The Supreme Court declared as unconstitutional the earmarking of five billion pesos from the Internal Revenue Allotment (IRA) for the Local Government Service Equalization Fund (LGSEF) in the General Appropriations Acts (GAAs) of 1999, 2000, and 2001. This ruling affirmed that such earmarking, along with the conditions imposed by the Oversight Committee on Devolution (OCD) for the release of these funds, violated the constitutional principle of local autonomy. It ensures that the LGUs’ share in national taxes is automatically released to them, free from national government control, thus protecting their fiscal independence and ability to address local needs effectively.
The Province’s Fight: Can the National Government Restrict Local Funds?
The Province of Batangas, led by its Governor Hermilando I. Mandanas, challenged the constitutionality of certain provisos in the General Appropriations Acts (GAAs) of 1999, 2000, and 2001. These provisos earmarked five billion pesos annually from the Internal Revenue Allotment (IRA) for the Local Government Service Equalization Fund (LGSEF). The province argued that these earmarks, coupled with conditions for release imposed by the Oversight Committee on Devolution (OCD), infringed on the constitutional guarantee of local autonomy.
The heart of the legal battle lay in the interpretation of Section 6, Article X of the Constitution, which mandates that local government units (LGUs) shall have a “just share” in the national taxes, to be “automatically” released to them. Sections 18 and 286 of the Local Government Code of 1991 reinforce this by stating that the “just share” should be “automatically and directly” released without needing any further action. Batangas contended that subjecting the LGSEF distribution to the Oversight Committee’s regulations contravened this constitutional directive.
The province further asserted that vesting the Oversight Committee with the power to determine the distribution and release of the LGSEF, a part of the LGUs’ IRA, was a violation of the principle of local autonomy. The petitioner cited a past incident in 2001, where the LGSEF release was delayed because the Oversight Committee did not convene, and no guidelines were issued. Moreover, the potential disapproval of project proposals by the Oversight Committee could result in a reduction of the LGUs’ IRA share, which is a key source of funding for local projects.
The respondents, through the Office of the Solicitor General, defended the constitutionality of the questioned provisions. They argued that Section 6, Article X of the Constitution, did not specify that the LGUs’ “just share” should be solely determined by the Local Government Code of 1991. They further claimed that Congress has the power to determine what the “just share” of the LGUs in the national taxes should be, and this is within the authority of Congress. Essentially, the respondents stated that Section 285 of the Local Government Code of 1991 was not fixed.
The Supreme Court addressed several procedural issues before delving into the substantive question. The Court emphasized the requirement for a party to have locus standi, demonstrating a direct and personal interest in the outcome of the controversy. The Court acknowledged that the Province of Batangas possessed the necessary standing to maintain the suit, as it sought to protect the interests of LGUs concerning their share in the national taxes or the IRA.
The Court underscored that the automatic release of the LGUs’ IRA was intended to guarantee and promote local autonomy. In the case of Pimentel, Jr. v. Aguirre, the Supreme Court declared that Section 4 of Administrative Order No. 372 could not be upheld because a basic feature of local fiscal autonomy is the automatic release of the shares of LGUs in the national internal revenue. In this case, AO 372 ordered the withholding of 10 percent of the LGUs’ IRA pending assessment, which the court struck down as unconstitutional.
The Supreme Court then declared the questioned provisions in the GAAs and the OCD resolutions as unconstitutional. The Court held that the LGSEF is part of the IRA or “just share” of the LGUs in the national taxes and subjecting its distribution and release to the Oversight Committee’s implementing rules and regulations makes the release not automatic. The Court further held that the use of the word “shall” connotes a mandatory order, with the Supreme Court stating:
Where the law, the Constitution in this case, is clear and unambiguous, it must be taken to mean exactly what it says, and courts have no choice but to see to it that the mandate is obeyed.
Additionally, the assailed OCD resolutions and the questioned provisos in the GAAs of 1999, 2000, and 2001 were argued to have improperly amended Section 285 of the Local Government Code of 1991 on the percentage sharing of the IRA among the LGUs. The Court agreed with the argument and stated that the percentage sharing of the IRA, fixed in the Local Government Code of 1991, are matters of general and substantive law. Thus, the Court cannot sanction any amendments through the GAAs.
The Supreme Court also said that a general appropriations bill is a special type of legislation, whose content is limited to specified sums of money dedicated to a specific purpose or a separate fiscal unit. Any provision therein which is intended to amend another law is considered an “inappropriate provision.” As such, increasing or decreasing the IRA of the LGUs or modifying their percentage sharing therein are matters of general and substantive law.
FAQs
| What was the key issue in this case? | The key issue was whether earmarking a portion of the IRA for the LGSEF and imposing conditions for its release violated the constitutional principle of local autonomy, which guarantees LGUs a “just share” of national taxes to be automatically released. |
| What is the Internal Revenue Allotment (IRA)? | The IRA is the share of local government units in the national internal revenue taxes, intended to fund local projects and services. It is a crucial source of income for LGUs and is constitutionally mandated to be released automatically. |
| What is the Local Government Service Equalization Fund (LGSEF)? | The LGSEF was a fund created to address funding shortfalls of functions and services devolved to the LGUs and other funding requirements of the program. It was sourced from the IRA but subjected to specific guidelines and mechanisms for its distribution. |
| What did the Supreme Court rule? | The Supreme Court ruled that the assailed provisos in the General Appropriations Acts of 1999, 2000 and 2001, and the assailed OCD Resolutions, are unconstitutional. It held that subjecting the release of the LGSEF to conditions set by the Oversight Committee violated the automatic release mandate. |
| What is local autonomy? | Local autonomy refers to the degree of self-governance granted to local government units, enabling them to manage their own affairs with minimal interference from the national government. It includes both administrative and fiscal autonomy. |
| What is the role of the Oversight Committee on Devolution (OCD)? | The Oversight Committee on Devolution was created to formulate rules and regulations for the effective implementation of the Local Government Code of 1991. However, the Supreme Court clarified that its authority does not extend to controlling the IRA of LGUs. |
| Why did the Court consider the case despite the IRA having been released? | The Court considered the case because it involved a grave violation of the Constitution and the issue was capable of repetition, yet evading review. This means similar provisions could appear in future appropriations laws, necessitating a definitive ruling. |
| What does “automatic release” mean? | “Automatic release” means that the LGUs’ share in national taxes should be released to them without the need for further action or compliance with additional conditions. The funds should be transferred directly and without any holdbacks imposed by the national government. |
In conclusion, the Supreme Court’s decision reinforces the constitutional principle of local autonomy, ensuring that LGUs receive their “just share” of national taxes without undue restrictions. This ruling is a key win for decentralization and empowers local governments to address the needs of their communities more effectively.
For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.
Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: THE PROVINCE OF BATANGAS VS. HON. ALBERTO G. ROMULO, G.R. No. 152774, May 27, 2004