Republic of the Philippines
Supreme Court
Manila
(continued)

53.  All these discussion lead to only one conclusion – the IRA reduction and withholding made in the year 2000 GAA directly affects the petitioners and the other citizens that they represent.  As shown above, the people have certainly sustained and will continue to sustain direct injury as a result of its enforcement.  The petitioners and those they represent have been, and will be, denied their rights and privileges to which they are lawfully entitled.   The petitioners are, therefore, proper and real parties in interest in this case.  

54.  Even assuming, for the sake of argument, that the petitioners herein have not sufficiently shown any direct injury that gives them the legal personality to file this case, the petitioners humbly submit that, as taxpayers, they have the legal personality to question the validity of the year 2000 GAA.  

The petitioners have the legal
standing as taxpayers.

55.  In a long line of cases, this Honorable Court allowed taxpayers’ suits in cases where the act complained of directly involves the illegal disbursement of public funds.    As early as the case of Pascual v. Secretary, 110 Phil. 331 (1960), this Honorable Court declared:

In the determination of the degree of interest essential to give the requisite standing to attack the constitutionality of a statute the general rule is that not only persons individually affected, but also, taxpayers, have sufficient interest in preventing the illegal expenditure of moneys raised by taxation and may therefore question the constitutionality of statutes requiring expenditure of public moneys.   (110 Phil. 331, 342-343)

56. The year 2000 GAA is a perfect example of an act directly involving the disbursement of public funds.   In fact, by its very nature, a general appropriations act governs the disbursement of public funds.   It determines and prescribes the amount of public funds that will be used by the government for different expenditures.   By directly violating the Constitution and the Local Government Code as regards the IRA that should be released to the local governments, the year 2000 GAA constitutes a “misapplication” and an “illegal disbursement” of public funds.  The illegal withholding (and the consequent non-disbursement) of P10 Billion of local government funds is as much an illegal disbursement of public funds as an unauthorized appropriation and use of public funds for unauthorized causes.  By refusing to comply with the clear mandate of the Constitution and the Local Government Code for the automatic release of the IRA in the amount provided, the Congress committed an unconstitutional exercise of its spending powers.  As taxpayers, the petitioners have the right to question this unconstitutional disbursement of public funds.

57.  Furthermore, the petitioners respectfully ask this Honorable Court to rule on the substantial constitutional issues raised because of their “transcendental importance” and their “value as precedents.”   As early as the Emergency Power Cases (Araneta v. Dinglasan, 84 Phil. 368; Rodriguez v. Gella, 93 Phil. 603), this Honorable Court has allowed taxpayers’ suits where serious constitutional issues are involved since, “the transcendental importance to the public of these cases demands that they be settled promptly and definitely, brushing aside…technicalities of procedure.”    The same policy has been applied by this Honorable Court in a long line of cases involving taxpayers’ suits, including those filed by people’s and non-governmental organizations, among which are:   Gonzales v. COMELEC, 21 SCRA 774 (1967); Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas v. Tan, 163 SCRA 371 (1988);  Association of Small Landowners in the Philippines v. Secretary of Agrarian Reform, 175 SCRA 343 (1989);   Daza v. Singson, 180 SCRA 496 (1989);  Basco v. PAGCOR, 197 SCRA 52 (1991);   Osmeña v. COMELEC, 199 SCRA 750 (1991);  Garcia v. Executive Secretary, 211 SCRA 219 (1992); KILOSBAYAN v. Guingona, 232 SCRA 110 (1994); and recently, Tatad v. Secretary of the Department of Energy, 281 SCRA 330 (1997).

58.  In the discussion above and in the succeeding discussion, the petitioners have sufficiently shown that the constitutional questions raised in the petition are of transcendental significance to the people.   The issues raised in this case involve the very foundations of our system of government.   This petition shows a clear case of disregard of the Constitution and the Local Government Code.   More than the P10 Billion funds, the principles behind the IRA and behind the country’s system of local governance, which the year 2000 GAA blatantly disregarded, are of paramount national interest and importance.

59.  Lastly, the people waited for their elected representatives – the local government officials, through the Union of Local Authorities of the Philippines – to initiate an action that will question the unconstitutional reduction and withholding of the IRA.   To this date, however, to the petitioners’ knowledge, no such case has been filed.   The petitioners, therefore, invoke their sovereign power as the source of governmental authority, and file this case to correct the illegal act concerning the IRA.    It would be myopic and contrary to the spirit of the Constitution to assume that only elected officials may have the standing to bring this case to the attention of this Honorable Court.

60.  In view of the discussion above, the petitioners invoke the words of Chief Justice Warren in Flast v. Cohen, 391 US 83 (1968), and humbly ask this Honorable Court -- assuming  it finds a barrier to this petition – not  to breach the barrier but simply to lower it.

61.  The petition shall now go to the substantial constitutional issues. The year 2000 GAA is unconstitutional as it violates the constitutional autonomy of local governments.   By placing P10 Billion of the local governments’ IRA under “unprogrammed funds,” the year 2000 GAA transgressed the constitutional mandate that the local government units’ just share in the national taxes shall be automatically released to them.  

The IRA is a right.

62.  It is necessary to first settle the characterization of the IRA.    It is noteworthy that the national government authorities usually refer to the IRA as “assistance” to local government units.  Therein lies the rub. The term “assistance” lends itself to an interpretation that the fund may be withdrawn at the pleasure or caprice of both the executive and legislative branches.  In a sense, the IRA is deprived of its mandatory nature if and when it is considered as assistance.  Against this notion, however, can be found explicit provisions in both the Constitution and the Local Government Code clearly characterizing the IRA as mandatory. 

63.  On this matter, the Constitution provides:  

Assuming the Constitutional provision quoted above is not a self- executing principle, the Local Government Code gives this Constitutional provision the necessary executory effect when it provides:

and

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%): x x x  

and

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 (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. (Emphasis Supplied).

64.  The unifying theme behind all the provisions cited is the emancipation of the IRA from any form of interference and/or control from the national government. This merely echoes the very underpinnings of the Local Government Code in the first place. Clearly, the IRA is not assistance nor is it subject to any form of control, save only in exceptional circumstances. It is a constitutional and legal mandate and an imperative for effective governance at the local level.

65.  This Honorable Court had an opportunity to explain the IRA’s rightful characterization.  In the recent case of Alvarez v. Guingona, 252 SCRA 695 (1996), the Supreme Court had the following to say:

The practical side to development through a decentralized local government system certainly concerns the matter of financial resources. With its broadened powers and increased responsibilities, a local government unit must now operate on a much wider scale. More extensive operations, in turn, entail more expenses. Understandably, the vesting of duty, responsibility and accountability in every local government unit is accompanied with a provision for reasonably adequate resources to discharge its powers and effectively carry out its functions. Availment of such resources is effectuated through the vesting in every local government unit of (1) the right to create and broaden its own source of revenue; (2) the right to be allocated a just share in national taxes, such share being in the form of internal revenue allotments (IRAs); and the right to be given its equitable share in the proceeds of the national wealth, if any, within its territorial boundaries.     (252 SCRA 695, 700-701)

In the quoted decision, this Honorable Court has spelled out several “rights” pertaining to local government units.  One such right is the IRA.

66.  The discussion above makes the following points plainly evident: first, the IRA is not assistance; second, the IRA is a right of local government units; and third, the IRA should be automatically released to local government units.  The IRA is not an amount that can be reduced or withheld through ordinary means and under slight pretenses. Any attempt, therefore, to subject the IRA to any condition should prompt one to declare that there has been a violation of the law.  The Constitution and the Statute are rather clear when they state that the IRA should be automatically released and should be free from any lien or holdback.

Placing P10 B of the IRA under “unprogrammed funds”
is an unlawful reduction of the IRA.

67. The Local Government Code states that:

x x x  

Provided, that in the event of an unmanageable public sector deficit, the President of the Philippines is hereby authorized, upon the recommendation of the 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 per cent (30%) of the collection of national internal revenue taxes of third fiscal year preceding the current fiscal year.  

x x x

In addition, Art. 379 of the implementing rules and regulations of the Local Government Code states that:

(b) Upon receipt of the joint recommendation of the Secretary of Finance, the Secretary of Interior and Local Government, and the Secretary of Budget and Management, and subject to consultation with the presiding officers of both Houses of Congress and the Presidents of the Leagues of LGUs, the President shall authorize the necessary adjustments of the total IRA to be distributed among the LGUs for the given year, provided, That in no case shall the adjusted amount be less than thirty percent (30%) of the national internal revenue collections of the third fiscal year preceding the fiscal year during which the reduction is to be made.

(c) Adjustments to the IRA share of LGUs shall be made only after effecting a corresponding reduction of the national government expenditures including cash and non-cash budgetary aids to GOCCs, government financial institutions (GFIs), the Oil Price Stabilization Fund (OPSF), and the Central Bank.

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