The Society of Honor by Joe America

By Giancarlo Angulo

Preface

For some time the company I worked for maintained eBudget, URS, OSBP, and most of the budget-related systems. That ended when I resigned to start consulting for the SEC. As I often try to do, I do not like not knowing the main processes, the main workflow, the main decision points, and the main things the IT system does. In the end, IT is just a means to an end. The IT system serves the business goals.

This primer is a way to demystify the budget and to add to what is in the public domain. During the time of Secretary Abad, the guiding principle was Budget ng Bayan: bridging the budget so people could understand how it serves their needs. Open Data was a big buzzword then. During GMA’s time I remember the PFM work that probably guided a lot of the reforms in public financial management. Those topics are for another time.

I must confess that this post was inspired by the recent Supreme Court ruling. That ruling is the subject of part 4.

This is part 1 of 4 in The Budget Series. This part is the overview: who does what, the budget year, the rules on Congress, and where the money goes. Part 2 covers how the National Expenditure Program is generated. Part 3 covers how the budget is managed once it is signed. Part 4 covers how the rules have been tested, including the Supreme Court ruling.

The question

Where does a peso in the national budget come from, and who can change it at each step?

TLDR

• The budget runs in four phases: preparation, legislation, execution and accountability. The executive runs the first and the third, Congress the second, and the Commission on Audit (COA) the fourth.
• Congress can cut the President’s proposed budget but cannot raise it (Constitution, Article VI, Section 25(1)).
• A peso that is appropriated is not a peso that is spent. On June 30, 2026, agencies had obligated 49.5% of the allotments released to them.
• The previous year’s budget has been re-enacted, in whole or in part, in 12 fiscal years since 2001, including a full year in 2001, 2004 and 2006.
• This post is accurate as of October 24, 2026.

Who does what

Step	Who	What they decide	The limit
Set the numbers	Development Budget Coordination Committee (DBCC), chaired by the DBM Secretary, with DEPDev, the DOF, the Office of the President and the BSP (as the Supreme Court describes it)	Growth, inflation and revenue assumptions; the total budget and deficit	Must be consistent with the medium-term fiscal program
Call for proposals	Department of Budget and Management (DBM)	What agencies may ask for, and when	The budget call and later memos
Propose	Each agency	Tier 1 (ongoing) and Tier 2 (new or expanded) requests	Ceilings set by DBM
Submit	The President	The National Expenditure Program (NEP)	Within 30 days of Congress opening its session (Art. VII, Sec. 22)
Start the bill	House of Representatives	Appropriation bills begin here	Art. VI, Sec. 24
Amend	Senate, then a bicameral conference committee	Reconcile the two versions	Only real differences between the two versions (see part 4)
Sign or veto	The President	Approve, or veto particular items	Cannot add items; override needs two-thirds of each House
Release	DBM	Allotments and cash	The budget law’s own rules
Spend	Agencies	Obligate and pay	Validity period, then reversion
Audit	COA	Post-audit of the accounts	Art. IX-D, Sec. 2

The budget year, using FY2027 as the example

1. Preparation (executive). The cycle for fiscal year 2027 opened on January 5, 2026, when DBM issued National Budget Memorandum No. 156, the budget call. It aligns the budget with the Philippine Development Plan midterm update and applies the Cash Budgeting System: only programs that are ready to be implemented and can be completed within the year, or within the allowed implementation period, are meant to be funded. Regional priority projects need endorsement from the Regional Development Councils.

Agencies file in two tiers. Tier 1 is the cost of ongoing programs at the same cost and quality. Tier 2 is new or expanded spending, ranked against a Budget Priorities Framework (NBM 157, March 16; Tier 2 proposals due April 24). Proposals go in through DBM’s Online Submission of Budget Proposals system. The DBCC approved the macroeconomic assumptions on May 25 and the fiscal program on June 16. Executive Review Board hearings ran June 1 to 15, and NBM 158 (June 25) gave each agency its FY2027 ceiling. After a presentation to the President and Cabinet, DBM handed the NEP to the President on August 10 and to the House on August 11. Part 2 goes through how the NEP is built.

2. Legislation (Congress). The Constitution gives the President 30 days from the opening of the regular session to submit the budget. Congress opened on the fourth Monday of July, which was July 27, so the deadline would have been August 26 (my arithmetic). The House acts first. The Senate amends. If the two versions differ, a bicameral conference committee reconciles them. The President then signs, or vetoes particular items.

There is also a safety net. If Congress has not passed the new budget by year end, the previous year’s budget is deemed re-enacted (Art. VI, Sec. 25(7)). Justice Singh, in a separate opinion in the October 2026 ruling, traces the rule to Section 7 of the 1902 Philippine Organic Act, which kept the colonial government running if the Philippine Assembly failed to pass appropriations. It has been used more often than most of us remember:

Fiscal year	Budget that was re-enacted	How long	Source
2001	2000 budget	Full year	DBM; Abad
2002	2001 budget	Until January 21, 2002	Abad
2003	2002 budget	Until May 12, 2003 (Abad); “3 months” (DBM)	Abad; DBM
2004	2003 budget	Full year	DBM; Abad
2005	2003 budget, as re-enacted	Until March 16, 2005 (Abad); “4 months” (DBM)	Abad; DBM
2006	2005 budget	Full year	DBM; Abad
2007	2005 budget, as re-enacted	Until March 23, 2007	Abad
2008	2007 budget	Until March 16, 2008 (Abad); “3 months” (DBM)	Abad; DBM
2009	2008 budget	Until March 16, 2009 (Abad); “3 months” (DBM)	Abad; DBM
2010	2009 budget (RA 9524)	Until the 2010 budget (RA 9970, approved February 8, 2010)	DBM circulars 2010-1 and 2010-2
2019	2018 budget (RA 10964)	The 2019 budget (RA 11260) was signed April 15, 2019; DBM charged releases to the re-enacted budget from January 2 to April 30	Rappler; DBM
2026	2025 budget (RA 12116)	Until January 4, 2026; the 2026 budget (RA 12314) took effect January 5	DBM Circular 599

I found no re-enacted budget between 2011 and 2018 or between 2020 and 2025. I did not look at years before 2001. Where two sources give different lengths for the same year, I show both. DBM’s own 2019 briefing listed only 2001, 2004 and 2006 as full years and 2003, 2005, 2008 and 2009 as partial years. Former Budget Secretary Florencio Abad wrote in 2014 that all budgets from 2001 to 2010 were re-enacted at least in part, and the DBM circulars show that 2010 was one of them. The 2019 briefing said the 2019 budget was the first re-enacted one in eight years, and the dates above put the previous one in early 2010.

What a re-enacted budget means in practice: agencies can keep the lights on but not start much that is new. In the first quarter of 2019, DBM let agencies obligate up to 25% of the lower of the 2018 budget or the proposed 2019 amount for regular programs and ongoing foreign-assisted projects. Centrally managed items and special purpose funds needed a separate release on a special budget request. DBM listed the costs: the fourth tranche of the salary increase for about 1.4 million civilian personnel was delayed by a quarter (P10.72 billion), pension benefits were not indexed, and P28.4 billion of ongoing and P43.74 billion of new infrastructure projects were affected. In 2010 the January limit was one twelfth per month. Abad’s paper makes a further point: a re-enacted budget leaves the President more savings to use at their discretion, which tilts the balance toward the executive. The 2026 gap lasted four days, but in 2001, 2004 and 2006 the country ran a full year on the previous budget.

3. Execution (executive). The budget law is itself the “allotment order” for most items, meaning agencies may obligate under it. Items with conditions, or lump sums without details, need a Special Allotment Release Order (SARO) or General Allotment Release Order (GARO) from DBM. Cash comes separately through Notices of Cash Allocation (NCA), issued by quarter and “subject to actual agency disbursement performance”. Under the 2026 budget law (Section 77), appropriations are valid for release and obligation until December 31, 2027, except personnel services, which is December 31, 2026. After that, unreleased and unobligated amounts revert to the General Fund unless Congress acts again. Part 3 goes through how the budget is managed.

4. Accountability. COA audits after the fact. I have kept this part short because I have not researched it beyond the Constitution.

What Congress can and cannot do

The Constitution has more rules about the budget than most of us remember. The ones that matter for this post:

• Congress “may not increase the appropriations recommended by the President” (Art. VI, Sec. 25(1)). It can cut, and it can move money around within the total. The ceiling comes from the 1935 Constitution, was dropped in 1973, and was restored in 1987 after a member of the Constitutional Commission raised it (Justice Singh’s opinion).
• No provision may be placed in the general appropriations bill unless it relates specifically to a particular appropriation in it (Sec. 25(2)). This is the “rider” rule behind the PhilHealth ruling in December 2025.
• No law may authorize transfers of appropriations. Only the President, the Senate President, the Speaker, the Chief Justice and the heads of constitutional commissions may be authorized to augment items in their own offices from savings (Sec. 25(5)).
• The President may veto “any particular item or items” without affecting the rest (Sec. 27(2)). The President cannot rewrite them.

Three kinds of money in the proposal

The FY2027 proposal is P7,200.2 billion, up P407.0 billion, or 6.0%, from the 2026 budget of P6,793.2 billion. It is 21.7% of GDP. It has three kinds of money, shown here down to their main lines (amounts in billions of pesos):

Kind	Component	Amount	Share of total
Programmed		4,494.1	62.4%
	Departments and agencies	3,858.2	53.6%
	Special purpose funds	635.9	8.8%
Automatic		2,706.1	37.6%
	National Tax Allotment (to local governments)	1,319.8	18.3%
	Interest payments	1,114.3	15.5%
	BARMM block grant	104.2	1.4%
	Retirement, life and insurance premiums	89.0	1.2%
	Special accounts	35.6	0.5%
	Net lending	28.7	0.4%
	Tax expenditures	14.5	0.2%
Unprogrammed		112.0	1.6%
	Restoring the fund balances of the PDIC	57.0	0.8%
	Support to foreign-assisted projects	42.6	0.6%
	Conversion of national government advances into subsidy for GOCCs	8.8	0.1%
	Program on risk management	3.6	0.05%
Total		7,200.2	100.0%

Source: DBCC briefing to Congress, August 17, 2026 (slides 4 to 6). Shares are of the P7,200.2 billion total, so lines may not add exactly because of rounding. Two automatic lines, military camp sales proceeds and pensions of former presidents and widows, are zero at this precision.

• Programmed is the money with identified sources. The proposal rolls it up into two parts: what departments and agencies spend directly (P3,858.2 billion), and special purpose funds (P635.9 billion), which are lump-sum accounts managed centrally. The Court’s list for the 2024 budget included the Contingent Fund, the National Disaster Risk Reduction and Management Fund, the Pension and Gratuity Fund and budgetary support to government corporations. The deck I used does not break the P3,858.2 billion down by department on its own; its department table includes automatic appropriations.
• Automatic is spending that existing laws already require, led by the National Tax Allotment and interest payments, which together are more than a third of the whole proposal.
• Unprogrammed is standby authority: money that can be spent only if revenues come in above target or certain other funds arrive. The Supreme Court calls it a “narrow contingent appropriation”. The FY2027 proposal cuts it to P112.0 billion, from P249.9 billion proposed for 2026.

By sector, the proposal puts social services at 34.1%, economic services at 25.5%, general public services at 18.3%, debt burden at 15.9% and defense at 6.3%. By recipient, national agencies get 60.2%, local governments 21.3%, interest 15.5% and government corporations 3.1%.

Health is P353.8 billion of the proposal, or 4.91%, and includes the DOH, the specialty hospitals and PhilHealth. For what the Universal Health Care Act promises, see part 1 of the UHC Series. For where its money is supposed to come from, see part 3 of the UHC Series.

Appropriated is not spent

DBM’s statement as of June 30, 2026, shown to Congress in August:

	Amount
Available appropriations	P7,542.46B
Allotments released	P6,632.55B
Obligated	P3,286.15B (49.5% of allotments)
Disbursed	P2,692.53B (81.9% of obligations)

An allotment is permission to commit. An obligation is the commitment itself, such as a signed contract. A disbursement is the cash leaving. A budget item can be fully appropriated and still be months from a payment. Another P909.91 billion of appropriations had not been released at all. For national government agencies alone, DBM’s own figures show P1,812.77 billion obligated against P4,265.71 billion released, an obligation rate of 42.5%. (DBCC briefing to Congress, slide 7.)

Constraints

• Congress cannot add to the President’s total. It can cut and realign, as long as the total does not rise.
• Appropriations are valid for a limited time. After that, unused money reverts unless Congress acts.
• The executive’s own release rules (allotments, SAROs, cash allocations) mean an appropriation is not a guarantee of spending.

What I’m unsure about

• I could not find who sits on the Executive Review Board. DBM’s own documents, and the Supreme Court’s description of the budget process, mention its hearings without naming its members.
• I did not research the accountability phase beyond the Constitution, the reporting deadlines in NBC 599 and the performance reviews it names.
• I did not look at re-enacted budgets before 2001. Where two sources give different lengths for the same re-enacted year, the table shows both, and I could not settle which is right.
• I have not audited any agency. The numbers are as published by DBM, the Supreme Court and the news reports linked below.

What I’d like readers to do

Correct a number, point me to DBM or COA data I missed, or tell me where the process differs in practice from what is on paper. Parts 2 to 4 take up how the NEP is generated, how the budget is managed, and how the rules have been tested.

Why this series

The problem solving series is about trying to chip at the problems of the Philippines. It is about finding solutions that may work because we will never admit defeat.

Sources

• 1987 Constitution, Art. VI Sec. 15, 24 to 27, 29; Art. VII Sec. 22; Art. IX-D Sec. 2
• Republic Act No. 12314 (2026 GAA), Sections 3, 77, 83 to 87
• DBM National Budget Memoranda: No. 156, No. 157, No. 158, and National Budget Circular No. 599
• FY 2027 National Expenditure Program, DBCC briefing to Congress (August 17, 2026)
• Supreme Court decision, G.R. Nos. 271059, 271347, E-02472 and E-04036 (October 7, 2026) and the Court’s press release (October 20, 2026)
• Re-enacted budgets: DBM, “Reenacted Budget” briefing (2019); Florencio B. Abad, “On the cusp of budget transformation”, Philippine Review of Economics 51(1), June 2014, Table 1; DBM Circular Letters 2010-1 and 2010-2; DBM status of allotment releases, December 2019; Rappler on the April 15, 2019 signing; Rappler, January 2, 2026
• Manila Bulletin: Palace to submit P7.2-T 2027 budget on Aug 11 and House gets record P7.2-T budget

Lovingly made with Claude.