Republic of the Philippines
Supreme Court
Manila
(continued)

68.  Based on the law and the implementing rules, several conditions have to be met before the IRA can be reduced. First, there must be an unmanageable public sector deficit. Second, cuts on the IRA should emanate from the Executive Branch. Third, before such a recommendation can be made, consultation with particular agencies, Congress and the Leagues has to be undertaken. Fourth, the cut cannot reduce the IRA to less than thirty percent (30%) of the amount collected as internal revenue taxes for the third fiscal year preceding the year in which the reduction is sought to be made. Finally, corresponding cuts on other agencies have to be undertaken.

69.  The very first condition that must exist is the presence of an unmanageable public sector deficit.  In fairness to the Senate Finance Committee, its proposal to cut the IRA was premised on a desire to keep the government’s deficit to a reasonable level. Assuming, without conceding, that an unmanageable public sector deficit may be incurred by the government, the test of the infirmity of the cut still has to be weighed by other prerequisites and it is in this regard that the cut imposed falls short of the standard set by the law.

70.  First, the law is explicit in stating that any cut should emanate from the executive department. Specifically, it outlines a process whereby the cut should first be recommended by no less than three Cabinet Secretaries. In the present situation, no such recommendation was ever made and the cuts were in fact brought about by Congressional action. Second, it is clear that no consultation with the Leagues concerned was ever undertaken.   Elementary fairness should at least have been observed when depriving local government units of the right to the IRA.   

71.  Defenders of the cut, however, state that in view of the imminent deficit, the cut in the IRA comprises local government units’ efforts at “burden sharing” or doing their part, so to speak, in governmental belt tightening.    First, it is clear that the cut, even under a scenario that an unmanageable public sector deficit will be incurred, does not comply with the strict provisions of the law. The law has recognized situations where a cut is allowed but has provided for the manner in which the same should be made. Any deviation from the manner so provided is therefore illegal.   Second, it should be noted that the “burden” has not been shared equally. An examination of the Bicameral Conference Committee Report on House Bill No. 8374 would reveal that some agencies’ and offices’ appropriations were actually increased[1] from what was initially earmarked in House Bill 8374.   Curiously, among the items where cuts were imposed, it was the IRA that received the biggest slash.   A certified copy of the Bicameral Conference Committee Report on House Bill No. 8374 is attached to this Petition as Annex D.

72.  Even assuming, for the sake of argument, that no real cut was imposed on the IRA, placing P10 B of the total IRA due the local governments under “unprogrammed funds,” in itself, constitutes an unlawful withholding that constitutes a gross violation of the constitutional mandate for the automatic release of the IRA and the Local Government Code’s provisions on such automatic release.  

Placing P10 B of the IRA under “unprogrammed funds”
is an illegal  withholding of the IRA.

73.  Section 1, LIV, Special Provision No. 4, of the year 2000 GAA provides that the appropriations indicated therein, which includes the P10 B IRA, “shall be released only when the original revenue targets submitted by the President of the Philippines to Congress pursuant to Section 22, Article VII of the Constitution can be realized based on a quarterly assessment of the Development Budget Committee, the Committee on Finance of the Senate and the Committee on Appropriations of the House of Representatives.”     This is clearly a prohibited withholding of the IRA.    The release of the IRA is made subject to a condition contrary to the constitutional mandate for its automatic release and to the Local Government Code’s prohibition against any lien or holdback.    The fact that the release of the P10B IRA is subject to a condition – it shall be released only when the original revenue targets can be realized - runs counter to the absolute language employed in the Constitution and the law, that the IRA should be released automatically.  It is, to employ the language of the law itself, made subject to a “holdback”.  

74.  The recent decision of this Honorable Court in the case of Aquilino Q. Pimentel, Jr., Petitioner; Roberto Pagdanganan, Intervenor, v. Hon. Alexander Aguirre and Hon. Emilia Boncodin, Respondents,  G.R. No. 132988, 19 July 2000, applies squarely to the present case.   The Honorable Court ruled:

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.   (pp. 20-22.)

Applying the Honorable Court’s quoted decision to the present case, the withholding of the P10 B IRA, albeit temporary, clearly contravenes the Constitution and the Law.   Although temporary, it constitutes a holdback that is prohibited by the Constitution and the Local Government Code.

The Local Government Code’s determination of the
constitutionally mandated just share of local governments
in national taxes constitutes a continuing appropriation.

75.  The respondents may argue that Congress’ power of the purse necessarily includes the power to allocate the amount it deems necessary for the local governments.  This argument, however, is bereft of any basis.    The Constitution mandates that local governments shall have a just share in the national taxes.    The Constitution also provides that such just share shall be “as determined by law.”   Compliance with the Constitutional mandate and the statutory determination of the just share of local governments in the national taxes came with the passage of the Local Government Code.     Section 284 of the Local Government Code provides the formula for the computation of the IRA, and the basis for such computation (i.e., the collection of the third fiscal year preceding the current fiscal year).    Section 285 provides the formula for the allocation of the IRA among the different local government units.    Section 286 provides for the automatic release of the IRA, without need of any further action, and the manner of such automatic release (i.e., on a quarterly basis, within five [5] days after the end of each quarter).   Section 286 further provides that the IRA shall not be subject to any lien or holdback that may be imposed by the National Government for whatever purpose.  

76.  The Local Government Code clearly supplies the constitutionally mandated determination of the just share of local governments in the national taxes.    Such determination, the petitioners submit, is a valid appropriation made by law.   In the case of Guingona v. Carague, 196 SCRA 221 (1991), a case involving the automatic appropriation for debt servicing, the Honorable Court quoted with approval the Solicitor General’s discussion of the Governmental budgetary process.   The discussion regarding the manner of appropriation is worth quoting: 

77.  Following the explanation in Guingona v. Carague, the Local Government Code’s provisions on the formula for the IRA and the manner for its release constitutes a valid appropriation which is not only for one year but for as long as the Local Government Code’s provisions subsist and have not been properly modified.    (The petitioners will explain below that there has been no valid amendment of the Local Government Code.)    In fact, the appropriation for the IRA is in a more favorable position compared to the appropriation for debt servicing.   Unlike the debt servicing appropriation, the IRA has a definite formula, which was fixed by law, and a definite base figure for the computation.

The year 2000 GAA is null and void for being
unconstitutional as it violates the autonomy of local
governments by placing P10 Billion of the IRA within
the control of the central government authorities.

78.  Section 25, Article II of the 1987 Constitution (the Declaration of Principles) clearly provides that, “The state shall ensure the autonomy of local governments.” Section 2, Article X (Local Government, General Provisions), in turn, provides that, “The territorial and political subdivisions shall enjoy local autonomy.”    For its part, the Local Government Code declares that local governments 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.  (Sec. 2)

79.  Faithful to the mandate of the Constitution, the Local Government Code contains provisions that are meant to respect and preserve the autonomy of local governments.   Thus, it provides that the President shall exercise “general supervision” only, not control, over local government units. (Sec. 25 [b])  This general supervision is meant to ensure that the acts of local government units are within the scope of their prescribed powers and functions.    It does not authorize the President to unduly meddle in local affairs.   National agencies and offices, on the other hand, are tasked to coordinate with the concerned local government units in the discharge of their project implementation functions. (Sec. 25 [c])  Moreover, these agencies and offices are mandated to ensure the participation of local government units both in the planning and implementation of national projects. In fact, the Local Government Code even goes to the extent of declaring that no project or program shall be implemented by government authorities without prior consultations with the local government units, non-governmental organizations, and other concerned sectors, and prior approval of the sanggunian concerned. (Sec. 26-27)

80.  All these provisions in the Local Government Code are meant to ensure the autonomy of local governments, following the express mandate of the Constitution.  Local autonomy, as stated in the law, is envisioned to enable local governments to attain their fullest development as self-reliant communities and make them more effective partners in the attainment of national goals. This principle of autonomy is premised on the recognition that local problems and concerns are best understood and resolved by the local governments and that local government units can effectively address these problems and concerns if they are equipped for the purpose as self-reliant communities, with minimum interference from national government officials.  

81.  The underlying reason for the preferential treatment of the IRA is, as stated earlier, the policy of emancipating the IRA from any form of interference and/or control from the national government.   Fiscal autonomy of local governments is indispensable to their political autonomy.   The special treatment of the IRA is rooted in the principle of local autonomy that guarantees the right of local governments to chart their own destiny and shape their own future with only limited intervention from the national government. 

82.  With the recent conflict on the IRA, a number of dangers that threaten the Philippine system of local governance surfaced.   On the part of the national government officials, the debate on the IRA highlights the mistaken belief that local governments are at the mercy of the central government, and that the IRA is a form of assistance given out of the generosity of the national government.    On the part of the local government officials, the IRA debate shows their vulnerability to succumb to pressure and influence from the national leadership.

83.  With the IRA cut, local government officials now have to court the national authorities, even beg, for the release of the IRA which is unlawfully withheld.   This undermines the integrity of our local governance system and destroys the foundations of autonomy and democracy in local governance.  It makes local governments extremely dependent, and therefore, subservient, to the national government.   This is clearly contrary to the constitutional autonomy of local governments.   

The year 2000 GAA is null and void for being unconstitutional
as the placing of P10 Billion of the IRA under “unprogrammed funds”
constitutes an undue delegation of legislative power to the respondents.

84.     In placing P10 Billion of the IRA under “unprogrammed funds,” the Congress made its release subject to the realization of the revenue targets, based on quarterly assessments.    In doing this, the legislature left in the hands of the Executive the determination of whether or not to release the P10 Billion funds, and if it decides to release it, when such release will be done.   This certainly constitutes an undue delegation of legislative powers.   

85.  A law must be complete in all its essential terms and conditions when it leaves the legislature so that there will be left nothing for the delegate to do except to enforce it. If there are gaps in the law that must be filled before it can be enforced, the delegate will then have the opportunity to step in the shoes of the legislature and exercise a discretion which is legislative in order to repair the omission.   This constitutes invalid delegation. (Guingona v. Carague, 196 SCRA 221, 234 [1991])    In this case, the year 2000 GAA leaves the Executive with the opportunity to step into the shoes of the Legislative and to exercise powers that are clearly legislative in nature.   The year 2000 GAA does not contain reasonable parameters that will guide the Executive in the enforcement of its provision as regards the P10 Billion IRA.  What situation will justify the release of the P10 Billion IRA?   Should the whole amount be released within the year or should the Executive release only part of the P10 Billion?  Or should the P10 Billion be withheld in its totality?  When and in what manner should the release, if any, be done?   All these questions are left unanswered.  The Executive has unlimited discretion to fill these gaps.   Doubtless, this is invalid delegation of legislative powers.

86.  By its very nature, an appropriations act specifies the use of public funds.   In the case of the P10 B IRA, the Legislature abdicated its constitutionally mandated function by granting the Executive unbridled discretion to make appropriations.  

The year 2000 GAA is null and void for being unconstitutional
as the placing of P10 Billion of the IRA under “unprogrammed funds”
constitutes an amendment of the Local Government Code of 1991,
which cannot be done in a general appropriations act
and which purpose was not reflected in the title of the year 2000 GAA.

87.  Article VI, Section 25 of the Constitution provides, in part, that, “No provision or enactment shall be embraced in a general appropriations bill unless it relates specifically to some particular appropriation therein.”   This Honorable Court explained this provision in the case of Philippine Constitution Association v. Enriquez, 235 SCRA 506 (1994), thus:

88.  By withholding and placing under “unprogrammed funds” P10 Billion of the total P121.788 IRA that should be released based on the formula prescribed by the Local Government Code, the year 2000 GAA, in effect, amends the substantial provisions of the Local Government Code.   It modifies not only the formula for the computation of the amount of the IRA (i.e. 40% or in a reduced amount not lower than 30% of the taxes collected in the third year preceding the current year [Sec. 284]), but also the manner of the automatic release of the IRA (i.e., within five [5] days after the end of each quarter, the IRA being free from any lien or holdback for whatever purpose [Sec. 286]) .    As stated in the quoted decision, this should be done in a separate enactment and cannot be done in the general appropriations act.     

89.  Even assuming, for the sake of argument, that such amendment of the Local Government Code can be done in the year 2000 GAA, the said provision amending the Local Government Code is still null and void.  Such amendment, if it was really the intention of the legislature, is not reflected in the title of the year 2000 GAA.   This is again a violation of the Constitution, specifically, Article VI, Section 26, which provides that, “Every bill passed by the Congress shall embrace only one subject which shall be expressed in the title thereof.”     The amendment of the Local Government Code is neither the only subject embraced in the year 2000 GAA (as the said law’s main subject is to appropriate funds for the operation of the government for the year 2000) nor is it reflected in the title.   As such, the provision that amends the Local Government Code is unconstitutional and therefore, void.

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