PART 4.
FISCAL AUTONOMY AND LOCAL SOURCES OF FUNDS
Sources of Funds
Under the 1987 Constitution, the sources of funds of local governments are:
1. their share in national taxes,
2. equitable share in the proceeds of the utilization and development national wealth
3. Local taxes,
4. fees and charges,
5. other sources of revenues
LGUs raise funds from:
1. Loans
2. donations and grants
3. exercise of proprietary functions
4. credit-financing schemes
Fiscal Autonomy
Fiscal autonomy means that LGUs have the:
(1) power to create their own sources of revenue in addition to their equitable share in the
national taxes released by the national government, as well as the
(2) power to allocate their resources in accordance with their own priorities.
(3) It extends to the preparation of their budgets, and local officials in turn-have to work within
the constraints thereof
DILG- can issue circulars regarding the full disclosure of local budgets and finances and list of
expenses which the internal revenue allotment (IRA) can be used and which requires
publication in biddings, since these are mere reiterations of statutory provisions
The Department of Justice- can only declare a tax measure unconstitutional and illegal. The
Secretary cannot amend, modify or repeal the tax measure or declare it excessive, confiscatory
or contrary to public welfare
Internal Revenue Allotment
LGUs shall have a just share, as determined by law, in the national taxes which shall be
automatically released to them
All LGUs have a 40% share in the national internal revenue taxes based on the collection of the
third fiscal year preceding the current fiscal year
Of the 40%:
provinces and cities- 23%
Municipalities- 34%;
Barangays- 20%.
The share of a particular local government shall be based on this formula:
Population- 50%;
land area- 25%;
equal sharing- 25%
President of the Philippines -is hereby authorized, upon the recommendation of Secretary of
Finance, Secretary of Interior and Local Government (SILG) and Secretary of Budget and
Management, and subject to consultation with the presiding officers of both Houses of Congress
and the presidents of the “liga”, to make the necessary adjustments in the internal revenue
allotment of local government units but in no case shall the allotment be less than thirty
percent (30%) of the collection of national internal revenue taxes of the third fiscal year
preceding the current fiscal year.
The IRA of LGUs:
(1) forms part of the income of local government units;
(2) forms part of the gross accretion of the funds of the local government units;
(3) regularly and automatically accrues to the local treasury without need of further action on the
part of the LGU;
(4) is a regular and recurring item of income;
(5) accrues to the general fund of the LGUs;
(6) is used to finance local operations subject to modes provided by the 1991 LGC and its
implementing rules;
(7) is included in the computation of the average annual income for purposes of conversion of
LGUs
The share of each LGU shall be released, without need of any further action, directly to the
provincial, city, municipal or barangay treasurer, as the case may be, on a quarterly basis within
five (5) days after the end of each quarter, and which shall not be subject to any lien or
holdback that may be imposed by the national government for whatever purpose
The President- cannot withhold 10% of the IRA without complying with the requirements
under Section 284 of the 1991 LGC. This would be violative of local autonomy and fiscal
autonomy
The General Appropriation Act cannot place a portion of the IRA in an Unprogrammed Fund
only to be released when a condition is met, i.e., the original revenue targets are realized
Share in National Wealth Proceeds
LGUs shall be entitled to an equitable share in the proceeds of the utilization and development
of the national wealth within their respective areas, in the manner provided by law, including
sharing the same with the inhabitants by way of direct benefits
LGUs shall have a - 40% share of gross collection derived by the national government from
the preceding fiscal year from mining taxes, royalties, forestry and fishery charges, and such
other taxes, fees, or charges, including related surcharges, interests, or fines, and from its share
in any co-production, joint venture or production sharing agreement in the utilization and
development of the national wealth within their territorial jurisdiction
The host province- 20%;
component municipality/ city- 45%
highly-urbanized or independent city- 65%
Barangay- 35%
Power of Taxation
While the local government units are being strengthened and made more autonomous, the
legislature must still see to it that:
(a) the taxpayer will not be over-burdened or saddled with multiple and unreasonable
impositions;
(b) each local government unit will have its fair share of available resources;
(c) the resources of the national government will not be unduly disturbed; and
(d) local taxation will be fair, uniform, and just.
An LGU is empowered as well to apply its resources and assets for productive,
developmental, or welfare purposes, in the exercise or furtherance of their governmental or
proprietary powers and functions.
LGUs may exercise the power to levy taxes, fees or charges on any base or subject:
(1) not otherwise specifically enumerated herein or taxed under the provisions of the National
Internal Revenue Code, as amended, or other applicable laws: Provided, That the taxes, fees,
or charges shall:
(2) not be unjust, excessive, oppressive, confiscatory or contrary to declared national policy:
Provided, further, That the:
(3) ordinance levying such taxes, fees or charges shall:
(4) not be enacted without any prior public hearing conducted for the purpose
While local government units are authorized to burden all such other class of goods with “taxes,
fees and charges,” excepting excise taxes, a specific prohibition is imposed barring the levying
of any other type of taxes with respect to petroleum products
The Court of Tax Appeals - has exclusive appellate jurisdiction to review on appeal, decisions,
orders or resolutions of the Regional Trial Courts in local tax cases originally resolved by them
in the exercise of their original or appellate jurisdiction; it has no jurisdiction over cases
involving fees, which are regulatory in nature
The local franchise tax cannot be imposed on a taxpayer who no longer owned or operated
the business subject to local franchise tax, and owned the properties being levied upon by the
province
The LGC allows the local government to collect an interest at the rate:
Unpaid taxes fees, or charges including surcharges - not exceeding 2% per month until such
amount is fully paid.
However, the law provides that the total interest on the unpaid amount or portion thereof should
not exceed thirty-six (36) months or three (3) years. In other words, the city cannot collect a
total interest on the unpaid tax including surcharge that is effectively higher than 72%
Generalia verba sunt generaliter inteligencia—what is generally spoken shall be generally
understood.
Setting the rate of the additional levy for the special education fund at less than 1% is within the
taxing power of local government units. It is consistent with the guiding constitutional principle of
local autonomy.
The power of the CTA - includes that of determining whether or not there has been grave
abuse of discretion amounting to lack or excess of jurisdiction on the part of the RTC in issuing
an interlocutory order in cases falling within the exclusive appellate jurisdiction of the tax court.
The CTA has jurisdiction over a special civil action for certiorari assailing an interlocutory order
issued by the RTC in a local tax case
The mayor -has the ministerial duty to ensure that all taxes and other revenues of the city are
collected, and that city funds are applied to the payment of expenses and settlement of
obligations of the city, in accordance with law or ordinance.
Under the LGC, all local taxes, fees, and charges shall be collected by the provincial, city,
municipal, or barangay treasurer, or their duly-authorized deputies,
Assessor- shall take charge, among others, of ensuring that all laws and policies governing the
appraisal and assessment of real properties for taxation purposes are properly executed.
The socialized housing tax charged by the city is a tax which is within its power to impose. Aside
from the specific authority vested by Section 43 of the UDHA, cities are allowed to exercise such
other powers and discharge such other functions and responsibilities as are necessary,
appropriate, or incidental to efficient and effective provision of the basic services and facilities
which include, among others, programs and projects for low-cost housing and other mass
dwellings. The collections made accrue to its socialized housing programs and projects. The tax
is not a pure exercise of taxing power or merely to raise revenue; it is levied with a regulatory
purpose. The levy is primarily in the exercise of the police power for the general welfare of the
entire city. It is greatly imbued with public interest
The garbage fee is a charge fixed for the regulation of an activity. It is not a tax and cannot
violate the rule on double taxation
Barangays- have the authority to impose fees for the collection and segregation of
biodegradable, compostable and reusable wastes from households, commerce, other sources
of domestic wastes, and for the use of barangay MRFs
The PEZA- is an instrumentality of the national government exempt from payment of real
property taxes under Section 133(o) of the Local Government Code.
PART 5. LOCAL GOVERNMENT OFFICIALS
Legislative Control over Structure
Congress shall provide for the: qualifications, election, appointment and removal,
term, salaries, and powers and functions and duties of local officials. Congress exercises
legislative control over structure of LGUs.
Term of Office
The term of office of elective local officials, except barangay officials, which shall be determined
by law, shall be three years and no such official shall serve for more than three
consecutive terms.
There is involuntary interruption of a local government officials’ term in the following
instances ( meaning, the involuntary interruption will not be counted sa 3-year term, so maka
run gihapon sila balik):
a) When a permanent vacancy occurs in an elective position and the official merely assumed
the position pursuant to the rules on succession under the LGC, then his service for the
unexpired portion of the term of the replaced official cannot be treated as one full term as
contemplated under the subject constitutional and statutory provision that service cannot be
counted in the application of any term limit
b) An elective official, who has served for three consecutive terms and who did not seek the
elective position for what could be his fourth term, but later won in a recall election. For, he had
become in the interim, i.e., from the end of the 3rd term up to the recall election, a private citizen
c) When a candidate is proclaimed as winner for an elective position and assumes office, his
term is interrupted when he loses in an election protest and is ousted from office, thus
disenabling him from serving what would otherwise be the unexpired portion of his term of office
had the protest been dismissed. The break or interruption need not be for a full term of three
years or for the major part of the 3-year term; an interruption for any length of time, provided the
cause is involuntary, is sufficient to break the continuity of service
The following instances shall not be considered as an interruption in the continuity of his
service for the full term for which he was elected ( meaning counted sa 3-year term):
1) Voluntary renunciation
2) The abolition of an elective local office due to the conversion of a municipality to a city
3) Preventive suspension is not a term-interrupting event as the elective officer’s continued
stay and entitlement to the office remain unaffected during the period of suspension, although
he is barred from exercising the functions of his office during this period.
For the 3-term rule to apply, two conditions must concur:
(1) the official concerned has been elected for three consecutive terms in the same local
government post; and
(2) he/she has fully served three consecutive terms. A municipal councilor who was elected
for three consecutive terms but who had to assume the position of vice-mayor on his/her second
term in view of the incumbent’s retirement is not deemed to have fully served three consecutive
terms
He/she must also have been elected to the same position for the same number of times
before the disqualification can apply.
The first requisite is absent when a proclamation was subsequently declared void since there
was no proclamation at all. While a proclaimed candidate may assume office on the strength of
the proclamation of the Board of Canvassers, he/she is only a presumptive winner who
assumes office subject to the final outcome of the election protest.
The second requisite is not present when the official vacates the office not by voluntary
renunciation but in compliance with the legal process of writ of execution issued by the
Commission on Elections
A person who has run for three consecutive terms may run in a recall election so long as the
said candidate is not running for immediate reelection following his/her three consecutive terms.
Term limits should be construed strictly to give the fullest possible effect to the right of
the electorate to choose their leaders. Thus, the 3-term limit for local elected officials is not
violated when a local official wins in a recall election for mayor after serving three full terms as
mayor since said election is not considered immediate reelection
Powers of Local Officials
Governor
1) general supervision and control over all programs, projects, services, and
activities of the provincial government;
2) enforce all laws and ordinances relative to the governance of the province;
3) represent the province in all its business transactions and sign in its behalf all bonds,
contracts, and obligations, and such other documents upon authority of the sangguniang
panlalawigan or pursuant to law or ordinance;
4) ensure that all executive officials and employees of the province faithfully discharge
their duties and functions as provided by law and the 1991 LGC;
5) ensure that the acts of the component cities and municipalities of the province and of
its officials and employees are within the scope of their prescribed powers, duties and
functions; and
6) ensure that all taxes and other revenues of the province are collected, and that provincial
funds are applied to the payment of expenses and settlement
Only the Provincial Governor could competently determine the soundness of an office order or
the propriety of its implementation, for the Provincial Governor has the power to supervise and
control “programs, projects, services, and activities”
City/Municipal Mayor
1) general supervision and control over all programs, projects, services, and activities of the
municipal government;
2) enforce all laws and ordinances relative to the governance of the municipality; upon
authorization by the sangguniang panglungsod/bayan,
3) represent the municipality in all its business transactions and sign on its behalf all bonds,
contracts, and obligations, and such other documents made pursuant to law or ordinance;
4) ensure that all executive officials and employees of the city/municipality faithfully
discharge their duties and functions;
5) solemnize marriages;
6) ensure that the acts of the city/municipality's component barangays and of its officials
and employees are within the scope of their prescribed powers, functions, duties and
responsibilities;
7) issue licenses and permits and suspend or revoke the same for any violation of the
conditions upon which said licenses or permits had been issued, pursuant to law or ordinance;
8) ensure the delivery of basic services and the provision of adequate facilities.
The issuance of a Barangay Protection Order by the Punong Barangay or, in his
unavailability, by any available Barangay Kagawad, merely orders the perpetrator to desist from
(a) causing physical harm to the woman or her child; and (2) threatening to cause the woman or
her child physical harm. Such function of the Punong Barangay is, thus, purely executive in
nature, in pursuance of his duty under the Local Government Code to "enforce all laws and
ordinances," and to "maintain public order in the barangay.
Punong Barangay
1) Enforce of all laws and ordinances which are applicable within the barangay;
2) promote the general welfare of the barangay;
3) negotiate, enter into, and sign contracts for and in behalf of the barangay, upon
authorization of the sangguniang barangay;
4) maintain public order in the barangay;
5) call and preside over the sessions of the sangguniang barangay and the barangay
assembly, and vote only to break a tie; upon approval by a majority of all the members of the
sangguniang barangay,
6) appoint or replace the barangay treasurer, the barangay secretary, and other appointive
barangay officials;
7) administer the operation of the katarungang pambarangay; and
8) exercise general supervision over the activities of the sangguniang kabataan.
Power to Appoint
The Local Chief Executive and the Vice-Local Chief Executive have the power to Appoint.
General Rule: appointments made by defeated local candidates after the elections are
prohibited to avoid animosities
Exceptions, such appointments may be allowed if the following requisites concur relative to
their issuance:
(1) The appointment has gone through the regular screening by the Personnel Selection Board
(PSB) before the prohibited period on the issuance of appointments as shown by the PSB report
or minutes of its meeting;
(2) The appointee is qualified;
(3) There is a need to fill up the vacancy immediately in order not to prejudice public service
and/or endanger public safety; and
(4) The appointment is not one of those mass appointments issued after the elections
Where a municipal mayor orders the suspension or dismissal of a municipal employee on
grounds he/she believes to be proper, but his/her order is reversed or nullified by the Civil
Service Commission or the Court of Appeals, he/she has the right to contest such
adverse
ruling. His/her right to appeal flows from the fact that his/her power to appoint carries with it the
power to remove. Being chief executive of the municipality, he/she possesses this
disciplinary power over appointive municipal officials and employees
The city legal officer has no disciplinary authority over the chief of the Legal Affairs and
Complaint Services of the Division of City Schools. Inasmuch as the said official was appointed
by and is a subordinate of the regional director of the Department of Education, Culture and
Sports, he/she is subject to the supervision and control of said director
The prohibition on midnight appointments only applies to presidential appointments. It does
not apply to appointments made by local chief executives. Nevertheless, the Civil Service
Commission has the power to promulgate rules and regulations to professionalize the
civil service. It may issue rules and regulations prohibiting local chief executives from
making appointments during the last days of their tenure. Appointments of local chief
executives must conform to these civil service rules and in order to be valid.
Ban on Holding Dual Positions
No (local) elective official shall be eligible for appointment or designation in any capacity to any
public office or position during his/her tenure
A city mayor cannot be appointed to the position of chairperson of the Subic Bay Metropolitan
Authority since such office is not an ex- officio post or attached to the office of the mayor.
Vacancies
Permanent Temporary
Death Leave of absence
Voluntary resignation Travel abroad
Conviction Suspension from office
Expiration of term Preventive suspension
Permanent disability Sickness
Fills a higher vacant office Temporary disability
Refuses to assume office
Fails to qualify
Removed from office
Failure of elections
In case there is a permanent vacancy caused by a sanggunian member belonging to a
political party:
For the sangguniang panlalawigan and sangguniang panglungsod of a highly urbanized
or independent component city- it shall be the President acting through the executive
secretary who shall appoint the replacement, upon the certification and nomination of the
political party from where the replaced member comes from
For the sangguniang panglungsod of component cities- it shall be the governor who shall
make the appointment upon the certification and nomination of the political party from where the
replaced member comes from.
For sangguniang barangay members- it is the mayor who appoints upon recommendation of
the sangguniang barangay
In case the vacancy is caused by a member who does not come from any political party:
- appointment shall be done by the officials mentioned upon the recommendation of the
sanggunian concerned, without, however, need of the nomination or certification from any
political party.
Resignations by sangguniang panlalawigan members must submit their letters of
resignation to the President or to his/her alter ego, the SILG. The letter must be submitted,
received and acted upon by the supervising officials, otherwise, there was no valid and
complete resignation
A sensu contrario, there is a vacancy when there is no person lawfully authorized to assume
and exercise at present the duties of the office
PART 6. ACCOUNTABILITY OF LOCAL GOVERNMENT UNITS AND OFFICIALS
Suability and Liability
LGUs have the power to sue and be sued. LGUs are not immune from suit.
LGUs and their officials are not exempt from liability for death or injury to persons or damage to
property
Liability of Local Government Units
Municipal corporations are responsible for the acts of its officers, except if and when, and only
to the extent that, they have acted by authority of the law, and in conformity with the
requirements thereof
The LGU is liable for the illegal dismissal of an appointive employee and the appointment in
his/her stead of another, a non-civil service eligible, whose salaries it thereafter paid. The
dismissal by the mayor was confirmed and ratified when the city did not oppose the dismissal
and the appointment
Mandamus is a remedy available to a property owner when a money judgment is rendered in
its favor and against a municipality or city
COA has the authority and power to settle “all debts and claims of any sort due from or owing to
the Government or any of its subdivisions, agencies and instrumentalities.”
Liability of Local Officials
Jurisdiction over administrative disciplinary actions against elective local officials is
lodged in two authorities: the Disciplining Authority and the Investigating Authority.
The Disciplinary Authority- may constitute a Special Investigating Committee in lieu of the SILG.
The disciplining Authority- With respect to a provincial governor, is the President of the
Philippines, whether acting by himself/herself or through the Executive Secretary
The SILG is the Investigating Authority, who may act himself/ herself or constitute and
Investigating Committee.
The grounds for disciplinary action against local elective officials are:
(1) Disloyalty to the Republic of the Philippines;
(2) Culpable violation of the Constitution;
(3) Dishonesty, oppression, misconduct in office, gross negligence, or dereliction of duty;
(4) Commission of any offense involving moral turpitude or an offense punishable by at least
prision mayor;
(5) Abuse of authority;
(6) Unauthorized absence for fifteen (15) consecutive working days, except in the case of
members of the sangguniang panlalawigan, sangguniang panlungsod, sangguniang bayan, and
sangguniang barangay;
(7) Application for, or acquisition of, foreign citizenship or residence or the status of an
immigrant of another country; and
(8) Such other grounds as may be provided in 1991 LGC and other laws
An “administrative offense” means every act or conduct or omission which amounts to, or
constitutes, any of the grounds for disciplinary action
There are two modes by which a public officer who has a direct or indirect financial or
pecuniary interest in any business, contract, or transaction may violate Section 3(h) of
the Anti-Graft and Corrupt Practices Act:
1) The first mode is if in connection with his/her pecuniary interest in any business, contract or
transaction, the public officer intervenes or takes part in his/her official capacity.
2) The second mode is when he/she is prohibited from having such interest by the Constitution
or any law.
A mayor relative to the issuance of a license to operate a cockpit which he/she owns cannot be
held liable under the first mode since he/she could not have intervened or taken part in his/her
official capacity in the issuance of a cockpit license because he/she was not a member of the
sangguniang bayan. Under the 1991 LGC, the grant of a license is a legislative act of the
sanggunian. However, the mayor could be liable under the second mode.
There are two (2) ways by which a public official violates Sec. 3(e) of R.A. No. 3019 in the
performance of his functions, namely:
(a) by causing undue injury to any party, including the Government; or
(b) by giving any private party any unwarranted benefits, advantage or preference. The accused
may be charged under either mode or under both
To be criminally liable for violation of Section 3(e) of R.A. 3019, the injury sustained must have
been caused by positive or passive acts of manifest partiality, evident bad faith, or gross
inexcusable negligence.
Administrative Proceedings
A verified complaint against any erring local elective official shall be prepared as follows:
(1) A complaint against any elective official of a province, a highly urbanized city, an
independent component city or component city shall be filed before the Office of the
President;
(2) A complaint against any elective official of a municipality shall be filed before the
sangguniang panlalawigan whose decision may be appealed to the Office of the
President; and
(3) A complaint against any elective barangay official shall be filed before the sangguniang
panlungsod or sangguniang bayan concerned whose decision shall be final and executor
In administrative proceedings, procedural due process simply means the opportunity to
explain one’s side or the opportunity to seek a reconsideration of the action or ruling complained
of.
Procedural due process has been recognized to include the following:
(1) the right to actual or constructive notice of the institution of proceedings which may affect a
respondent’s legal rights;
(2) a real opportunity to be heard personally or with the assistance of counsel, to present
witnesses and evidence in one’s favor, and to defend one’s rights;
(3) a tribunal vested with competent jurisdiction and so constituted as to afford a person charged
administratively a reasonable guarantee of honesty as well as impartiality; and
(4) a finding by said tribunal which is supported by substantial evidence submitted for
consideration during the hearing or contained in the records or made known to the parties
affected
Penalties
Only the courts can remove a local elective official. The President and higher supervising LGU
have no such authority.
A sangguniang panlalawigan may cause the removal of a municipal mayor who did not appeal
to the Office of the President within the reglementary period the decision removing him/her from
office
The President may suspend an erring provincial elected official who committed several
administrative offenses for an aggregate period exceeding six months provided that each
administrative offense, the period of suspension does not exceed the 6-month limit
Preventive Suspension
Preventive suspension is merely a preventive measure, a preliminary step in an administrative
investigation. This is not a penalty.
The purpose of the suspension order is to prevent the accused from using his/her position and
the powers and prerogatives of his/her office to influence potential witnesses or tamper with
records which may be vital in the prosecution of the case against him/her. If after such
investigation, the charge is established and the person investigated is found guilty of acts
warranting his/her suspension or removal, then he/she is suspended, removed or dismissed.
This is the penalty. Not being a penalty, the period within which one is under preventive
suspension is not considered part of the actual penalty of suspension. Thus, service of the
preventive suspension cannot be credited as service of penalty
A preventive suspension may be imposed by the disciplinary authority at any time:
(1) after the issues are joined, i.e., respondent has filed an answer;
(2) when the evidence of guilt is strong; and
(3) given the gravity of the offenses, there is great probability that the respondent, who
continues to hold office, could influence the witnesses or pose a threat to the safety and integrity
of the records and other evidence.
However, the failure of respondent to file his/her answer despite several opportunities given
him/her is construed as a waiver of his/her right to present evidence in his/her behalf. In this
situation, a preventive suspension may be imposed even if an answer has not been filed
Only two requisites must concur to render the preventive suspension order valid:
1) First, there must a prior determination by the Ombudsman that the evidence of
respondent’s guilt is strong.
2) Second, (a) the offense charged must involve dishonesty, oppression, grave misconduct or
neglect in the performance of duty; (b) the charges would warrant removal from the service; or
(c) the respondent’s continued stay in the office may prejudice the case filed against him
The preventive suspension shall continue until the case is terminated by the Office of the
Ombudsman but not more than six months
Direct recourse to the courts without exhausting administrative remedies is not permitted. Thus,
a mayor who claims that the imposition of preventive suspension by the governor was
unjustified and politically motivated, should seek relief first from the SILG, not from the courts
Effect of Re-Election
A reelected local official may not be held administratively accountable for misconduct
committed during his/her prior term of office. The rationale for this holding is that when the
electorate put him/her back into office, it is presumed that it did so with full knowledge of his/her
life and character, including his/her past misconduct. If, armed with such knowledge, it still
reelects him/her, then such reelection is considered a condonation of his/her past misdeeds
A public official cannot be removed for administrative misconduct committed during a prior
term since his/her re-election to office operates as a condonation. To do otherwise would be to
deprive the people of their right to elect their officers. When the people have elected a person to
office, it must be assumed that they did this with knowledge of his/her life and character that
they disregarded or forgave his/her fault, if he/she had been guilty of any
