In one of its most significant rulings of 2026, the Supreme Court has struck down major portions of the national budget. It found that Congress gravely abused its discretion by appropriating more than the Constitution allows.

The 121-page decision was released to the press on October 20, 2026.

What the Court struck down

According to reports on the decision, the Court voided:

2024 General Appropriations Act (GAA): congressional increases totaling ₱449.5 billion in unprogrammed appropriations, which are standby funds that may only be released when certain conditions, such as excess revenue, are met;
2025 GAA: a ₱17.99-billion addition to the Special Road Fund; and
2026 GAA: key provisions on standby funds.

The legal basis

The Constitution provides that Congress may not increase the appropriations recommended by the President for the operation of the government, as specified in the budget the executive submits. The Court found that Congress went beyond this constitutional cap when it added billions to the budget items above.

When a branch of government acts beyond its constitutional limits, the Supreme Court may declare its acts void for grave abuse of discretion. The Constitution expressly gives the Court this power of judicial review.

What happens now

Unspent funds under the voided provisions can no longer be released.
Money already spent generally cannot be clawed back retroactively, according to lawmakers reacting to the ruling.
The decision comes as the Senate reviews the House version of the 2027 budget. Senators have said they will use it as a guide to remove questionable items.

Senators reacting to the decision compared it to the Court’s 2013 ruling striking down the Disbursement Acceleration Program (DAP). Sen. Leila de Lima, a co-petitioner in the challenge to the 2026 unprogrammed appropriations, said the ruling closes a loophole that let lawmakers park projects in standby funds.

Why it matters to businesses and the public

Government contractors and suppliers with projects funded from the voided items should review their contracts and payment status. Projects that were not yet funded or disbursed may be affected.
Local governments and agencies relying on the voided funds may need to look for other funding sources.
More broadly, the ruling reinforces that the power of the purse has constitutional limits, and that courts will enforce them.

How Recososa Law Firm can help

If your business has a government contract or project that may be affected by this ruling, our Corporate and Commercial Law and Litigation teams can review your contract, payment status, and options. Contact us for a consultation.

This article is a simplified summary based on news reports of the Supreme Court’s decision, for general information only. It is not legal advice. Read the full text of the decision and consult a lawyer about your specific situation.