Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. 152774 May 27, 2004

THE PROVINCE OF BATANGAS, represented by its Governor, HERMILANDO I.

MANDANAS, petitioner,
vs.
HON. ALBERTO G. ROMULO, Executive Secretary and Chairman of the
Oversight Committee on Devolution; HON. EMILIA BONCODIN, Secretary,
Department of Budget and Management; HON. JOSE D. LINA, JR., Secretary,
Department of Interior and Local Government, respondents.

DECISION

CALLEJO, SR., J.:

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
(P5,000,000,000.00) of the Internal Revenue Allotment (IRA) for the Local Government
Service Equalization Fund (LGSEF) and imposed conditions for the release thereof.

Named as respondents are Executive Secretary Alberto G. Romulo, in his capacity as

Chairman of the Oversight Committee on Devolution, Secretary Emilia Boncodin of the
Department of Budget and Management (DBM) and Secretary Jose Lina of the
Department of Interior and Local Government (DILG).

Background

On December 7, 1998, then President Joseph Ejercito Estrada issued Executive Order
(E.O.) No. 48 entitled "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."1 The Oversight Committee (referred
to as the Devolution Committee in E.O. No. 48) constituted under Section 533(b) of
Republic Act No. 7160 (The Local Government Code of 1991) has been tasked to
formulate and issue the appropriate rules and regulations necessary for its effective
implementation.2 Further, to address the funding shortfalls of functions and services
devolved to the LGUs and other funding requirements of the program, the "Devolution
Adjustment and Equalization Fund" was created. 3 For 1998, the DBM was directed to set
aside an amount to be determined by the Oversight Committee based on the devolution
status appraisal surveys undertaken by the DILG. 4 The initial fund was to be sourced
from the available savings of the national government for CY 1998. 5 For 1999 and the
succeeding years, the corresponding amount required to sustain the program was to be
incorporated in the annual GAA.6 The Oversight Committee has been authorized to issue
the implementing rules and regulations governing the equitable allocation and
distribution of said fund to the LGUs.7

The LGSEF in the GAA of 1999

In Republic Act No. 8745, otherwise known as 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:

... PROVIDED, That the amount of FIVE BILLION PESOS (P5,000,000,000) shall
be earmarked for the Local Government Service Equalization Fund for the funding
requirements of projects and activities arising from the full and efficient
implementation of devolved functions and services of local government units
pursuant to R.A. No. 7160, otherwise known as the Local Government Code of 1991:
PROVIDED, FURTHER, That such amount shall be released to the local government
units 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 as constituted pursuant to Book IV, Title III, Section
533(b) of R.A. No. 7160. The Internal Revenue Allotment shall be released directly
by the Department of Budget and Management to the Local Government Units
concerned.

On July 28, 1999, the Oversight Committee (with then Executive Secretary Ronaldo
B. Zamora as Chairman) passed Resolution Nos. OCD-99-003, OCD-99-005 and
OCD-99-006 entitled as follows:

OCD-99-005

RESOLUTION ADOPTING THE ALLOCATION SCHEME FOR THE PhP5

BILLION CY 1999 LOCAL GOVERNMENT SERVICE EQUALIZATION FUND
(LGSEF) AND REQUESTING HIS EXCELLENCY PRESIDENT JOSEPH
EJERCITO ESTRADA TO APPROVE SAID ALLOCATION SCHEME.

OCD-99-006

RESOLUTION ADOPTING THE ALLOCATION SCHEME FOR THE PhP4.0

BILLION OF THE 1999 LOCAL GOVERNMENT SERVICE EQUALIZATION
FUND AND ITS CONCOMITANT GENERAL FRAMEWORK, IMPLEMENTING
GUIDELINES AND MECHANICS FOR ITS IMPLEMENTATION AND
RELEASE, AS PROMULGATED BY THE OVERSIGHT COMMITTEE ON
DEVOLUTION.

OCD-99-003

RESOLUTION REQUESTING HIS EXCELLENCY PRESIDENT JOSEPH

EJERCITO ESTRADA TO APPROVE THE REQUEST OF THE OVERSIGHT
COMMITTEE ON DEVOLUTION TO SET ASIDE TWENTY PERCENT (20%)
OF THE LOCAL GOVERNMENT SERVICE EQUALIZATION FUND (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 on October 6, 1999.

Under the allocation scheme adopted pursuant to Resolution No. OCD-99-005, the
five billion pesos LGSEF was to be allocated as follows:

1. The PhP4 Billion of the LGSEF shall be allocated in accordance with the
allocation scheme and implementing guidelines and mechanics promulgated and
adopted by the OCD. To wit:

a. The first PhP2 Billion of the LGSEF shall be allocated in accordance with
the codal formula sharing scheme as prescribed under the 1991 Local
Government Code;

b. The second PhP2 Billion of the LGSEF shall be allocated in accordance

with a modified 1992 cost of devolution fund (CODEF) sharing scheme, as
recommended by the respective leagues of provinces, cities and
municipalities to the OCD. The modified CODEF sharing formula is as
follows:

Province : 40%

Cities : 20%

Municipalities : 40%

This is applied to the P2 Billion after the approved amounts granted to individual
provinces, cities and municipalities as assistance to cover decrease in 1999 IRA
share due to reduction in land area have been taken out.

2. The remaining PhP1 Billion of the LGSEF shall be earmarked to support local
 affirmative action projects and other priority initiatives submitted by LGUs to the
Oversight Committee on Devolution for approval in accordance with its prescribed
guidelines as promulgated and adopted by the OCD.

In Resolution No. OCD-99-003, the Oversight Committee set aside the one billion pesos
or 20% of the LGSEF to support Local Affirmative Action Projects (LAAPs) of LGUs.
This remaining amount was intended to "respond to the urgent need for additional funds
assistance, otherwise not available within the parameters of other existing fund sources."
For LGUs to be eligible for funding under the one-billion-peso portion of the LGSEF, the
OCD promulgated the following:

III. CRITERIA FOR ELIGIBILITY:

1. LGUs (province, city, municipality, or barangay), individually or by group or

multi-LGUs or leagues of LGUs, especially those belonging to the 5th and 6th class,
may access the fund to support any projects or activities that satisfy any of the
aforecited purposes. A barangay may also access this fund directly or through their
respective municipality or city.

2. The proposed project/activity should be need-based, a local priority, with high

development impact and are congruent with the socio-cultural, economic and
development agenda of the Estrada Administration, such as food security, poverty
alleviation, electrification, and peace and order, among others.

3. Eligible for funding under this fund are projects arising from, but not limited to,
the following areas of concern:

a. delivery of local health and sanitation services, hospital services and other
tertiary services;

b. delivery of social welfare services;

c. provision of socio-cultural services and facilities for youth and community

development;

d. provision of agricultural and on-site related research;

e. improvement of community-based forestry projects and other local projects on

environment and natural resources protection and conservation;

f. improvement of tourism facilities and promotion of tourism;

g. peace and order and public safety;

h. construction, repair and maintenance of public works and infrastructure,

including public buildings and facilities for public use, especially those
 destroyed or damaged by man-made or natural calamities and disaster as well as
facilities for water supply, flood control and river dikes;

i. provision of local electrification facilities;

j. livelihood and food production services, facilities and equipment;

k. other projects that may be authorized by the OCD consistent with the
aforementioned objectives and guidelines;

4. Except on extremely meritorious cases, as may be determined by the Oversight

Committee on Devolution, this portion of the LGSEF shall not be used in
expenditures for personal costs or benefits under existing laws applicable to
governments. Generally, this fund shall cover the following objects of expenditures
for programs, projects and activities arising from the implementation of devolved and
regular functions and services:

a. acquisition/procurement of supplies and materials critical to the full and

effective implementation of devolved programs, projects and activities;

b. repair and/or improvement of facilities;

c. repair and/or upgrading of equipment;

d. acquisition of basic equipment;

e. construction of additional or new facilities;

f. counterpart contribution to joint arrangements or collective projects among

groups of municipalities, cities and/or provinces related to devolution and
delivery of basic services.

5. To be eligible for funding, an LGU or group of LGU shall submit to the Oversight
Committee on Devolution through the Department of Interior and Local
Governments, within the prescribed schedule and timeframe, a Letter Request for
Funding Support from the Affirmative Action Program under the LGSEF, duly
signed by the concerned LGU(s) and endorsed by cooperators and/or beneficiaries, as
well as the duly signed Resolution of Endorseme.nt by the respective Sanggunian(s)
of the LGUs concerned. The LGU-proponent shall also be required to submit the
Project Request (PR), using OCD Project Request Form No. 99-02, that details the
following:

(a) general description or brief of the project;

(b) objectives and justifications for undertaking the project, which should
highlight the benefits to the locality and the expected impact to the local
 program/project arising from the full and efficient implementation of social
services and facilities, at the local levels;

(c) target outputs or key result areas;

(d) schedule of activities and details of requirements;

(e) total cost requirement of the project;

(f) proponent's counterpart funding share, if any, and identified source(s) of

counterpart funds for the full implementation of the project;

(g) requested amount of project cost to be covered by the LGSEF.

Further, under the guidelines formulated by the Oversight Committee as contained in

Attachment - Resolution No. OCD-99-003, the LGUs were required to identify the
projects eligible for funding under the one-billion-peso portion of the LGSEF and submit
the project proposals thereof and other documentary requirements to the DILG for
appraisal. The project proposals that passed the DILG's appraisal would then be
submitted to the Oversight Committee for review, evaluation and approval. Upon its
approval, the Oversight Committee would then serve notice to the DBM for the
preparation of the Special Allotment Release Order (SARO) and Notice of Cash
Allocation (NCA) to effect the release of funds to the said LGUs.

The LGSEF in the GAA of 2000

Under Rep. Act No. 8760, otherwise known as 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. This proviso, found in Item No. 1, Special Provisions, Title
XXXVII A. Internal Revenue Allotment, was similarly worded as that contained in the
GAA of 1999.

The Oversight Committee, in its Resolution No. OCD-2000-023 dated June 22, 2000,
adopted the following allocation scheme governing the five billion pesos LGSEF for
2000:

1. The PhP3.5 Billion of the CY 2000 LGSEF shall be allocated to and shared by the
four levels of LGUs, i.e., provinces, cities, municipalities, and barangays, using the
following percentage-sharing formula agreed upon and jointly endorsed by the
various Leagues of LGUs:

For Provinces 26% or P 910,000,000

For Cities 23% or 805,000,000

 For Municipalities 35% or 1,225,000,000

For Barangays 16% or 560,000,000

Provided that the respective Leagues representing the provinces, cities,

municipalities and barangays shall draw up and adopt the horizontal
distribution/sharing schemes among the member LGUs whereby the Leagues
concerned may opt to adopt direct financial assistance or project-based arrangement,
such that the LGSEF allocation for individual LGU shall be released directly to the
LGU concerned;

Provided further that the individual LGSEF shares to LGUs are used in accordance
with the general purposes and guidelines promulgated by the OCD for the
implementation of the LGSEF at the local levels pursuant to Res. No. OCD-99-006
dated October 7, 1999 and pursuant to the Leagues' guidelines and mechanism as
approved by the OCD;

Provided further that each of the Leagues shall submit to the OCD for its approval
their respective allocation scheme, the list of LGUs with the corresponding LGSEF
shares and the corresponding project categories if project-based;

Provided further that upon approval by the OCD, the lists of LGUs shall be endorsed
to the DBM as the basis for the preparation of the corresponding NCAs, SAROs, and
related budget/release documents.

2. The remaining P1,500,000,000 of the CY 2000 LGSEF shall be earmarked to

support the following initiatives and local affirmative action projects, to be endorsed
to and approved by the Oversight Committee on Devolution in accordance with the
OCD agreements, guidelines, procedures and documentary requirements:

On July 5, 2000, then President Estrada issued a Memorandum authorizing then

Executive Secretary Zamora and the DBM to implement and release the 2.5 billion
pesos LGSEF for 2000 in accordance with Resolution No. OCD-2000-023.

Thereafter, the Oversight Committee, now under the administration of President

Gloria Macapagal-Arroyo, promulgated Resolution No. OCD-2001-29 entitled
"ADOPTING RESOLUTION NO. OCD-2000-023 IN THE ALLOCATION,
IMPLEMENTATION AND RELEASE OF THE REMAINING P2.5 BILLION
LGSEF FOR CY 2000." Under this resolution, the amount of one billion pesos of the
LGSEF was to be released in accordance with paragraph 1 of Resolution No. OCD-
2000-23, to complete the 3.5 billion pesos allocated to the LGUs, while the amount
of 1.5 billion pesos was allocated for the LAAP. However, out of the latter amount,
P400,000,000 was to be allocated and released as follows: P50,000,000 as financial
assistance to the LAAPs of LGUs; P275,360,227 as financial assistance to cover the
decrease in the IRA of LGUs concerned due to reduction in land area; and
P74,639,773 for the LGSEF Capability-Building Fund.
 The LGSEF in the GAA of 2001

In view of the failure of Congress to enact the general appropriations law 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.

On January 9, 2002, the Oversight Committee adopted Resolution No. OCD-2002-

001 allocating the five billion pesos LGSEF for 2001 as follows:

Modified Codal Formula P3.000 billion

Priority Projects 1.900 billion
Capability Building Fund .100 billion
P5.000 billion

RESOLVED FURTHER, that the P3.0 B of the CY 2001 LGSEF which is to be allocated
according to the modified codal formula shall be released to the four levels of LGUs, i.e.,
provinces, cities, municipalities and barangays, as follows:

LGUs Percentage Amount

Provinces 25 P0.750 billion
Cities 25 0.750
Municipalities 35 1.050
Barangays 15 0.450
100 P3.000 billion

RESOLVED FURTHER, that the P1.9 B earmarked for priority projects shall be
distributed according to the following criteria:

1.0 For projects of the 4th, 5th and 6th class LGUs; or

2.0 Projects in consonance with the President's State of the Nation Address
(SONA)/summit commitments.

RESOLVED FURTHER, that the remaining P100 million LGSEF capability building
fund shall be distributed in accordance with the recommendation of the Leagues of
Provinces, Cities, Municipalities and Barangays, and approved by the OCD.

Upon receipt of a copy of the above resolution, Gov. Mandanas wrote to the individual
members of the Oversight Committee seeking the reconsideration of Resolution No.
OCD-2002-001. He also wrote to Pres. Macapagal-Arroyo urging her to disapprove said
resolution as it violates the Constitution and the Local Government Code of 1991.
On January 25, 2002, Pres. Macapagal-Arroyo approved Resolution No. OCD-2002-001.

The Petitioner's Case

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 Committee's Resolutions Nos. OCD-99-003, OCD-99-005, OCD-99-006,
OCD-2000-023, OCD-2001-029 and OCD-2002-001 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 Local Government Code of 1991.

Section 6, Article X of the Constitution is invoked as it mandates that the "just

share" of the LGUs shall be automatically released to them. Sections 18 and 286 of
the Local Government Code 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 posits that to subject the distribution and release of the five-billion-peso
portion of the IRA, classified as the LGSEF, to compliance by the LGUs with the
implementing rules and regulations, including the mechanisms and guidelines prescribed
by the Oversight Committee, contravenes the explicit directive of the Constitution that
the LGUs' share in the national taxes "shall be automatically released to them." The
petitioner maintains that the use of the word "shall" must be given a compulsory
meaning.

To further buttress this argument, 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 Local Government Code of 1991. The petitioner
cites as an example the experience in 2001 when the release of the LGSEF was long
delayed because the Oversight Committee was not able to convene that year and no
guidelines were issued therefor. Further, the possible disapproval by the Oversight
Committee of the project proposals of the LGUs would result in the diminution of the
latter's share in the IRA.

Another infringement alleged to be occasioned by the assailed OCD resolutions is the

improper amendment to Section 285 of the Local Government Code 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%. 8
This formula has been improperly amended or modified, with respect to the five-billion-
peso portion of the IRA allotted for the LGSEF, by the assailed OCD resolutions as they
invariably provided for a different sharing scheme.

The modifications allegedly constitute an illegal amendment by the executive branch of a

substantive law. Moreover, the petitioner mentions that in the Letter dated December 5,
2001 of respondent Executive Secretary Romulo addressed to respondent Secretary
Boncodin, the former endorsed to the latter the release of funds to certain LGUs from the
LGSEF in accordance with the handwritten instructions of President Arroyo. Thus, the
LGUs are at a loss as to how a portion of the LGSEF is actually allocated. Further, there
are still portions of the LGSEF that, to date, have not been received by the petitioner;
hence, resulting in damage and injury to the petitioner.

The petitioner prays that the Court declare as unconstitutional and void the assailed
provisos relating to the LGSEF in the GAAs of 1999, 2000 and 2001 and the assailed
OCD resolutions (Resolutions Nos. OCD-99-003, OCD-99-005, OCD-99-006, OCD-
2000-023, OCD-2001-029 and OCD-2002-001) issued by the Oversight Committee
pursuant thereto. The petitioner, likewise, prays that the Court direct the respondents to
rectify the unlawful and illegal distribution and releases of the LGSEF for the
aforementioned years and release the same in accordance with the sharing formula under
Section 285 of the Local Government Code of 1991. Finally, the petitioner urges the
Court to declare that the entire IRA should be released automatically without further
action by the LGUs as required by the Constitution and the Local Government Code of
1991.

The Respondents' Arguments

The respondents, through the Office of the Solicitor General, urge the Court to dismiss
the petition on procedural and substantive grounds. On the latter, 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 Section 6, Article X of the Constitution does not
specify that the "just share" of the LGUs shall be determined solely by the Local
Government Code 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.

The respondents further theorize that Section 285 of the Local Government Code 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. Section 285 of the Local Government
Code 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." However, the LGUs have no
vested right in a permanent or fixed percentage as Congress may increase or decrease the
"just share" of the LGUs in accordance with what it believes is appropriate for their
operation. There is nothing in the Constitution which prohibits Congress from making
such determination through the appropriations laws. If the provisions of a particular
statute, the GAA in this case, are within the constitutional power of the legislature to
enact, they should be sustained whether the courts agree or not in the wisdom of their
enactment.

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 petitioner's allegation that there are portions of the LGSEF that it has
not, to date, received, thereby causing it (the petitioner) injury and damage, is subject to
proof and must be substantiated in the proper venue, i.e., the lower courts.

Further, according to the respondents, the petition has already been rendered moot and
academic as it no longer presents a justiciable controversy. The IRAs for the years 1999,
2000 and 2001, have already been released and the government is now operating under
the 2003 budget. In support of this, the respondents submitted certifications issued by
officers of the DBM attesting to the release of the allocation or shares of the petitioner in
the LGSEF for 1999, 2000 and 2001. There is, therefore, nothing more to prohibit.

Finally, the petitioner allegedly has no legal standing to bring the suit because it has not
suffered any injury. In fact, the petitioner's "just share" has even increased. Pursuant to
Section 285 of the Local Government Code of 1991, the share of the provinces is 23%.
OCD Nos. 99-005, 99-006 and 99-003 gave the provinces 40% of P2 billion of the
LGSEF. OCD Nos. 2000-023 and 2001-029 apportioned 26% of P3.5 billion to the
provinces. On the other hand, OCD No. 2001-001 allocated 25% of P3 billion to the
provinces. Thus, the petitioner has not suffered any injury in the implementation of the
assailed provisos in the GAAs of 1999, 2000 and 2001 and the OCD resolutions.

The Ruling of the Court Procedural Issues

Before resolving the petition on its merits, the Court shall first rule on the following
procedural issues raised by the respondents: (1) whether the petitioner has legal standing
or locus standi to file the present suit; (2) whether the petition involves factual questions
that are properly cognizable by the lower courts; and (3) whether the issue had been
rendered moot and academic.

The petitioner has locus standi to maintain the present suit

The gist of the question of standing is whether a party has "alleged such a personal stake
in the outcome of the controversy as to assure that concrete adverseness which sharpens
the presentation of issues upon which the court so largely depends for illumination of
difficult constitutional questions."9 Accordingly, it has been held that the interest of a
party assailing the constitutionality of a statute must be direct and personal. Such party
must be able to show, not only that the law or any government act is invalid, but also that
he has sustained or is in imminent danger of sustaining some direct injury as a result of its
enforcement, and not merely that he suffers thereby in some indefinite way. It must
appear that the person complaining has been or is about to be denied some right or
privilege to which he is lawfully entitled or that he is about to be subjected to some
burdens or penalties by reason of the statute or act complained of.10

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 petitioner's constitutional claim is, in
substance, that the assailed provisos in the GAAs of 1999, 2000 and 2001, and the OCD
resolutions contravene Section 6, Article 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
Section 285 of the Local Government Code of 1991, occasioned by the implementation
of the assailed measures. These allegations are sufficient to grant the petitioner standing
to question the validity of the assailed provisos in the GAAs of 1999, 2000 and 2001, and
the OCD resolutions as the petitioner clearly has "a plain, direct and adequate interest" in
the manner and distribution of the IRA among the LGUs.

The petition involves a significant legal issue

The crux of the instant controversy is whether 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. This is undoubtedly a legal question. On the other
hand, the following facts are not disputed:

1. The earmarking of five billion pesos of the IRA for the LGSEF in the assailed
provisos in the GAAs of 1999, 2000 and re-enacted budget for 2001;

2. The promulgation of the assailed OCD resolutions providing for the allocation
schemes covering the said five billion pesos and the implementing rules and
regulations therefor; and

3. The release of the LGSEF to the LGUs only upon their compliance with the
implementing rules and regulations, including the guidelines and mechanisms,
prescribed by the Oversight Committee.

Considering that these facts, which are necessary to resolve the legal question now before
this Court, are no longer in issue, the same need not be determined by a trial court. 11 In
any case, the rule on hierarchy of courts will not prevent this Court from assuming
jurisdiction over the petition. The said rule may be relaxed when the redress desired
cannot be obtained in the appropriate courts or where exceptional and compelling
circumstances justify availment of a remedy within and calling for the exercise of this
Court's primary jurisdiction.12

The crucial legal issue submitted for resolution of this Court entails the proper legal
interpretation of constitutional and statutory provisions. Moreover, the "transcendental
importance" of the case, as it necessarily involves the application of the constitutional
principle on local autonomy, cannot be gainsaid. The nature of the present controversy,
therefore, warrants the relaxation by this Court of procedural rules in order to resolve the
case forthwith.

The substantive issue needs to be resolved notwithstanding the supervening e0vents

Granting arguendo that, as contended by the respondents, the resolution of the case had
already been overtaken by supervening events as the IRA, including the LGSEF, for
1999, 2000 and 2001, had already been released and the government is now operating
under a new appropriations law, still, there is compelling reason for this Court to resolve
the substantive issue raised by the instant petition. Supervening events, whether intended
or accidental, cannot prevent the Court from rendering a decision if there is a grave
violation of the Constitution.13 Even in cases where supervening events had made the
cases moot, the Court did not hesitate to resolve the legal or constitutional issues raised to
formulate controlling principles to guide the bench, bar and public.14

Another reason justifying the resolution by this Court of the substantive issue now before
it is the rule that courts will decide a question otherwise moot and academic if it is
"capable of repetition, yet evading review."15 For the GAAs in the coming years may
contain provisos similar to those now being sought to be invalidated, and yet, the
question may not be decided before another GAA is enacted. It, thus, behooves this Court
to make a categorical ruling on the substantive issue now.

Substantive Issue

As earlier intimated, the resolution of the substantive legal issue in this case calls for the
application of a most important constitutional policy and principle, that of local
autonomy.16 In Article II of the Constitution, the State has expressly adopted as a policy
that:

Section 25. The State shall ensure the autonomy of local governments.

An entire article (Article 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:

Section 2. The territorial and political subdivisions shall enjoy local autonomy.

Consistent with the principle of local autonomy, the Constitution confines the President's
power over the LGUs to one of general supervision. 17 This provision has been interpreted
to exclude the power of control. The distinction between the two powers was enunciated
in Drilon v. Lim:18

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.19

The Local Government Code of 1991 20 was enacted to flesh out the mandate of the
Constitution.21 The State policy on local autonomy is amplified in Section 2 thereof:

Sec. 2. Declaration of Policy. (a) It is hereby declared the policy of the State that the
territorial and political subdivisions of the State shall enjoy genuine and meaningful local
autonomy to enable them to attain their fullest development as self-reliant communities
and make them more effective partners in the attainment of national goals. Toward this
end, the State shall provide for a more responsive and accountable local government
structure instituted through a system of decentralization whereby local government units
shall be given more powers, authority, responsibilities, and resources. The process of
decentralization shall proceed from the National Government to the local government
units.

Guided by these precepts, the Court shall now determine whether the assailed provisos in
the GAAs of 1999, 2000 and 2001, earmarking for each corresponding year the amount
of five billion pesos of the IRA for the LGSEF and the OCD resolutions promulgated
pursuant thereto, transgress the Constitution and the Local Government Code of 1991.

The assailed provisos in the GAAs of 1999, 2000 and 2001 and the OCD resolutions
violate the constitutional precept on local autonomy

Section 6, Article X of the Constitution reads:

Sec. 6. 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 Local Government Code of 1991, among its salient provisions, underscores the
automatic release of the LGUs' "just share" in this wise:

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;
...

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.

(b) Nothing in this Chapter shall be understood to diminish the share of local government
units under existing laws.

Webster's Third New International Dictionary defines "automatic" as "involuntary

either wholly or to a major extent so that any activity of the will is largely negligible;
of a reflex nature; without volition; mechanical; like or suggestive of an automaton."
Further, the word "automatically" is defined as "in an automatic manner: without
thought or conscious intention." Being "automatic," thus, connotes something
mechanical, spontaneous and perfunctory. 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 Local Government Code of 1991, the "just share" of the LGUs shall
be released to them "without need of further action." Construing Section 286 of the LGC,
we held in Pimentel, Jr. v. Aguirre,22 viz:

Section 4 of AO 372 cannot, however, be upheld. A basic feature of local fiscal autonomy
is the automatic release of the shares of LGUs in the National internal revenue. This is
mandated by no less than the Constitution. The Local Government Code specifies further
that the release shall be made directly to the LGU concerned within five (5) days after
every quarter of the year and "shall not be subject to any lien or holdback that may be
imposed by the national government for whatever purpose." As a rule, the term "SHALL"
is a word of command that must be given a compulsory meaning. The provision is,
therefore, IMPERATIVE.

Section 4 of AO 372, however, orders the withholding, effective January 1, 1998, of 10

percent of the LGUs' IRA "pending the assessment and evaluation by the Development
Budget Coordinating Committee of the emerging fiscal situation" in the country. Such
withholding clearly contravenes the Constitution and the law. Although temporary,
it is equivalent to a holdback, which means "something held back or withheld, often
temporarily." Hence, the "temporary" nature of the retention by the national
government does not matter. Any retention is prohibited.

In sum, while Section 1 of AO 372 may be upheld as an advisory effected in times of

national crisis, Section 4 thereof has no color of validity at all. The latter provision
effectively encroaches on the fiscal autonomy of local governments. Concededly, the
President was well-intentioned in issuing his Order to withhold the LGUs' IRA, but the
rule of law requires that even the best intentions must be carried out within the
parameters of the Constitution and the law. Verily, laudable purposes must be carried out
by legal methods.23
The "just share" of the LGUs is incorporated as the IRA in the appropriations law or
GAA enacted by Congress annually. 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 local government units 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." Pursuant thereto, the Oversight
Committee, through the assailed OCD resolutions, apportioned the five billion pesos
LGSEF such that:

For 1999

P2 billion - allocated according to Sec. 285 LGC

P2 billion - Modified Sharing Formula (Provinces 40%;

Cities 20%; Municipalities 40%)

P1 billion projects (LAAP) approved by OCD.24

For 2000

P3.5 billion Modified Sharing Formula (Provinces 26%;

Cities 23%; Municipalities 35%; Barangays 16%);

P1.5 billion projects (LAAP) approved by the OCD.25

For 2001

P3 billion Modified Sharing Formula (Provinces 25%;

Cities 25%; Municipalities 35%; Barangays 15%)

P1.9 billion priority projects

P100 million capability building fund.26

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.

To the Court's mind, the entire process involving the distribution and release of the
LGSEF is constitutionally impermissible. 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.

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.27 Moreover, as correctly posited by the petitioner, the use of the word "shall"
connotes a mandatory order. Its use in a statute denotes an imperative obligation and is
inconsistent with the idea of discretion.28

Indeed, the Oversight Committee exercising discretion, even control, over the distribution
and release of a portion of the IRA, the LGSEF, is an anathema to and subversive of the
principle of local autonomy as embodied in the Constitution. Moreover, it finds no
statutory basis at all as the Oversight Committee was created merely to formulate the
rules and regulations for the efficient and effective implementation of the Local
Government Code of 1991 to ensure "compliance with the principles of local autonomy
as defined under the Constitution."29 In fact, its creation was placed under the title of
"Transitory Provisions," signifying its ad hoc character. According to Senator Aquilino Q.
Pimentel, the principal author and sponsor of the bill that eventually became Rep. Act No.
7160, the Committee's work was supposed to be done a year from the approval of the
Code, or on October 10, 1992.30 The Oversight Committee's authority is undoubtedly
limited to the implementation of the Local Government Code 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.

That the automatic release of the IRA was precisely intended to guarantee and promote
local autonomy can be gleaned from the discussion below between Messrs. Jose N.
Nolledo and Regalado M. Maambong, then members of the 1986 Constitutional
Commission, to wit:

MR. MAAMBONG. Unfortunately, under Section 198 of the Local Government Code,
the existence of subprovinces is still acknowledged by the law, but the statement of the
Gentleman on this point will have to be taken up probably by the Committee on
Legislation. A second point, Mr. Presiding Officer, is that under Article 2, Section 10 of
the 1973 Constitution, we have a provision which states:

The State shall guarantee and promote the autonomy of local government units,
especially the barrio, to insure their fullest development as self-reliant communities.

This provision no longer appears in the present configuration; does this mean that the
concept of giving local autonomy to local governments is no longer adopted as far as this
Article is concerned?

MR. NOLLEDO. No. In the report of the Committee on Preamble, National Territory,
and Declaration of Principles, that concept is included and widened upon the initiative of
Commissioner Bennagen.

MR. MAAMBONG. Thank you for that.

With regard to Section 6, sources of revenue, the creation of sources as provided by

previous law was "subject to limitations as may be provided by law," but now, we are
using the term "subject to such guidelines as may be fixed by law." In Section 7, mention
is made about the "unique, distinct and exclusive charges and contributions," and in
Section 8, we talk about "exclusivity of local taxes and the share in the national wealth."
Incidentally, I was one of the authors of this provision, and I am very thankful. Does this
indicate local autonomy, or was the wording of the law changed to give more autonomy
to the local government units?31

MR. NOLLEDO. Yes. In effect, those words indicate also "decentralization" because
local political units can collect taxes, fees and charges subject merely to guidelines, as
recommended by the league of governors and city mayors, with whom I had a dialogue
for almost two hours. They told me that limitations may be questionable in the sense that
Congress may limit and in effect deny the right later on.

MR. MAAMBONG. Also, this provision on "automatic release of national tax share"
points to more local autonomy. Is this the intention?

MR. NOLLEDO. Yes, the Commissioner is perfectly right.32

The concept of local autonomy was explained in Ganzon v. Court of Appeals 33 in this
wise:

As the Constitution itself declares, local autonomy 'means a more responsive and
accountable local government structure instituted through a system of decentralization.'
The Constitution, as we observed, does nothing more than to break up the monopoly of
the national government over the affairs of local governments and as put by political
adherents, to "liberate the local governments from the imperialism of Manila." Autonomy,
however, is not meant to end the relation of partnership and interdependence between the
central administration and local government units, or otherwise, to usher in a regime of
federalism. The Charter has not taken such a radical step. Local governments, under the
Constitution, are subject to regulation, however limited, and for no other purpose than
precisely, albeit paradoxically, to enhance self-government.

As we observed in one case, decentralization means devolution of national administration

but not power to the local levels. Thus:

Now, 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.' At the same time, it relieves the central government
of the burden of managing local affairs and enables it to concentrate on national
concerns. 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 [sic] favor of local governments [sic] 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. According to a constitutional
author, decentralization of power amounts to 'self-immolation,' since in that event,
the autonomous government becomes accountable not to the central authorities but
to its constituency.34

Local autonomy includes both administrative and fiscal autonomy. The fairly recent case
of Pimentel v. Aguirre35 is particularly instructive. The Court declared therein that local
fiscal autonomy includes the power of the LGUs to, inter alia, allocate their resources in
accordance with their own priorities:

Under existing law, local government units, in addition to having administrative

autonomy in the exercise of their functions, enjoy fiscal autonomy as well. 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. It extends to the preparation of their budgets, and local officials in turn have to
work within the constraints thereof. They are not formulated at the national level and
imposed on local governments, whether they are relevant to local needs and resources or
not ...36

Further, a basic feature of local fiscal autonomy is the constitutionally mandated

automatic release of the shares of LGUs in the national internal revenue.37

Following this ratiocination, the Court in Pimentel struck down as unconstitutional

Section 4 of Administrative Order (A.O.) No. 372 which ordered the withholding,
effective January 1, 1998, of ten percent of the LGUs' IRA "pending the assessment and
evaluation by the Development Budget Coordinating Committee of the emerging fiscal
situation."

In like manner, the assailed provisos in the GAAs of 1999, 2000 and 2001, and the OCD
resolutions constitute a "withholding" of a portion of the IRA. They put on hold the
distribution and release of the five billion pesos LGSEF and subject the same to the
implementing rules and regulations, including the guidelines and mechanisms prescribed
by the Oversight Committee from time to time. Like Section 4 of A.O. 372, the assailed
provisos in the GAAs of 1999, 2000 and 2001 and the OCD resolutions effectively
encroach on the fiscal autonomy enjoyed by the LGUs and must be struck down. They
cannot, therefore, be upheld.

The assailed provisos in the GAAs of 1999, 2000

and 2001 and the OCD resolutions cannot amend

Section 285 of the Local Government Code of 1991

Section 28438 of the Local Government Code provides that, beginning the third year of its
effectivity, the LGUs' share in the national internal revenue taxes shall be 40%. This
percentage is fixed and may not be reduced except "in the event the national government
incurs an unmanageable public sector deficit" and only upon compliance with stringent
requirements set forth in the same section:

Sec. 284. ...

Provided, That in the event that the national government incurs an unmanageable public
sector deficit, the President of the Philippines is hereby authorized, upon recommendation
of Secretary of Finance, Secretary of Interior and Local Government 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 the national internal revenue taxes of
the third fiscal year preceding the current fiscal year; Provided, further That in the first
year of the effectivity of this Code, the local government units shall, in addition to the
thirty percent (30%) internal revenue allotment which shall include the cost of devolved
functions for essential public services, be entitled to receive the amount equivalent to the
cost of devolved personnel services.

Thus, from the above provision, 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 percent 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.

Section 285 then specifies how the IRA shall be allocated among the LGUs:

Sec. 285. Allocation to Local Government Units. The share of local government units in
the internal revenue allotment shall be allocated in the following manner:

(a) Provinces Twenty-three (23%)

(b) Cities Twenty-three percent (23%);

(c) Municipalities Thirty-four (34%); and

(d) Barangays Twenty percent (20%).

However, this percentage sharing is not followed with respect to the five billion pesos
LGSEF as the assailed OCD resolutions, implementing the assailed provisos in the GAAs
of 1999, 2000 and 2001, provided for a different sharing scheme. For example, for 1999,
P2 billion of the LGSEF was allocated as follows: Provinces 40%; Cities 20%;
Municipalities 40%.39 For 2000, P3.5 billion of the LGSEF was allocated in this
manner: Provinces 26%; Cities 23%; Municipalities 35%; Barangays 26%. 40 For
2001, P3 billion of the LGSEF was allocated, thus: Provinces 25%; Cities 25%;
Municipalities 35%; Barangays 15%.41

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 Local
Government Code 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 Local Government Code 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 Local
Government Code 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.42

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.43
Any provision therein which is intended to amend another law is considered an
"inappropriate provision." The category of "inappropriate provisions" includes
unconstitutional provisions and provisions which are intended to amend other laws,
because clearly these kinds of laws have no place in an appropriations bill.44

Increasing or decreasing the IRA of the LGUs or modifying their percentage sharing
therein, which are fixed in the Local Government Code of 1991, are matters of general
and substantive law. To permit Congress to undertake these amendments through the
GAAs, as the respondents contend, would be to give Congress the unbridled
authority to unduly infringe the fiscal autonomy of the LGUs, and thus put the same
in jeopardy every year. This, the Court cannot sanction.

It is relevant to point out at this juncture that, unlike those of 1999, 2000 and 2001, the
GAAs of 2002 and 2003 do not contain provisos similar to the herein assailed provisos.
In other words, the GAAs of 2002 and 2003 have not earmarked any amount of the IRA
for the LGSEF. Congress had perhaps seen fit to discontinue the practice as it recognizes
its infirmity. Nonetheless, as earlier mentioned, this Court has deemed it necessary to
make a definitive ruling on the matter in order to prevent its recurrence in future
appropriations laws and that the principles enunciated herein would serve to guide the
bench, bar and public.

Conclusion

In closing, it is well to note that the principle of local autonomy, while concededly
expounded in greater detail in the present Constitution, dates back to the turn of the
century when President William McKinley, in his Instructions to the Second Philippine
Commission dated April 7, 1900, ordered the new Government "to devote their attention
in the first instance to the establishment of municipal governments in which the natives of
the Islands, both in the cities and in the rural communities, shall be afforded the
opportunity to manage their own affairs to the fullest extent of which they are capable,
and subject to the least degree of supervision and control in which a careful study of their
capacities and observation of the workings of native control show to be consistent with
the maintenance of law, order and loyalty."45 While the 1935 Constitution had no specific
article on local autonomy, nonetheless, it limited the executive power over local
governments to "general supervision ... as may be provided by law."46 Subsequently, the
1973 Constitution explicitly stated that "[t]he State shall guarantee and promote the
autonomy of local government units, especially the barangay to ensure their fullest
development as self-reliant communities."47 An entire article on Local Government was
incorporated therein. The present Constitution, as earlier opined, has broadened the
principle of local autonomy. The 14 sections in Article X thereof markedly increased the
powers of the local governments in order to accomplish the goal of a more meaningful
local autonomy.

Indeed, the value of local governments as institutions of democracy is measured by the

degree of autonomy that they enjoy.48 As eloquently put by

M. De Tocqueville, a distinguished French political writer, "[l]ocal assemblies of citizens

constitute the strength of free nations. Township meetings are to liberty what primary
schools are to science; they bring it within the people's reach; they teach men how to use
and enjoy it. A nation may establish a system of free governments but without the spirit of
municipal institutions, it cannot have the spirit of liberty."49

Our national officials should not only comply with the constitutional provisions on local
autonomy but should also appreciate the spirit and liberty upon which these provisions
are based.50

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.

SO ORDERED.

ROMEO J. CALLEJO, SR.

Associate Justice

WE CONCUR:

On official leave

HILARIO G. DAVIDE, JR.

Chief Justice

On official leave

REYNATO S. PUNO JOSE C. VITUG

Associate Justice Associate Justice

ARTEMIO V. PANGANIBAN LEONARDO A. QUISUMBING

Associate Justice Associate Justice

CONSUELO YNARES-SANTIAGO ANGELINA SANDOVAL-GUTIERREZ

Associate Justice Associate Justice

ANTONIO T. CARPIO MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice Associate Justice

RENATO C. CORONA CONCHITA CARPIO MORALES

Associate Justice Associate Justice

ADOLFO S. AZCUNA DANTE O. TINGA

Associate Justice Associate Justice

C E R T I FI CATI O N

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the
conclusions in the above decision were reached in consultation before the case was
assigned to the writer of the opinion of the Court.

JOSE C. VITUG
Acting Chief Justice

Footnotes
1
Section 1, E.O. No. 48.
2
Section 2, id.
3
Section 4, id.
4
Ibid.
5
Id.
6
Id.
7
Id.
8
Infra.
9
Baker v. Carr, 369 U.S. 186, 7 L.Ed. 2d 633 cited in, among others, Agan, Jr. v.
PIATCO, G.R. Nos. 155001, 155547 and 155661, May 5, 2003 and Farias v.
Executive Secretary, G.R. Nos. 147387 and 152161, December 10, 2003.
10
Agan, Jr. v. PIATCO, supra.
11
Ibid.
12
Id. 13 Chavez v. Public Estates Authority, 384 SCRA 152 (2002).
14
Ibid, citing, among others, Salonga v. Pao, 134 SCRA 438 (1995).
15
Southern Pac. Terminal Co. v. ICC, 219 U.S. 498, 55 L.Ed. 310 (1911) cited in,
among others, Viola v. Alunan III, 277 SCRA 409 (1997); Acop v. Guingona, Jr., 383
SCRA 577 (2002).
16
San Juan v. Civil Service Commission, 196 SCRA 69 (1991).
17
Section 4, Article X.
18
235 SCRA 135 (1994).
19
Id. at 142.
20
Rep. Act No. 7160 was signed into law by then President Corazon C. Aquino on
October 10, 1991. It took effect on January 1, 1992.
21
Section 3, Article X reads:

Sec. 3. The Congress shall enact a local government code which shall provide
for a more responsive and accountable local government structure instituted
through a system of decentralization with effective mechanisms of recall,
initiative, and referendum, allocate among the different local government units
their powers, responsibilities, and resources, and provide for the qualifications,
election, appointment and removal, terms, salaries, powers and functions and
duties of local officials, and all other matters relating to the organization and
operation of local government units.
22
336 SCRA 201 (2000).
23
Id. at 220-221. (Emphasis supplied.)
24
Per OCD-99-005, 99-006, 99-003.
25
Per OCD-2000-023 and 2001-029.
26
Per OCD-2002-001.
27
Quisumbing v. Manila Electric Co., 380 SCRA 195 (2002).
28
Codoy v. Calugay, 312 SCRA 333 (1999).
29
Section 533 of Rep. Act 7160 reads in part:

Sec. 533. Formulation of Implementing Rules and Regulations. (a) Within one
(1) month after the approval of this Code, the President shall convene the
Oversight Committee as herein provided for. The said Committee shall formulate
and issue the appropriate rules and regulations necessary for the efficient and
effective implementation of any and all provisions of this Code, thereby ensuring
compliance with the principles of local autonomy as defined under the
Constitution.

...

(c) The Committee shall submit its report and recommendation to the President
within two (2) months after its organization. If the President fails to act within
thirty (30) days from receipt thereof, the recommendation of the Oversight
Committee shall be deemed approved. Thereafter, the Committee shall supervise
the transfer of such powers and functions mandated under this Code to the local
government units, together with the corresponding personnel, properties, assets
 and liabilities of the offices or agencies concerned, with the least possible
disruptions to existing programs and projects. The Committee shall, likewise,
recommend the corresponding appropriations necessary to effect the said
transfer.
30
Pimentel, The Local Government Code of 1991: The Key to National
Development, p. 576.
31
The Committee Report No. 21 submitted by the Committee on Local Governments
of the Constitutional Commission, headed by Commissioner Jose N. Nolledo,
proposed to incorporate the following provisions:

SEC. 6. Each government unit shall have the power to create its own sources of
revenue and to levy taxes, fees and charges subject to such guidelines as may be
fixed by law.

SEC. 7. Local governments shall have the power to levy and collect charges or
contributions unique, distinct and exclusive to them.

SEC. 8. Local taxes shall belong exclusively to local governments and they shall,
likewise, be entitled to share in the proceeds of the exploitation and development
of the national wealth within their respective areas. The share of local
governments in the national taxes shall be released to them automatically.
32
3 RECORD OF THE CONSTITUTIONAL COMMISSION 231.
33
200 SCRA 271 (1991).
34
Id. at 286-287. (Citations omitted.)
35
Supra at note 22.
36
Id. at 218.
37
Id. at 220.
38
The provision reads in part:

Sec. 284. Allotment of Internal Revenue Taxes. Local government units shall
have a share in the national internal revenue taxes based on the collection of the
third fiscal year preceding the current fiscal year as follows:

(a) On the first year of the effectivity of this Code, thirty percent (30%);

(b) On the second year, thirty-five percent (35%); and

 (c) On the third year and, thereafter, forty percent (40%).
39
Per OCD Res.-99-005, 99-006, 99-003.
40
Per OCD-2000-023 and 2001-029.
41
Per OCD-2002-001.
42
Philippine Constitutional Association v. Enriquez, 235 SCRA 506 (1994).
43
Ibid, citing Beckman, The Item Veto Power of the Executive, 31 Temple Law
Quarterly 27 (1957).
44
Id.
45
Mendoza, From McKinley's Instructions to the New Constitution: Documents on
the Philippine Constitutional System, pp. 67-68.
46
Paragraph (1), Section 11, Article VII of the 1935 Constitution reads:

Sec. 11(1). The President shall have control of all the executive departments,
bureaus or offices, exercise general supervision over all local governments as
may be provided by law, and take care that the laws be faithfully executed.
47
Section 10, Article II thereof.
48
Sinco, Philippine Political Law, 10th ed., pp. 681-682.
49
Ibid.
50
San Juan v. Civil Service Commission, supra.

The Lawphil Project - Arellano Law Foundation