MALACAñANG

MANILA

January 21, 2002

THE HONORABLE SPEAKER

LADIES AND GENTLEMEN OF

THE HOUSE OF REPRESENTATIVES

Today, I am signing into law the General Appropriations Bill for Fiscal Year 2002 (House Bill No. 2840), as Republic Act No. 9162, entitled, “AN ACT APPROPRIATING FUNDS FOR THE OPERATION OF THE GOVERNMENT OF THE REPUBLIC OF THE PHILIPPINES FROM JANUARY ONE TO DECEMBER THIRTY-ONE, TWO THOUSAND TWO, AND FOR OTHER PURPOSES”, otherwise known as the General Appropriations Act for FY 2002.

I. GENERAL COMMENTS

I am pleased to note that the Twelfth Congress has once again lived up to their sworn duty to enact the General Appropriations Bill, the single most important legislative measure, at the soonest possible time. This clearly demonstrates that Congress is indeed a true and active partner of the Executive Department in achieving our common vision of making a positive difference in the lives of our people, especially the poor.

I am sincerely grateful to the House Committee on Appropriations and the Senate Committee on Finance, the leaders and members of the Twelfth Congress, for painstakingly crafting the appropriations bill that will support the priorities and strategies I have proposed for the operation of the government and for the implementation of vital programs and projects for FY 2002.

II. ITEMS FOR DIRECT VETO

However, pursuant to the powers vested in me by the Constitution, I am duty bound to directly veto a few items of appropriations, including special and general provisions, of the FY 2002 General Appropriations Bill (GAB), for the reason that they are inconsistent with the provisions of the Constitution as well as of existing laws and policies:

A. USE OF INCOME

A.1 STATE UNIVERSITIES AND COLLEGES - WEST VISAYAS STATE

UNIVERSITY

I hereby veto Special Provision No. 1, “Use of Income", page 232, which will authorize 1/5 of the earned income of West Visayas State University (WVSU) Hospital for the free hospitalization of indigent patients in Iloilo City. While the purpose of this special provision may be noble, the WVSU President and its Governing Board could not be divested of their authority under R.A. No. 8292 to determine the appropriate use of income as they see fit for the best interest of the University and the necessities of its service.

A.2 DEPARTMENT OF HEALTH – OFFICE OF THE SECRETARY

For the same reason as above, I hereby veto Special Provision No. 8, “Use of Income of the Western Visayas Medical Center (WVMC)”, page 363, which mandates that 1/5 of the earned income of the Center shall be used for hospitalization of indigent patients in Iloilo City. This compartmentalized authority, if allowed, would be an encroachment upon the legitimate discretion of the duly constituted management of the WVMC on the utilization of its income, to see to it that everybody, especially the indigents, regardless of affiliation and origin, is served by the Center.

A.3 DEPARTMENT OF JUSTICE - BUREAU OF IMMIGRATION

The Bureau of Immigration is not authorized in its charter to use its income. Under existing budgeting laws, use of income by agencies should be authorized by a separate substantive law. Otherwise, all income of agencies shall accrue to the General Fund of the Government. Hence, I hereby veto Special Provision No. 1, “Use of Income”, page 424.

However, as in the past when we have allowed the Bureau to use its excess income, it is still so authorized under Special Provision No. 9, “Use of Excess Fees and Charges”, page 1092 under the Unprogrammed Fund.

A.4 DEPARTMENT OF SCIENCE AND TECHNOLOGY – APPLICABLE TO

ALL AGENCIES UNDER THE DOST

On the same legal ground as I have elucidated in the immediately preceding veto, there is no separate statutory authority for the DOST, including all its attached Agencies, to use its income, hence, I hereby veto Special Provision No. 1, “Use of Income”, page 707.

B. IMPLEMENTATION OF PAY EQUALIZATION OF ELEMENTARY AND SECONDARY SCHOOL PRINCIPALS

Special Provision No. 23, Department of Education-Office of the Secretary, on “Implementation of Pay Equalization of Elementary and Secondary School Principals”, page 80, which provides that the amount of P191,000,000.00 shall be allocated and released for the final implementation of the pay equalization of elementary school principals in accordance with DECS-DBM Joint Circular No. 3 dated October 30, 2000, is hereby vetoed. The funding requirements for the purpose are already incorporated in the computation of the salaries under the Personal Services appropriations of all division offices of the Department.

C. LABORATORY SCHOOLS OF STATE UNIVERSITIES AND COLLEGES

Special Provision No. 15, Applicable to all State Universities and Colleges (SUCs), on “Laboratory Schools”, page 265, is hereby vetoed. The rule laid down in this special provision is similar to and a mere reiteration of the rule already provided under the preceding Special Provision No. 10, allowing SUCs to maintain laboratory classes which can be spread to campuses/branches offering teacher education program, provided that the total number of students in such laboratory classes shall not exceed 500 per SUC.

D. ENGINEERING AND ADMINISTRATIVE OVERHEAD OF THE DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS

Special Provision No. 9, “Engineering and Administrative Overhead”, Department of Public Works and Highways-Office of the Secretary, page 634, reduced the percentage allocation for Engineering and Administrative Overhead from 3.5%, as authorized in previous years, to 2%. This reduction would greatly impair the quality of projects, as well as implementation efficiency, due to inadequate funds for supervision and management, quality control, material testing and pre-construction activities and other engineering and administrative expenses directly related to project implementation. Hence, I hereby veto this provision. Accordingly, the Executive Department shall continue to observe the 3.5% overhead rate until such time that an adjustment becomes absolutely necessary.

E. AUTHORITY TO RETAIN AND USE INCOME OF THE PHILIPPINE RACING COMMISSION

I hereby veto Special Provision No. 1, Philippine Racing Commission (PhilRaCom), "Authority to Retain and Use Income", page 896. Although the Commission has authority in its charter to use its income, the retention thereof would violate sound fiscal and budget management policy. In addition, the agency has no separate statutory authority to retain its income. Accordingly, the use of income by the PhilRaCom shall be subject to existing budgeting laws, rules and regulations.

F. FUNDS FOR CAPITAL OUTLAYS OF THE PHILIPPINE NATIONAL OIL COMPANY

Special Provision No. 2 of the Philippine National Oil Company (PNOC), “Funds for Capital Outlays”, page 1304, prescribing a cap of P1 Billion for investments in exploration, exploitation and development of indigenous energy sources and a ceiling of thirty six percent (36%) of the outstanding capital stock in such equity investment, is hereby vetoed. While this was included in the budget proposal, recent developments indicate that the cap of P1 Billion and the 36% ceiling will constrain the flexibility of the PNOC to invest in its own subsidiary, the PNOC Petrochemical Development Corporation, for the implementation of the Naphtha Cracker Plant, which is one of the priority projects of the Administration.

However, the PNOC shall abide by the financial and narrative reporting requirements prescribed by Congress on the utilization of funds for capital outlays.

G. RELEASE AND USE OF APPROPRIATIONS RESERVES

Finally, I veto General Provision, Section 69, “Release and Use of Appropriation Reserves”, pages 1316-1317. Section 37, Chapter 5, Book VI of E.O. No. 292 already authorizes the establishment of reserves against appropriations to provide for contingencies and emergencies which may arise later in the calendar year and which would otherwise require deficiency appropriations; and the necessary adjustments in case conditions change during the fiscal year justifying the use of the reserves.

Accordingly, the Executive Department shall implement the imposition, release and use of appropriation reserves in accordance with the above-cited provision of E.O. No. 292. In the imposition of reserves, certain exceptions involving appropriations of vital nature shall be made like those pertaining to specific district projects or allocations that aim to address the necessities in the grass roots level.

III. ITEMS FOR CONDITIONAL IMPLEMENTATION

Apart from the directly vetoed items of appropriations, special and general provisions, I have noted provisions in the FY 2002 GAB that granted special authorizations; disregarded the requirement of Special Budget under Section 35, Chapter 5, Book VI of E.O. No. 292; and broadened the authority for utilization of fees and charges. These provisions need to be subsumed under existing budgetary regulations or covered by appropriate guidelines to ensure consistent implementation.

Accordingly, pursuant to Sections 1 and 17, Article VII of the Constitution, the implementation of some special and general provisions in the FY 2002 GAB shall be subject to Section 35, Chapter 5, Book VI of E.O. No. 292 or to policies and guidelines formulated by the Executive Department.

A. ACTIVITY A.III.a.2 OF THE PROFESSIONAL REGULATION COMMISSION - APPROPRIATIONS FOR PREPARATION OF TEST QUESTIONS AND THE CONDUCT AND THE RATING OF LICENSURE EXAMINATIONS

Under Activity A.III.a.2 of the Professional Regulation Commission, pages 911-912, the compensation of the chairmen and members of various Professional Regulatory Boards (PRBs) were indicated. With the enactment of R.A. No. 8981 and the issuance of its Implementing Rules and Regulations, however, I will begin to implement the rationalization of the compensation of chairmen and members of PRBs as mandated therein. Hence, the implementation of this activity shall be subject to guidelines to be issued jointly by the Professional Regulation Commission and the Department of Budget and Management.

B. SPECIAL AND GENERAL PROVISIONS SUBJECT TO SECTION 35, CHAPTER 5, BOOK VI OF E.O. NO. 292 REQUIRING SPECIAL BUDGET

A.1 DepEd-OSEC, Special Provision No. 3, “Allocation for Equivalent Record Form (ERF) and Master Teacher (MT)”, page 78

A.2 DOE-OSEC, Special Provision No. 1, “Use of Income”, page 272

A.3 DOF-BIR, Special Provision No. 2, “Use of Income”, page 320

A.4 DFA-OSEC, Special Provision No. 3, “Proceeds of Sale of Motor Vehicles and Insurance”, page 345

A.5 DFA-OSEC, Special Provision No. 9, “Use of Income”, page 345

A.6 DOH-OSEC, Special Provision No. 7, “Use of Income”, page 363

A.7 DND-VMMC, Special Provision No. 1, “Use of Income”, page 532

C. SPECIAL AND GENERAL PROVISIONS SUBJECT TO GUIDELINES FORMULATED BY APPROPRIATE AGENCIES

B.1 DepEd-OSEC, Special Provision No. 24, “Provision for IT Laboratory Dep. Ed.”, page 80 - by the Department of Education

B.2 SUCs-Palawan State University, Special Provision No. 1, “Release of Appropriations of the Palawan College of Arts and Trades”, page 216 - by the Commission on Higher Education

B.3 SUCs-Special Provisions Applicable to All SUCs, Special Provision No. 4, “Release of Appropriations for Branches of SUCs”, page 265 - by the Commission on Higher Education and the Department of Budget and Management

B.4 DFA-OSEC, Special Provision No. 9, “Use of Income”, page 345 - by the Department of Foreign Affairs and the Department of Budget and Management

B.5 DOH-OSEC, Special Provision No. 2, “Phase-out Plan”, page 362 - by the Department of Health, Department of Budget and Management and the League of Provinces

B.6 DPWH-OSEC, Special Provision No. 1, “Restriction on the Delegation of Project Implementation”, page 633 - by the Department of Public Works and Highways

B.7 Unprogrammed Fund, Special Provision No. 8, “Use of Fees and Charges”, pages 1091-1092 – by the Department of Budget and Management

B.8 General Provision, Section 21, “Domestic Purchases and Foreign Importations”, page 1310 – by the Department of Trade and Industry or the Department of Science and Technology

B.9 General Provision, Section 70, “Notice of Release of Funds”, page 1317 - by the Department of Budget and Management

B.10 General Provision, Section 78, “Lease-Rental of Computers and Other Information Technology (IT) Equipment”, page 1318 - by the National Computer Center

B.11 General Provision, Section 82, “Implementing Agency for Nationally Funded Projects”, pages 1318-1319 – by the Department of Budget and Management, specifically on the consultation requirement

D. MONITORING EXPENSES OF THE MOVIE AND TELEVISION REVIEW

AND CLASSIFICATION BOARD

Under Special Provision No. 1, Movie and Television Review and Classification Board (MTRCB), on “Monitoring Expenses of Board Members”, page 852, the monitoring expenses of P12,000.00 to be paid to each member of the Board per month should be within the level of appropriations authorized for the purpose. Hence, any deficiency shall be covered only by savings in appropriations of the MTRCB, subject to the approval of the Secretary of Budget and Management.

E. ALLOCATION FOR HEALTH PROMOTION AND DISEASE PREVENTION PROGRAMS OF THE FOUR SPECIALTY HOSPITALS

The implementation of Special Provision No. 1, "Allocation for Health Promotion and Disease Prevention Programs of Four (4) Specialty Hospitals", under Special Provision Applicable to Four (4) Specialty Hospitals, page 992, shall ultimately be subject to the policies adopted by each specialty hospital.

The four specialty hospitals had been providing more than five percent (5%) of their respective Maintenance and Other Operating Expenses for health promotion and disease prevention in their Corporate Operating Budgets. There is a danger that the five percent (5%) fixed in the special provision could be construed as a restriction on the hospitals to allocate more funds as may be necessary.

More importantly, the operations of these hospitals are funded not only from National Government subsidy but also from their internally generated funds. Although the activities funded from National Government subsidy are geared towards health promotion and the prevention and treatment of specific diseases, the specialty hospitals, as government corporations, should be given the flexibility in the allocation of their funds for programs and activities deemed necessary to achieve their specific mandates.

F. USE OF FEES AND CHARGES

The authority to use fees and charges under Special Provision No. 8 of the Unprogrammed Fund, “Use of Fees and Charges”, pages 1091-1092, is purposely granted to some agencies to facilitate the replenishment of the supplies utilized and direct operating expenses incurred in the event of deficiencies in appropriations in the pursuit of their business-type activities during the year.

Accordingly, the following authorizations shall be subject to separate guidelines to be issued by the Department of Budget and Management:

Department/Agency Source of Income Purpose

JUSTICE

National Bureau of Issuance of Clearance To augment maintenance

Investigation Certificate and other operating

expenses, purchase of

computers and equipment

and construction of building

Department/Agency Source of Income Purpose

Land Registration Registration Fees Construction of various

Authority provincial and city office

buildings, microfilming of

all vital lead documents,

and for expenses relative

to its computerization project

NATIONAL DEFENSE

Veterans Memorial Income derived To augment its maintenance

Medical Center from fees, golf and other operating expenses

operations and and necessary capital outlays

other income of the hospital

Notwithstanding the above, I note that the VMMC is separately authorized to use its income under DND-VMMC Special Provision No. 1.

IV. GENERAL OBSERVATIONS

I have noted that the FY 2002 GAB includes, as annexes, the following items, namely, “Debt Service – Interest Payment” (Annex A), pages 1349-1350, and “Debt Service – Principal Amortization” (Annex B), pages 1351-1352. I consider the attachment as items for information only. Otherwise, said items would be directly vetoed for the reason that they are inconsistent with the Foreign Borrowings Act (R.A. No. 4860, as amended), Section 31 of PD No. 1177, and Section 26, Chapter 4, Book VI of Executive Order (E.O.) No. 292, the Administrative Code of 1987.

Likewise, I note the following special and general provisions and hereby express my views thereon:

A. CONGRESS OF THE PHILIPPINES, Special Provision No. 2, Applicable to the Congress of the Philippines, “Organizational Structure of the Senate, the House of Representatives, the Senate and House of Representatives Electoral Tribunals and the Commission on Appointments”, page 13

This special provision had always been included as one of the observations in previous Veto Messages since 1989. I would like to affirm the trust of my predecessors that the leadership of Congress and the institutions covered by the provision shall faithfully observe, particularly on the aspect of compensation, the letter and spirit of the constitutional principle of salary standardization which Congress itself enshrined as a state policy under R.A. No. 6758, the Compensation and Position Classification Act of 1989, and Joint Resolution No. 1, s. 1994 of Congress, as well as in R.A. No. 6686, as amended by R.A. No. 8441.

B. DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES, Special Provision No. 4, Office of the Secretary, "Release and Implementation of Foreign-Assisted Projects for Environmental Management", page 279

In this special provision, particularly that pertaining to the release of the amounts authorized therein, I interpret the phrase "shall be released directly to the Environmental Management Bureau through the Office of the Secretary" to mean that the release of the amounts shall be made to the DENR Office of the Secretary which, in turn, would sub-allot the same to the Environmental Management Bureau.

C. INTERNAL REVENUE ALLOTMENT, Special Provision No. 1, "Use of the Fund", page 1039

I have noted that the Internal Revenue Allotment (IRA) has been fully incorporated in the GAB, which means that Congress did not accept the proposal for IRA to be automatically appropriated. Nevertheless, the IRA had been appropriated without reduction.

In this regard, as previously authorized in prior years and in order not to impair local government budgets, and ultimately, the operations of LGUs, the enforcement of the provisions of Sections 325 (a) and 331 (b) of the Local Government Code of 1991 (R.A. No. 7160) on the 45%-55% Personal Services limitation shall continue to be waived to enable local government units to:

i. absorb national government personnel transferred on account of devolution;

ii. in the case of newly-created cities, absorb the cost of devolved hospital services transferred from provinces;

iii. create the mandatory positions specified in the Code;

iv. continue the implementation of the Compensation Standardization Law authorized under R.A. No. 6758 for provinces, cities and municipalities and as provided for under existing guidelines for the barangays; and

v. continue the payment of Magna Carta benefits of Public Health Workers.

Likewise, the capitalization of the Partido Development Administration to be subscribed and paid by the member-municipalities pursuant to R.A. No. 7820 may continue to be charged against the respective IRA of the member-municipalities.

D. General Provisions, Section 5, “Trust Receipts”, page 1306

It is understood that, as provided under existing laws, authorized receipts from non-tax sources by any government office or agency acting as a trustee, agent or administrator, or those which have been received as guaranty for the fulfillment of an obligation, and all other collections classified as trust receipts are treated as trust liabilities of the agency concerned. Otherwise, all other receipts shall accrue to the General Fund of the National Government.

In this regard, receipts filed to guarantee the re-exportation of temporary importations, being by their nature trust receipts, shall likewise be treated as trust liabilities.

E. General Provisions, Section 14, “Loan Agreements”, page 1308

I interpret the term "Untied loans" as used in the general provision as those loans that have no conditionalities. They are distinguished from “program loans”, which by technical definition, are foreign loans which are conditioned on the attainment of reforms in specific government sectors or programs and the proceeds thereof are attributable to regular or existing expenditure items authorized in the General Appropriations Act.

F. GENERAL PROVISIONS, Section 36, “Authorized Deductions”, page 1312

I fully agree with the intent of this general provision. However, I interpret the declaration in the general provision that, "It shall be unlawful for departments, bureaus, offices and agencies to collect any form of service fees for the payment of any obligation through authorized deductions" as excluding payment of service fees by the GSIS, HDMF, PHIC and other Government Financial Institutions, the BIR, or entities specifically allowed by existing laws.

The service fees duly collected shall be deposited with the National Treasury, and may later be used by the agencies concerned for the establishment of Provident Funds in favor of all its employees in accordance with existing rules and regulations.

V. INCREASES IN APPROPRIATIONS AND NEW BUDGETARY ITEMS

The budgetary reallocation made by Congress which provided additional allocations for programs or projects or which introduced new items in the budgets of some departments, bureaus, offices and agencies including special purpose funds, shall be implemented subject to Presidential approval pursuant to Section 25(5), Article VI of the Constitution, and in accordance with the requirements of Section 35, Chapter 5, Book VI of E.O. No. 292.

VI. CLOSING STATEMENT

As I sign the FY 2002 General Appropriations Bill into law, I express my high regard for the leaders and members of both Houses of Congress, especially to the House Committee on Appropriations and the Senate Committee on Finance, for their selfless efforts in the expeditious enactment of the Bill.

Most importantly, I am grateful that the Twelfth Congress has acceded to my request not to look just at peso signs, but at the faces of the people whose hopes for survival are pinned on what we can do for them and on what we can do for our nation. This is a good start for the year.

This Bill has become Republic Act No. 9162.

Very truly yours,