ADMIN LOCAL GOVERNMENT CODE

Title: Province of Batangas v. Romulo G.R. No. 152774

Date: May 27, 2004
Ponente: Callejo, Sr., J.
HON. ALBERTO G. ROMULO, Executive Secretary and
Chairman of the Oversight Committee on Devolution;
THE PROVINCE OF BATANGAS, represented by its
HON. EMILIA BONCODIN, Secretary, Department of Budget
Governor, HERMILANDO I. MANDANAS,
and Management; HON. JOSE D. LINA, JR., Secretary,
petitioner
Department of Interior and Local Government,
respondents
DOCTRINES
 Consistent with the principle of local autonomy, the Constitution confines the President’s power over the LGUs to
one of general supervision. An officer in control lays down the rules in the doing of an act. If they are not followed,
he may, in his discretion, order the act undone or re-done by his subordinate or he may even decide to do it himself.
Supervision does not cover such authority. The supervisor or superintendent merely sees to it that the rules are
followed, but he himself does not lay down such rules, nor does he have the discretion to modify or replace them. If
the rules are not observed, he may order the work done or re-done but only to conform to the prescribed rules. He
may not prescribe his own manner for doing the act. He has no judgment on this matter except to see to it that the
rules are followed.
 Autonomy is either decentralization of administration or decentralization of power. There is decentralization of
administration when the central government delegates administrative powers to political subdivisions in order to
broaden the base of government power and in the process to make local governments more responsive and
accountable and ensure their fullest development as self-reliant communities and make them more effective
partners in the pursuit of national development and social progress. The President exercises general supervision
over them, but only to ensure that local affairs are administered according to law. He has no control over their acts
in the sense that he can substitute their judgments with his own. Decentralization of power, on the other hand,
involves an abdication of political power in the favor of local governments units declared to be autonomous. In that
case, the autonomous government is free to chart its own destiny and shape its future with minimum intervention
from central authorities.
 Local autonomy includes both administrative and fiscal autonomy. Fiscal autonomy means that local governments
have the 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 power to allocate their resources in accordance with their own
priorities. A basic feature of local fiscal autonomy is the constitutionally mandated automatic release of the shares of
LGUs in the national internal revenue.
NATURE OF THE CASE: The Province of Batangas, represented by its Governor, Hermilando I. Mandanas, filed the
present petition for certiorari, prohibition and mandamus under Rule 65 of the Rules of Court,
as amended, to declare as unconstitutional and void certain provisos contained in the General
Appropriations Acts (GAA) of 1999, 2000 and 2001, insofar as they uniformly earmarked for
each corresponding year the amount of five billion pesos (₱5,000,000,000.00) of the Internal
Revenue Allotment (IRA) for the Local Government Service Equalization Fund (LGSEF) and
imposed conditions for the release thereof.
FACTS
 Then President Joseph Estrada issued E048 (Establishing a Program for Devolution Adjustment and Equalization).
The program was established to facilitate the process of enhancing the capacities of local government units (LGUs)
in the discharge of the functions and services devolved to them by the National Government Agencies concerned
pursuant to the Local Government Code (LGC). The Oversight Committee (referred to as the Devolution) constituted
under Sec. 533(b) of RA7160 (The LGC of 1991) has been tasked to formulate and issue the appropriate rules and
regulations necessary for its effective implementation.
 In RA8745 (the GAA of 1999), the program was renamed as the Local Government Service Equalization Fund (LGSEF).
Under said appropriations law, the amount of P96,780,000,000 was allotted as the share of the LGUs in the internal
revenue taxes. Item No. 1, Special Provisions, Title XXXVI A. Internal Revenue Allotment of Rep. Act No. 8745
contained the following proviso:
o PROVIDED, That the amount of FIVE BILLION PESOS (P5,000,000,000) shall be earmarked for the LGSEF for the
funding requirements of projects and activities arising from the full and efficient implementation of devolved
functions and services of LGUs pursuant to RA7160 (The LGC of 1991)
 o PROVIDED, FURTHER, That such amount shall be released to the LGUs subject to the implementing rules and
regulations, including such mechanisms and guidelines for the equitable allocations and distribution of said fund
among LGUs subject to the guidelines that may be prescribed by the Oversight Committee on Devolution as
constituted pursuant to Book IV, Title III, Sec. 533(b) of RA 7160. The Internal Revenue Allotment (IRA) shall be
released directly by the Department of Budget and Management (DBM) to the LGUs concerned.
 The Oversight Committee (with then Executive Secretary Zamora as Chairman) passed the following resolutions:
o OCD-99-005: Resolution Adopting The Allocation Scheme For The Php 5 Billion By 1999 LGSEF And Requesting
His Excellency President Joseph Ejercito Estrada To Approve Said Allocation Scheme
o OCD-99-006: Resolution Adopting The Allocation Scheme For The Php 40 Billion Of The LGSEF And Its
Concomitant General Framework, Implementing Guidelines And Mechanics For Its Implementation And Release,
As Promulgated By The Oversight Committee On Devolution
o OCD-99-003: Resolution Requesting His Excellency President Joseph Ejercito Estrada To Approve The Request Of
The Oversight Committee On Devolution To Set Aside 20% Of The LGSEF For Local Affirmative Action Projects
And Other Priority Initiatives For LGUs Institutional And Capability Building In Accordance With The
Implementing Guidelines And Mechanics As Promulgated By The Committee
 These OCD resolutions were approved by then President Estrada.
 Under RA8760 (the GAA of 2000), the amount of P111,778,000,000 was allotted as the share of the LGUs in the
internal revenue taxes. As in the GAA of 1999, the GAA of 2000 contained a proviso earmarking five billion pesos of
the IRA for the LGSEF.
 In view of the failure of Congress to enact the GAA for 2001, the GAA of 2000 was deemed re-enacted, together with
the IRA of the LGUs therein and the proviso earmarking five billion pesos thereof for the LGSEF.
 The petitioner now comes to this Court assailing as unconstitutional and void the provisos in the GAAs of 1999, 2000
and 2001, relating to the LGSEF. Similarly assailed are the Oversight Committees Resolutions issued pursuant
thereto. The petitioner submits that the assailed provisos in the GAAs and the OCD resolutions, insofar as they
earmarked the amount of five billion pesos of the IRA of the LGUs for 1999, 2000 and 2001 for the LGSEF and
imposed conditions for the release thereof, violate the Constitution and the LGC of 1991. Sec. 6, Art. X of the
Constitution is invoked as it mandates that the just share of the LGUs shall be automatically released to them. Secs. 18
and 286 of the LGC of 1991, which enjoin that the just share of the LGUs shall be automatically and directly released to
them without need of further action are, likewise, cited.
 The petitioner contends that to vest the Oversight Committee with the authority to determine the distribution and
release of the LGSEF, which is a part of the IRA of the LGUs, is an anathema to the principle of local autonomy as
embodied in the Constitution and the LGC of 1991.
 Another infringement alleged to be occasioned by the assailed OCD resolutions is the improper amendment to Sec.
285 of the LGC of 1991 on the percentage sharing of the IRA among the LGUs. Said provision allocates the IRA as
follows: Provinces 23%; Cities 23%; Municipalities 34%; and Barangays 20%.
 The respondents contend that the assailed provisos in the GAAs of 1999, 2000 and 2001 and the assailed resolutions
issued by the Oversight Committee are not constitutionally infirm. The respondents advance the view that Sec. 6,
Art. X of the Constitution does not specify that the just share of the LGUs shall be determined solely by the LGC of
1991. Moreover, the phrase “as determined by law” in the same constitutional provision means that there exists no
limitation on the power of Congress to determine what is the just share of the LGUs in the national taxes. In other
words, Congress is the arbiter of what should be the just share of the LGUs in the national taxes.
 Further, Sec. 285 of the LGC of 1991, which provides for the percentage sharing of the IRA among the LGUs, was not
intended to be a fixed determination of their just share in the national taxes. Congress may enact other laws,
including appropriations laws such as the GAAs of 1999, 2000 and 2001, providing for a different sharing formula.
Sec. 285 of the LGC of 1991 was merely intended to be the default share of the LGUs to do away with the need to
determine annually by law their just share.
 On procedural grounds, the respondents urge the Court to dismiss the petition outright as the same is defective. The
petition allegedly raises factual issues which should be properly threshed out in the lower courts, not this Court, not
being a trier of facts. Specifically, the petitioners allegation that there are portions of the LGSEF that it has not, to
date, received, thereby causing it injury and damage, is subject to proof and must be substantiated in the proper
venue. Since the IRAs for the years 1999, 2000 and 2001, have already been released and the government is now
operating under the 2003 budget, the petitioner allegedly has no legal standing to bring the suit because it has not
suffered any injury.
 The petitioner counters that the only possible exception to the mandatory automatic release of the LGUs’ IRA is if
the national internal revenue collections for the current fiscal year is less than 40% of the collections of the
 preceding third fiscal year, in which case what should be automatically released shall be a proportionate amount of
the collections for the current fiscal year. The adjustment may even be made on a quarterly basis depending on the
actual collections of national internal revenue taxes for the quarter of the current fiscal year. In the instant case,
however, there is no allegation that the national internal revenue tax collections for the fiscal years 1999, 2000 and
2001 have fallen compared to the preceding three fiscal years.
ISSUE/S
Whether or not the assailed provisos contained in the GAAs of 1999, 2000 and 2001, and the OCD resolutions infringe the
Constitution and the Local Government Code of 1991. YES
RATIO
 The Court holds that the petitioner possesses the requisite standing to maintain the present suit. The petitioner, a
local government unit, seeks relief in order to protect or vindicate an interest of its own, and of the other LGUs. This
interest pertains to the LGUs share in the national taxes or the IRA. The petitioners constitutional claim is, in
substance, that the assailed provisos in the GAAs of 1999, 2000 and 2001, and the OCD resolutions contravene Sec.
6, Art. X of the Constitution, mandating the automatic release to the LGUs of their share in the national taxes.
Further, the injury that the petitioner claims to suffer is the diminution of its share in the IRA, as provided under Sec.
285 of the LGC of 1991.
 Art. II of the Constitution, the State has expressly adopted as a policy that:
o Sec. 25. The State shall ensure the autonomy of local governments.
 An entire article (Art. X) of the Constitution has been devoted to guaranteeing and promoting the autonomy of
LGUs. Section 2 thereof reiterates the State policy in this wise:
o Sec. 2. The territorial and political subdivisions shall enjoy local autonomy.
 The assailed provisos in the GAAs of 1999, 2000 and 2001 and the OCD resolutions violate the constitutional precept
on local autonomy. Sec. 6, Art. X of the Constitution reads, “Local government units shall have a just share, as
determined by law, in the national taxes which shall be automatically released to them.” When parsed, it would be
readily seen that this provision mandates that (1) the LGUs shall have a just share in the national taxes; (2) the just
share shall be determined by law; and (3) the just share shall be automatically released to the LGUs.
 The LGC of 1991, among its salient provisions, underscores the automatic release of the LGUs just share in this wise:
o Sec. 18. Power to Generate and Apply Resources. Local government units shall have the power and authority to
establish an organization that shall be responsible for the efficient and effective implementation of their
development plans, program objectives and priorities; to create their own sources of revenue and to levy taxes,
fees, and charges which shall accrue exclusively for their use and disposition and which shall be retained by
them; to have a just share in national taxes which shall be automatically and directly released to them without
need of further action.
o Sec. 286. Automatic Release of Shares. (a) The share of each local government unit 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.
 As such, the LGUs are not required to perform any act to receive the just share accruing to them from the national
coffers. As emphasized by the LGC of 1991, the just share of the LGUs shall be released to them without need of
further action.
 Under the assailed provisos in the GAAs of 1999, 2000 and 2001, a portion of the IRA in the amount of five billion
pesos was earmarked for the LGSEF, and these provisos imposed the condition that such amount shall be released
to the LGUs subject to the implementing rules and regulations, including such mechanisms and guidelines for the
equitable allocations and distribution of said fund among local government units subject to the guidelines that may
be prescribed by the Oversight Committee on Devolution. Significantly, the LGSEF could not be released to the LGUs
without the Oversight Committee’s prior approval.
 Further, with respect to the portion of the LGSEF allocated for various projects of the LGUs (P1 billion for 1999; P1.5
billion for 2000 and P2 billion for 2001), the Oversight Committee, through the assailed OCD resolutions, laid down
guidelines and mechanisms that the LGUs had to comply with before they could avail of funds from this portion of
the LGSEF. The guidelines required (a) the LGUs to identify the projects eligible for funding based on the criteria laid
down by the Oversight Committee; (b) the LGUs to submit their project proposals to the DILG for appraisal; (c) the
project proposals that passed the appraisal of the DILG to be submitted to the Oversight Committee for review,
evaluation and approval. It was only upon approval thereof that the Oversight Committee would direct the DBM to
release the funds for the projects.
 The LGSEF is part of the IRA or just share of the LGUs in the national taxes. To subject its distribution and release to the
 vagaries of the implementing rules and regulations, including the guidelines and mechanisms unilaterally prescribed by
the Oversight Committee from time to time, as sanctioned by the assailed provisos in the GAAs of 1999, 2000 and
2001 and the OCD resolutions, makes the release not automatic, a flagrant violation of the constitutional and statutory
mandate that the just share of the LGUs shall be automatically released to them. The LGUs are, thus, placed at the
mercy of the Oversight Committee.
 The Oversight Committee was created merely to formulate the rules and regulations for the efficient and effective
implementation of the LGC of 1991 to ensure compliance with the principles of local autonomy as defined under the
Constitution. The Oversight Committees authority is undoubtedly limited to the implementation of the LGC of 1991,
not to supplant or subvert the same. Neither can it exercise control over the IRA, or even a portion thereof, of the
LGUs.
 The respondents argue that this modification is allowed since the Constitution does not specify that the just share of
the LGUs shall only be determined by the LGC of 1991. That it is within the power of Congress to enact other laws,
including the GAAs, to increase or decrease the just share of the LGUs. This contention is untenable. The LGC of
1991 is a substantive law. And while it is conceded that Congress may amend any of the provisions therein, it may
not do so through appropriations laws or GAAs. Any amendment to the LGC of 1991 should be done in a separate
law, not in the appropriations law, because Congress cannot include in a general appropriation bill matters that
should be more properly enacted in a separate legislation.
RULING
WHEREFORE, the petition is GRANTED. The assailed provisos in the General Appropriations Acts of 1999, 2000 and
2001, and the assailed OCD Resolutions, are declared UNCONSTITUTIONAL.
(SANTOS, 2B 2017-2018)