

FDC enjoins Congress to reclaim its power to set budget levels by repealing this archaic provision in the
budget law. The 16
th
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

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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.

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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

Finally, FDC enjoins the 16
th
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.