DECISION № 2 OF 12 MAY 2009 ON CONSTITUIONAL CASE № 1/2009
A total of 54 Members of the 40 th National Assembly approached the Constitutional Court with a challenge of the constitutionality of Art. 18, para 2, subpara 1 of the 2009 State Budget Act (SBA) of the Republic of Bulgaria.
It is claimed that Art. 18, para 2, subpara 1 of the 2009 SBA is in contravention to Art. 84, item 2 and Art. 106 of the Constitution. The provision that is challenged allows the Council of Ministers to revise the 2009 budget items, specifically the revenue-expenditure balance, that the National Assembly has approved. However, the claimant insists that to revise the State Budget solely upon the discretion of the Council of Ministers and in the absence of clearly defined parameters and by means of an act of the Executive, is tantamount to departure from the Constitution-established province of the Executive and to invasion into the exclusive competences of the Legislature.
The Constitutional Court assumed that in order to rule on merit on the challenge of the constitutionality of Art. 18, para 2, subpara 1 of the 2009 SBA, it had to answer the following questions :
1. What are the Constitution-defined powers of the National Assembly and of the Council of Ministers vis-à-vis the State Budget?
2. What is the core of an annual state budget act in general and that of the 2009 State Budget Act in particular?
3. What does Art. 18, para 2, subpara 1 of the 2009 SBA that refers to paragraph 1 of the same article read?
1. The powers of the National Assembly and of the Council of Ministers vis-à-vis the State Budget as defined in Art. 84, item 2 – the exclusive competence of the National Assembly to pass the state budget and the budget report, and in Art. 87, para 2 – the exclusive competence of the Council of Ministers to draw up and present the State Budget Bill, and in Art. 106 in the section “ The Council of Ministers shall manage the implementation of the state budget ” are crucial in the solution of the case that was brought to the Constitutional Court. These Constitution provisions maintain the balance between the Legislature and the Executive vi-a-vis the State Budget that the SBA shall not upset.
The Constitutional Court views Art. 106 as a general constitutional norm. It is not a specific legal text that treats the Council of Ministers' competences in the state budget implementation; this matter is left to the ordinary legislation and is treated in the Organic Budget Law. The Constitution approach that it should not be a complete catalog of the Council of Ministers' powers recognizes the specifics of the execution and administration that the CoM does. Alongside the general regulations of the Council of Ministers' competences are subject to one and only Constitution-set limitation-ta be always based on the law. By definition the management of the implementation of the state budget is administration to enforce the approved State Budget Act and therefore must be compliant with both the Organic Budget Law and the State Budget Act for the specific year.
Art. 106 is the constitutional justification on the basis of which Art. 35, para 2 of the Organic Budget Law provides for ,,additional budget credits”, i.e. for spending that was not approved in the SBA. However, this option can materialize given the accumulation of two preconditions: 1. these credits must be covered by an overperforming revenue side and by new income sources; and 2. the balance of the consolidated fiscal program must not worsen. However, if the budget parameters worsen in the course of performance in absolute terms and as ratios to an extent that will essentially change the figures and philosophy of the specific annual budget, the only Constitution-compliant action will be for the National Assembly to update the specific State Budget Act on the proposition from the Council of Ministers again. This is the only way to keep the budget implementation in its part that is directly managed by the Council of Ministers conformant with the law.
2. The Constitutional Court's practices so far recognized the distinctiveness of the SBA which contains heterogeneous provisions. The Court assumed that for the exact definition of its specifics inasmuch as it is not a law in the substantive sense it is needed and sufficient to define the SBA as a formal law. The Constitution reads that t he National Assembly shall pass laws, resolutions, declarations and addresses ( Art. 86, para 1), its internal rules ( Art . 73), and constitutional amendment s in a procedure as prescribed in Chapter 9 of the Constitution (Art. 155, para 1). In that sense the phrase “ and other acts passed by the National Assembly ” ( Art. 149, para 1, subpara 2) as a legal concept covers, inter alia, the formal state budget act derived as specifics by means of interpretation.
The State Budget Act is binding on the Council of Ministers and sets the financial frame of CoM activities. This piece of legislation is passed by the National Assembly subject to a legislating procedure and enters into force accordingly. Once passed in the legislating procedure the SBA can be amended solely by the authority that passed it subject to that procedure. In parallel, by virtue of Art. 87, para 2 of the Constitution the Council of Ministers enjoys the exclusive prerogative to submit the State Budget Bi ll to the National Assembly.
Unlike all other pieces of legislation the SBA is valid for one year, i.e. its duration is fixed and its effect is onetime.
The specific matter, the budget, that the act treats and that is recurrent, while it is always different in the particulars and the nature of budget relations that are fundamental social relations which will resist long-term regulations but call for short-term regulations in order to be able to operate, have resulted in specific internal structure and in a different technique in formulating the legally differing provisions that the SBA contains, They vary from genuine legal norms to provisions of revenue and expenditure figures that become budget targets once put in the SBA. The SBA structure, in particular the revenue-expenditure part for the specific year, have certain peculiar provisions. They make up the legal justification for the Council of Ministers activities within the scope of its executive function and in parallel, they are on the verge of primary law-making that is intrinsic to parliament alone. While such provisions must be well limited by the legislating authority if they are to make sure the Council of Ministers efficiently implements the budget, they should not change the very justification of the activity – the SBA and its targets. The annual SBA's peculiar ability to reflect the specifics of the specific year allows provisions that are untypical of other annual budget provisions that may determine conditions for the possible and allowable additional activity of the Council of Ministers in budget implementation.
The specifics of the SBA invites the question whether and to what an extent the legal form can bring normative nature automatically into the content. In the Constitutional Court's understanding while that form makes the State Budget implementation binding, it cannot bring normative aspects into the State Budget content. In parallel, that form opens the way to provisions with a normative load or to ,,normative admixtures” into the content.
The manifest recent world trend of intensified government activities on budget-related problems while parliament activities slow down, gives justice to the description of a budget as executive or legislative. The sole criterion for the Constitutional Court in seeking an answer about the nature and specifics of the 2009 State Budget Act is the Constitution which is given a modern reading. The Constitution does not provide for any delegated legislating authority by the National Assembly to the Council of Ministers and therefore, rules out such delegated powers vis-à-vis the SBA's specific matter. In parallel, the Constitution vests the State Budget implementation with the Council of Ministers and thus defines the scope of its constitutionally permitted activity in that sphere of the Executive, within the framework of the concrete legal justification for this activity – the relevant SBA. In that sense there is no logic to expect that it is constitutionally permitted for the SBA to provide for the Council of Ministers a power of discretion to amend this piece of legislation on its own and thus change the legal grounds that are limited by the law, for its activity in the public finance sector.
3. The challenged Art. 18, para 2, subpara 1 reads: ,,The approved budget balance in Art. 1, para 3 can be reduced: 1. in the cases treated in paragraph 1 – by an amount equal to that that had to be generated in the revenue side but was not. ”
The provision that it refers to – Art. 18, para 1, reads: ,,In the event of economic and financial targets and indicators leading to projections and estimations of slowed down economic development rates, in the event of a largely mismatching current account deficit of the balance of payments and a non-performing consolidated fiscal program, the non-interest payments and the transfers as per Art. 1, para 2 can be made in amounts that make up 90% of the approved sum in compliance with Art. 17, para 1, upon the condition that the budget balance of the consolidated fiscal program is positive.”
The quoted text makes obvious that there is not sufficient clarity about the institution that can take the appropriate actions. The two paragraphs have no subject and the predicate is a reflexive verb.
As a budget indicator – the final resulting figure between the State Budget revenue and expenditure side, the balance reflects, to the maximum extent, the philosophy of a state budget in a given year. An update of the budget constitutes an essential adjustment of the SBA and is subject to an initiative from the Council of Ministers which must submit it to the National Assembly for approval by an act amending the State Budget Act. The legislative form, with such a specific content though, expresses the constitutional idea of shared political responsibility in such an adjustment.
As in December 2008 it was objectively impossible to sufficiently forecast the trends and speed of the manifestation of the symptoms of crisis in the finance and economy, the condition-limited provision of paragraph 1 enables the Council of Ministers to take actions that limit or prevent such an undesired effect during the implementation of the 2009 State Budget. However, such actions must not change the philosophy of the State Budget for the year in question, i.e. a budget with a surplus as big as to be able to have a cushion effect on the inflation processes.
The National Assembly is the only institution that passes the annual State Budget Act. In the same way and on the same grounds the National Assembly is the only institution that changes and amends pieces of legislation, including the SBA. Art. 18, para 2, subpara 1 guarantees the National Assembly's prerogative to adjust the resulting balance whenever it is impacted by the Council of Ministers activities as described in paragraph 1 to an extent that makes it binding to have a readjustment of the budget balance already approved under Art. 1, para 3.
That case faced the Constitutional Court with a peculiar situation. The Court found that the inexistence of clarity was to blame for the extent of noncompliance of the legal text – Art. 18, para 2, subpara 1 of the SBA with the above-cited Constitution norms – Art. 84, item 2, Art. 87, para 2 and Art. 106 – the quoted part. The noncompliance is not sufficient to pass a ruling of dissonance with the Constitution, but is sufficient to allow the application of that legal text in contravention to the Constitution. Without any demonstration of superfluous judicial activism, with the motivation of this decision the Constitutional Court can and must prevent an application of the legal text in question in a way inconsistent with the Constitution, with the extraction of the constitutionally appropriate content by a reference, inter alia, to the direct application of the respective Constitution provisions concerning the division of the budgeting prerogatives between the National Assembly and the Council of Ministers.
With these considerations in mind the Constitutional Court dismissed the challenge of the 54 Members of the 40 th National Assembly of the constitutionality of Art. 18, para 2, subpara 1 of the 2009 SBA.
Председател: Румен Янков