BATANGAS v ROMULO - Municipalities: 40%

G.R. No. 152774 / 27 May 2004/ CALLEJO, J./ LOCGOV (c) Remaining P1B: Earmarked to support LAAP and other
priority initiatives submitted to the OC on Devolution for
SUMMARY. In each of the 1999, 2001, and 2002 GAAs, P5B of the approval.1
IRA due to LGUs was earmarked as the Local Gov’t Service 2000 GAA: The LGSEF reappears
Equalization Fund (LGSEF). Each P5B portion was specifically P111.778B was the LGUs’ internal revenue allotment in RA
allocated to the LGUs in varying percentages, and also partly set 8760, or the 2000 GAA. The 2000 GAA, like in 1999, also contained
aside for local affirmative action projects, subject to the approval of a proviso earmarking P5B of the IRA as the LGSEF. The allocation
the Oversight Committee. Petitioner assailed the LGSEF as is as follows:
unconstitutional, first, for being contrary to the mandate that the (a) P3.5B: Percentage-sharing formula:
LGUs’ just share be “automatically released” to them; and second, - Provinces: 26% (P910M)
for illegally amending §285, LGC, which already provides for the - Cities: 23% (P805M)
percentage sharing of LGUs in the IRA. The SC agreed: the fact that - Municipalities: 35% (P1.225B)
the release of portions of the LGSEF is subject to the OC’s approval - Barangays: 16% (P560M)
is contrary to the principle of local autonomy, and any amendment to (b) Remaining P1.5B: Earmarked again to support LAAP,
the percentage sharing embodied in the LGC should be made in a to be endorsed and approved by the OC, in
separate law, not in a GAA. accordance with its guidelines, procedures, and
DOCTRINE. Pursuant to the precept of Local Autonomy, the documentary requirements
Constitution and the LGC both mandate the automatic release of the Pres. Estrada then authorized the Executive Secretary and the
LGUs’ share in the national revenue taxes. Therefore, such releases DBM to release the first P2.5B of the 2000 LGSEF. Later, the OC,
cannot be subject to conditions. under the new administration of Pres. Macapagal-Arroyo,
The only possible exception to the mandatory automatic release of promulgated OCD-2001-29 for the allocation, implementation, and
the LGUs’ IRA is if the national internal revenue collections for the release of the remaining P2.5B of the 2000 LGSEF.
current fiscal year is less than 40 percent of the collections of the
preceding third fiscal year, in which case what should be 2001 GAA: The LGSEF reappears
automatically released shall be a proportionate amount of the In 2001, Congress failed to enact a GAA, so the 2000 GAA was
collections for the current fiscal year. The adjustment may even be deemed re-enacted, together with the IRA of the LGUs therein. The
made on a quarterly basis depending on the actual collections of proviso earmarking P5B for the LGSEF was therefore also re-
national internal revenue taxesfor the quarter of the current fiscal enacted, and allocated as follows: P111.778B was the LGUs’ internal
year. revenue allotment in RA 8760, or the 2000 GAA. The 2000 GAA,
like in 1999, also contained a proviso earmarking P5B of the IRA as
FACTS. the LGSEF. The allocation is as follows:
Background: The beginnings of the LGSEF (a) P3B: Modified codal formula:
In 1998, Pres. Estrada issued EO No. 48, which established a - Provinces: 25% (P750M)
“Program for Devolution Adjustment and Equalization,” by - Cities: 25% (P750M)
virtue of which a “Devolution Adjustment and Equalization - Municipalities: 35% (P1.050B)
Fund” was created. This was in order to address the funding - Barangays: 15% (P450M)
shortfalls of functions and services devolved to LGUs. (b) P1.9B: LAAP
Through the program, the DBM was to set aside an amount from (c) Remaining P100M: LGSEF “capability building fund”
the savings of the national government, to be determined by the
Oversight Committee (OC) established in the LGC. Said amount was The petitioner’s arguments
then to be incorporated in the annual General Appropriations Act
(GAA). The OC was then authorized to issue the implementing rules 1
and regulations governing the allocation and distribution of said fund A summary of the guidelines for approval:
(a) LGUs must identify the projects eligible for funding, based on the
to the LGUs.
criteria laid down by the OC;
(b) LGUs must submit their project proposals to the DILG fo
1999 GAA: Rebirth as the LGSEF appraisal; and
The program was renamed the Local Government Service (c) The project proposals that pass DILG appraisal are submitted to
Equalization Fund (LGSEF) in RA 8745, or the 1999 GAA. Under the OC for review, evaluation, and approval.
said appropriations law, P96.780B was allotted as the LGUs’ share in Just for background, some of the projects eligible for funding are the
the internal revenue taxes. Out of this amount, P5B was set aside as following:
the LGSEF. (a) Delivery of local health and sanitation services, hospital services
and other tertiary services;
The OC then passed three resolutions related to the LGSEF:
(b) Delivery of social welfare services;
(a) OCD-99-005: Resolution adopting the allocation scheme (c) Provision of socio-cultural services and facilities for youth and
for the P5B 1999 LGSEF community development;
(b) OCD-99-006: Resolution adopting the allocation scheme (d) Provision of agricultural and on-site related research;
for the first P4B of the 1999 LGSEF and its concomitant (e) Improvement of community-based forestry projects and other local
general framework, implementing guidelines and projects on environment and natural resources protection and
mechanics for its implementation and release conservation;
(c) OCD-99-003: Resolution setting aside 20% of the LGSEF (f) Improvement of tourism facilities and promotion of tourism;
(g) Peace and order and public safety;
(or the remaining P1B) for local affirmative action projects
(h) Construction, repair and maintenance of public works and
(LAAP) and other priority initiatives for LGUs infrastructure, including public buildings and facilities for public
Hence, the 1999 LGSEF was to be allocated as follows: use, especially those destroyed or damaged by man-made or
(a) First P2B: In accordance with the codal formula sharing natural calamities and disaster as well as facilities for water supply,
scheme prescribed in the LGC flood control and river dikes;
(b) Second P2B: Modified cost of devolution fund, with a (i) Provision of local electrification facilities;
formula as follows: (j) Livelihood and food production services, facilities and equipment;
- Provinces: 40% and
(k) Other projects that may be authorized by the OC consistent with
- Cities: 20% the aforementioned objectives and guidelines.
 Gov. Mandanas of Batangas then wrote to the members of the (b) It is moot and academic. The IRAs for the years 1999,
OC seeking reconsideration, and also to PGMA, urging her to 2000, and 2001 have been released, and the
disapprove the allocation for violating the Constitution and the LGC. government is now operating under the 2003 budget.
However, PGMA approved the OC Resolution embodying the above (c) Petitioner has no legal standing, because it has not
allocation. suffered any injury.
The Province, represented by Gov. Mandanas, thus come before
the Court to assail the constitutionality of the LGSEF provisos in the ISSUES & RATIO.
1999, 2000, and 2001 GAAs, and the OC resolutions,2 on the Procedural
following grounds: 1. Whether the petitioner has legal standing.—YES.
(1) The LGSEF violates the Constitution and LGC Petitioner has legal standing. As a local government unit, it seeks
insofar as the mandate that the just share of LGUs in relief in order to protect or vindicate its own interest, as well as that
the national taxes shall be “automatically released” of the other LGUs. This interest pertains to the LGUs’ share in the
to them. Subjecting the distribution and release of the national taxes, or the IRA.
P5B LGSEF, which is part of the IRA, to compliance
by the LGUs to the rules, regulations, mechanisms, and 2. Whether the petition involves factual questions properly
guidelines prescribed by the OC contravenes the cognizable by the lower courts.—NO.
explicit directive of the Constitution (Art. X, §6) and The instant controversy is predicated upon a substantial issue
the LGC (§18 and §286) that their share in the national (see above). Further, the following facts are necessary to resolve the
taxes be automatically released to them. This is issue before the Court, and being undisputed, they no longer need to
repugnant to the principle of local autonomy: as an be determined by a trial court:
example, in 2001, the release of the LGSEF was long (a) That P5B was earmarked in the 1999, 2000, and 2001
delayed, because the OC was unable to convene and GAAs;
issue guidelines. (b) That the OC promulgated the assailed resolutions; and
(2) The LGSEF improperly amends §285, LGC, which (c) That the LGSEF was to be released to the LGUs only
prescribes the percentage sharing3 of the IRA among upon their compliance with implementing rules and
LGUs. The modifications with respect to the LGSEF regulations, as prescribed by the OC.
constitute an illegal amendment by the executive
branch of a substantive law. (Further, petitioner 3. Whether the issue had been rendered moot and academic.—
mentions that in a Dec. 2001 letter, Exec. Sec. Romulo NO.
endorsed to DBM Sec. Boncodin the release of the There is compelling reason for the Court to resolve the
LGSEF to certain LGUs in accordance with PGMA’s substantive issue in spite of supervening events. = Capable of
handwritten instructions. Hence, the LGUs are at a loss repetition, evading review, controlling principles to guide bench, bar,
as to how a portion of the LGSEF was actually and public.
allocated.) Finally, portions of the LGSEF are yet to be
released, resulting in damage and injury to the Substantial
petitioner. 1. Whether the assailed GAA provisos and OCD resolutions
infringe upon the Constitutional and statutory mandate that the
The respondents’ arguments IRAs “automatically released” to LGUs.—YES.
The respondents contend that: The assailed GAA provisions and OC resolutions violate the
(1) Congress is the arbiter of what should be the “just constitutional principle of local autonomy.
share” of the LGUs in the national taxes. Art. X, §6 does
not specify that the just share of the LGUs shall be The Court first cited Art. X, §64 of the Constitution and §§18
determined solely by the LGC. Moreover, the phrase “as and 286 of the LGC to highlight the automatic release of the IRA.
determined by law” in that provision means that there exists §286 particularly states that the IRA “shall not be subject to any
no limitation on the power of Congress to determine what lien or holdback that may be imposed by the national
is the just share of the LGU’s in the national taxes. government for whatever purpose.”
(2) §285, LGC was not intended to be a fixed determination It also looked to Webster’s Dictionary for a definition of
of their share in the national taxes. Congress may enact automatic: “involuntary either wholly or to a major extent so that any
other laws, including appropriations laws, providing for a activity of the will is largely negligible.” Hence, it connotes
different sharing formula. The provision was merely something mechanical, spontaneous, and perfunctory: LGUs are
intended to be the default share of the LGUs, but they have thus not required to perform any act to receive their just share.
no vested right in a permanent or fixed percentage, because The Court also referred to its ruling in Pimentel v. Aguirre: “A
Congress may increase or decrease the LGUs’ share in basic feature of local fiscal autonomy is the automatic release of
accordance with what it believes is appropriate for their the shares of LGUs in the national internal revenue. […] Any
operation. retention is prohibited.”
(3) The petition is procedurally infirm because: In the 1999, 2000, and 2001 GAAs, a P5B-portion of the IRA
(a) It raises factual issues that should be threshed out in was earmarked for the LGSEF, and its release was subject to
the lower courts. (Specifically, they refer to compliance with implementing rules and regulations prescribed by
petitioner’s allegation that because portions of the the OC. The LGSEF could therefore not be released to the LGUs
LGSEF have not been released, injury and damage has without the OC’s prior approval.
been incurred. Respondents argue that such allegation The entire process is constitutionally impermissible. The
is subject to proof in the proper venue.) LGSEF is part of the IRA, and to subject its distribution and
release to implementing rules and regulations unilaterally
2
OCD-99-003, OCD 99-005, OCD-99-006, OCD-2000-023, OCD-2001-029, prescribed by the OC makes the release not automatic.
and OCD-2002-001
3
§285 provides for the following allocation of the IRA:
4
(a) Provinces: 23% They parsed the provision as having three mandates:
(b) Cities: 23% (a) The LGUs shall have a just share in the national taxes;
(c) Municipalities: 34% (b) That just share shall be determined by law; and
(d) Barangays: 20% (c) That just share shall be automatically released to the LGUs.
 The OC’s exercise of discretion, even control, over the
distribution and release of part of the IRA is contrary to the principle
of local autonomy. Moreover, there is no statutory basis for it,
since the OC was created merely to formulate rules and
regulations to effectively implement the LGC and ensure
compliance with the principles of local autonomy in the
Constitution. (The OC was created under the LGC’s “Transitory
Provisions,” and principal author and sponsor Sen. Pimentel has said
that the OC’s work should have terminated a year from the LGC’s
approval.)
Local autonomy includes both administrative and fiscal
autonomy. The assailed GAA provisos and OC resolutions
constitute a “withholding” of portions of the IRA, which
effectively encroach on the LGUs’ fiscal autonomy. They thus
cannot be upheld.

2. Whether the assailed GAA provisos and OCD resolutions

constitute an illegal amendment to the LGC, insofar as they
prescribe a different allocation of the IRA to LGUs.—YES.

The assailed GAA provisions and OC resolutions cannot amend

§285, LGC.
§285 provides for the allocation of the IRA.5 The only possible
exception thereto is embodied in §284,6 but 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 years.
The percentage allocations for the LGSEF are thus contrary to
the LGC. Though respondents argue that the Congress has the
power to enact other laws to increase or decrease the LGUs’ just
share, Congress may not amend the LGC through GAAs. Any
amendment to the LGC should be done in a separate law. A GAA
is a special type of legislation, limited to specified sums of money,
dedicated to a specific purpose or separate fiscal unit. Increasing or
decreasing the LGUs’ IRAs or modifying their percentage
sharing therein as fixed in the LGC are matters of substantive law.
To permit Congress to undertake these amendments through the
GAAs would give Congress unbridled authority to unduly
infringe the LGUs’ fiscal autonomy.

The Court noted that the 2002 and 2003 GAAs no longer contain
provisos earmarking any portion of the IRA for the LGSEF. Hence, it
seems Congress has seen fit to discontinue a practice that it
recognizes as infirm.

DECISION. The petition is granted.

5
Supra footnote 4.
6
If the national internal revenue collections for the current fiscal year is less
than 40% of the collections of the preceding 3rd fiscal year, what should be
automatically released shall be a proportionate amount of the collections for
the current fiscal year.