Supreme Court Strikes Down Key Provisions of 2024 to 2026 National Budgets

 

The Supreme Court has declared several provisions in the Philippines' 2024, 2025, and 2026 national budgets unconstitutional, ruling that congressional increases to certain appropriations and changes to revenue-based spending conditions violated constitutional and statutory limits.

The decision, penned by Senior Associate Justice Marvic Leonen and released on October 7, reinforces the restrictions on Congress's power to modify the national budget and limits the Executive's discretion to release standby funds without meeting established fiscal requirements.

At the center of the ruling is a fundamental principle of public finance: government spending must follow the budget framework proposed by the President and approved within constitutional boundaries. Congress cannot circumvent those limits by shifting large amounts into reserve allocations or altering the conditions under which public money becomes available.

P449.5 Billion Increase Invalidates 2024 Budget

The Court declared Republic Act No. 11975, or the 2024 General Appropriations Act, unconstitutional after finding that Congress increased unprogrammed appropriations by P449.5 billion through the Bicameral Conference Committee.

The adjustment raised the allocation for these standby funds from the P281.9 billion proposed in the National Expenditure Program to P731.4 billion in the enacted budget.

Unprogrammed appropriations are contingent funding authorizations that may be released when specified revenue or financing conditions are satisfied. They are not inherently unconstitutional. However, the Supreme Court emphasized that their creation and use must remain consistent with constitutional spending limits.

Article VI, Section 25(1) of the Constitution prohibits Congress from increasing the total appropriations recommended by the President for the operation of the government. According to the Court, this restriction covers both programmed and unprogrammed appropriations.

By leaving the programmed budget unchanged while substantially increasing standby allocations, lawmakers effectively expanded the overall spending authority beyond the Executive's original proposal.

The ruling underscores why the distinction between programmed and unprogrammed funds cannot be used to bypass fiscal safeguards. A reserve allocation remains part of the national budget and must be counted when determining whether constitutional limits have been respected.

The decision granted the petition filed by the late lawmaker Edcel Lagman and other petitioners and partly granted the petition of former senator Aquilino Pimentel III.

Supreme Court Rejects SAGIP Lump-Sum Funding

The Court also invalidated the Strengthening Assistance for Government Infrastructure and Social Programs, commonly known as SAGIP, which appeared in the 2024 and 2025 budgets.

The justices classified SAGIP as an unconstitutional lump-sum appropriation because it provided a single pool of funding for multiple purposes without sufficiently identifying the specific projects to be financed when the budget was enacted.

Under this arrangement, the Executive could determine spending priorities and select projects during budget implementation. The Court found that this approach weakened transparency, reduced public oversight, and compromised the constitutional division of responsibilities between Congress and the Executive.

The ruling also raised concerns about the President's item-veto power. When funding is grouped into a broad allocation rather than clearly defined appropriations, the constitutional mechanism for reviewing and rejecting specific spending items becomes less effective.

The Court's reasoning draws on its earlier ruling in Belgica v. Ochoa, which addressed unconstitutional lump-sum appropriations and safeguards against discretionary spending mechanisms.

The latest decision reinforces the requirement that public expenditures be sufficiently defined and subjected to legislative scrutiny before funds are released.

P17.99 Billion Road Fund Increase Also Declared Unconstitutional

The 2025 General Appropriations Act, or Republic Act No. 12116, was also struck down on a separate ground involving the Department of Public Works and Highways Special Road Fund.

The Supreme Court granted the petition filed by the Filipinos for Peace, Justice and Progress Movement Inc. and other petitioners, finding that Congress unlawfully increased the fund's programmed line-item appropriation by approximately P17.99 billion.

The Special Road Fund is financed through Motor Vehicle User's Charge collections and is classified as a Special Account in the General Fund.

Although Congress generally has authority to supplement appropriations, the Administrative Code restricts lawmakers from increasing amounts specified in special provisions beyond those proposed by the President.

The Court found that the additional allocation violated this statutory restriction. The decision highlights that legislative authority over the national budget remains subject not only to constitutional requirements but also to specific laws governing particular funds.

Separately, the Court identified P12.75 billion in increases to Special Accounts in the General Fund across certain agencies as inconsistent with the Administrative Code's restrictions.

2026 Budget Provisions on Revenue Surpluses Nullified

The Court's decision also addressed the 2026 General Appropriations Act, invalidating Special Provisions 1(a) and 1(b) under Chapter XLIII.

These provisions allowed unprogrammed appropriations to be triggered by excess collections from individual non-tax revenue sources or by newly established revenue streams.

The Supreme Court reaffirmed that the release of unprogrammed funds must depend on whether aggregate government revenue collections exceed the overall revenue targets assumed in the Budget of Expenditures and Sources of Financing.

Assessing revenue performance on an individual-source basis can produce an apparent surplus even when total collections remain below the government's overall target.

For example, one agency or revenue stream might collect more than expected while other sources underperform. Treating the isolated increase as a genuine surplus could authorize spending without sufficient support from the government's overall fiscal position.

The Court warned that this approach creates an artificial surplus, undermines the integrated budget plan, and risks contributing to deficits.

Acting on the petition filed by lawmakers Edgar Erice and Leila De Lima, the Court issued a permanent injunction prohibiting the Senate, House of Representatives, Office of the Executive Secretary, and Department of Budget and Management from implementing the challenged provisions.

Existing Projects Protected, but Officials May Face Liability

Despite declaring the challenged provisions unconstitutional, the Court applied the doctrine of operative fact to protect programs, projects, and beneficiaries who had already relied in good faith on the 2024 and 2025 budgets.

The doctrine recognizes that certain real-world consequences of an invalidated law may need to be preserved to prevent unfair or disruptive outcomes.

However, the protection does not automatically extend to the officials who authored, promoted, or implemented the unconstitutional provisions.

Those officials may still face civil, criminal, or administrative liability unless the appropriate tribunals determine that they acted in good faith.

This distinction allows the government to avoid unnecessarily disrupting legitimate activities and beneficiaries while preserving the possibility of accountability for public officials involved in the disputed budget provisions.

What the Ruling Means for Philippine Public Spending

The Supreme Court's decision establishes important limits on how lawmakers can adjust budget allocations and how the government can authorize spending from contingent funds.

First, unprogrammed appropriations cannot be used to circumvent the constitutional ceiling on the national budget. Second, lump-sum funding mechanisms must not give the Executive unchecked discretion to select projects after enactment. Third, statutory restrictions governing special accounts remain binding on Congress. Finally, the release of standby funds must reflect the government's overall revenue position rather than isolated collection gains.

For taxpayers, the decision reinforces the principle that public money must be allocated through a transparent and legally compliant process. For policymakers, it signals that changes to the national budget must respect the President's proposed fiscal framework and the constitutional safeguards governing public expenditure.

The broader implication is clear: fiscal flexibility does not exempt the government from accountability. Even when additional funds appear available, their allocation and release must follow the legal framework designed to protect public resources and maintain discipline in government spending.