This institution of an automatic appropriation for debt was largely unopposed because the measure was needed in order to maintain capacity to borrow at reasonable rates, and in order to save Congress the trouble of passing a specific bill every year. Thus, for many years this was the only federal spending that was put on what a later age might call “automatic pilot” [Gordon, 1995].
Our budget thus, with Section 31(B) in place, is under an “automatic pilot” which prioritizes loan repayments rather than social or economic services, with our helpless Congress scrambling to allocate what meager is left after paying our debts.
This provision is responsible for the fact that for all post-EDSA governments, from 1986 to 2008, debt service for interest payments alone already averaged around 25.72% of the national government budget. Moreover, from 1986 to 1996 and 1999 to 2008, interest payment allocation exceeded education spending, despite the provision in the Philippine Constitution, Article XIV, Section 5.5, stating that education is supposed to receive the highest budgetary allocation.
There are other challenges. Former Senior Commissioner of the Commission on Audit (CoA) Bartolome C. Fernandez Jr., who crafted during his time COA Resolution No. 89-44 (adopted Sept. 7, 1989) which is COA’s official position on the Section 26(B) of EO 292 amid doubts as to the continued applicability and effectivity of PD 1177 (Sec. 31) vis-à-vis the constitutional injunction that “No money shall be paid out of the Treasury except in pursuance of an appropriation made by law” which “shall originate exclusively in the House of Representatives” (Sec. 29(1) and Sec. 24, Art. VI, 1987 Constitution).
Fernandez believes that “was deemed inconsistent with the 1987 Constitution pursuant to its Transitory Provision to the effect that only those decrees and other executive issuances ‘not inconsistent with this (1987) Constitution shall remain operative until amended, repealed or revoked (Sec. 3, Art. XVIII).’ The inconsistency was demonstrated by the fact that PD 1177 was issued by President Marcos alone and not enacted by Congress and, hence, was not an appropriation law within the contemplation of the Constitution; that it did not originate from the House of Representatives or undergo the legislative process of appropriation mandated by the Constitution; and that being an executive issuance under a regime of authoritarianism, it was promulgated without the consent of the sovereign people. Given such inconsistency, the COA concluded that PD 1177 ceased to be operative after the ratification of the 1987 Constitution.” [Inquirer, 2010].
Bills repealing or amending the automatic appropriations provision or Section 26(B) of the Revised Administrative Code of 1987 has been re-filed by many representatives in the 14th Congress, but failed to advance . These bills include HB00179 by Rep. Juan Edgardo M. Angara, HB00329 by Appropriations Committee Chairperson Rep. Edcel Lagman, HB01115 by Bayan Muna Rep. Satur Ocampo, HB01134 by Gabriela Rep. Liza Maza, HB01721 by Rep. Ma Rachel J. Arenas, HB03284 by Rep. Rufus Rodriguez, and HB04426 by Rep. Narciso Santiago III. During the House deliberations on HB 2454 (2008 GAB), there has been a consensus between Minority Leader Rep. Ronaldo Zamora and Lagman to support the repeal of the provision.
In May 2009, FDC President and Rep. Walden Bello filed HR01509 urging the House to fast track the passage of appropriate bills calling for the repeal and/or amendment of the automatic appropriations provision so as to pave way for a moratorium on the payment of external debts so the country can effectively deal with the economic and climate crises. The proposal, however, has been pending on the Committee on Rules since December 2009.
For the Senate, Sen. Pia Cayetano (who just won a second-term after the 2010 elections) and Senate Minority Leader Aquilino “Nene” Q. Pimentel, Jr. (PDP-Laban) during the 2008 budget deliberations called for the repeal of the automatic appropriations, which was re-echoed by the media. Cayetano also filed Senate Resolution 235 to review the provision. Bills explicitly repealing the provision like SB1558 by Sen. Jinggoy P. Ejercito-Estrada and SB1591 by Sen. Antonio “Sonny” F. Trillanes IV were also filed in the 14th Congress.
• PhP 15.9 billion corresponding to savings as a result of the appreciation of the peso with the exchange rate recomputed at PhP 41 to a dollar from a high assumption of PhP 48: $1 in the NEP ( National Expenditure Program) or a PhP 7 differential (savings of PhP 2.272 billion is generated for every peso appreciation); The FDC research cluster provided the figure (included in all scenarios on savings from PhP 48: $1 to PhP 38: $1).
• PhP 5 billion in premature allocations for interest payments for program loans and bond issuances still in the pipeline.
• Support to priority social programs – savings generated in excess of PhP 25.9 billion from interest on foreign loans due to peso appreciation — priority requirements for education and health. Also, based on the Bicameral Conference Summary Report, the PhP 25.9 billion debt service cuts were used for augmenting the appropriations for health, education, agriculture, social welfare, infrastructure, local governance , justice and judiciary , labor and employment, energization, environment, and public safety and security, among others.
The proposal was vetoed by then President Gloria Macapagal-Arroyo. The presidential veto was justified on the following grounds: (1) automatic appropriation for debt service is allowed by law and has been declared constitutional; (2) the prohibition on disbursement of funds for interest payments on loans challenged as fraudulent, wasteful and/or useless is an encroachment on the constitutional guarantee of non-impairment of contracts; and (3) the government’s credit standing needs to be preserved and protected.
• Gordon, John Steele (1995, November). The Federal Debt: And how it grew, grew, and grew. American Heritage Magazine, Volume 46, Issue 7.
• Krishnakumar, Anita S. (2005). In Defense of the Debt Limit Statute. President and Fellows of Harvard College Harvard Journal on Legislation (JOL) – Volume 42, Number 1, Winter 2005.
• Fernandez Jr., Bartolome C. (2010, September 24). Debt servicing violates 1987 Constitution. Philippine Daily Inquirer (Letter to the Editor).