Cash reversions are not revenues
The recent Supreme Court (SC) ruling declaring unconstitutional the transfer of Philippine Health Insurance Corp. (PhilHealth) funds to the National Treasury has exposed more than an isolated budgetary abuse. It has revealed a dangerous fiscal illusion—one that helps explain why the unprogrammed appropriations (UA) mechanism should no longer exist.
At the center of the controversy are Special Provision 1(d), Chapter XLIII, Unprogrammed Appropriations of the 2024 General Appropriations Act and Department of Finance (DOF) Circular No. 003-2024, which authorized the transfer of “unused” or “excess” fund balances of government-owned and controlled corporations to the Bureau of Treasury. Using this provision, the DOF, defining “fund balance” as unrestricted cash and investments, ordered the remittance of P167 billion from PhilHealth and the Philippine Deposit Insurance Corporation (PDIC). The SC voided both for being unconstitutional riders and constituting grave abuse of discretion.
The SC has now ruled that this maneuver—at least as applied to PhilHealth—is unconstitutional. The reason is fundamental: PhilHealth funds are trust funds, collected for a specific purpose and protected by law. They cannot be swept into the general coffers of government and treated as new revenue to activate the UA. But the implications of this ruling go far beyond PhilHealth.
Reversions are not revenues. In 2024, revenue agencies struggled to meet targets. Tax collections did not significantly exceed programmed levels. Yet the government projected an image of robust fiscal performance—one that supposedly justified the activation of the massive UAs.
How? By relabeling reversions of reserved funds legally earmarked to provide health care, particularly for indigents and the elderly who rely on government premium subsidies as “revenue collections.”
PhilHealth’s unused subsidy and PDIC’s Deposit Insurance Fund were never tax revenues. They were not earnings. They were earmarked, trust-based funds, temporarily parked in government institutions for specific purposes: health insurance protection and deposit insurance stability.
Calling their forced remittance to the Treasury “new” or “excess” revenue was not just accounting sleight of hand. It was a legal fiction—one now dismantled by the SC.
Once that fiction is removed, the conclusion is unavoidable: there were no real excess revenues in 2024.
Why this matters for UAs. The UA exists only on one condition: that additional money becomes available beyond what Congress originally programmed. The law is explicit—UA may be released only if there are excess revenues, new revenue sources, or unprogrammed loan proceeds, duly certified by the Treasury.
But if the supposed “new revenues” were actually unconstitutional cash reversions, then the legal trigger for UA never existed.
This means that any reliance on Special Provision 1(d) reversions to justify UA releases was invalid from the start. And this exposes the deeper danger of the UA mechanism.
UA as a temptation toward fiscal abuse. For decades, UA was a marginal feature of the budget—small, seldom used, and largely ignored. But between 2023 and 2025, UA ballooned to extraordinary levels, reaching hundreds of billions of pesos.
Such scale creates irresistible temptations. UA becomes a standing invitation to manufacture triggers when real revenues fall short. It encourages fiscal adventurism: sweep trust funds, reclassify balances, stretch accounting rules, and then claim that Congress-authorized standby appropriations can now be activated. In short, UA rewards fiscal imprudence.
Worse, it facilitates pork. By holding vast sums “in reserve,” UA weakens transparency and enables backdoor reallocations, post-enactment bargaining, and the masking of patronage-driven projects behind technical budget jargon.
The Supreme Court has shown the way. By striking down the PhilHealth fund reversion, the SC has made a critical point: cash availability does not equal lawful revenue. Trust funds cannot be treated as fiscal slack. Accounting convenience cannot override constitutional limits.
Applied consistently, this ruling undermines the very logic that has been used to justify the activation of UAs.
The lesson is clear. UA is no longer a harmless contingency mechanism. It has become a structural vulnerability—one that incentivizes creative accounting, undermines fiscal discipline, and opens new pathways for pork and abuse.
A necessary reform. If we are serious about restoring integrity to the budget process, the answer is no longer incremental reform. The UA must be abolished.
Not only because it raises constitutional questions, but because experience has shown that it invites the very abuses our Constitution was designed to prevent.
The SC has closed the door on unconstitutional fund reversions. It is now up to Congress—and the public—to close the door on the mechanism that made those reversions tempting in the first place.
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Atty. Florencio “Butch” Abad is a former Secretary of Budget and Management and former Chair of the House Committee on Appropriations. He is currently a Professor of Praxis at the Ateneo School of Government.
