Institute of Politics and Governance

Internal Revenue Allotment: Issues, Incursions and Implications
Atty. Dan Gatmaytan

Aquilino Pimentel who was the principal author of the Local Government Code, filed a Petition with the Supreme Court, asking it:

a. to annul Section 1 of AO No. 372, insofar as it requires local government units to reduce their expenditures by 25 percent of their authorized regular appropriations for non-personal services; and

b. to enjoin respondents from implementing Section 4 of the Order, which withholds a portion of their internal revenue allotments.

The Issues

The main issue in the case is the validity of Administrative Order No. 372 insofar as LGUs are concerned.

Senator Pimentel was of the opinion that Section 1 of the Order is in effect a form of "control" over local government officials prohibited by the Constitution. On the other hand, the government claimed that Section 1 of the Order was a mere act of "supervision".

Pimentel also claimed that Section 4 violates the Constitution and the Local Government Code, because it prevents the automatic release of the IRA. The government defended Section 4 by saying that there is no violation of the laws because the withholding was merely temporary.

Before resolving the main issue, the Court reviewed the scope of the President's power of general supervision over local governments, and the extent of the local governments' autonomy under Philippine law.

Scope of President's Power of Supervision Over LGUs

Section 4 of Article X of the Constitution confines the President's power over local governments to one of general supervision. It provides that, "The President of the Philippines shall exercise general supervision over local governments. x x x"

According to the Court, this provision excludes the power of control. The Court distinguished them as follows:

x x x In administrative law, supervision means overseeing or the power or authority of an officer to see that subordinate officers perform their duties. If the latter fail or neglect to fulfill them, the former may take such action or step as prescribed by law to make them perform their duties. Control, on the other hand, means the power of an officer to alter or modify or nullify or set aside what a subordinate officer ha[s] done in the performance of his duties and to substitute the judgment of the former for that of the latter."

The Supreme Court explained that supervisory power is the power of mere oversight over an inferior body; it does not include any restraining authority over such body.

Officers in control lay down the rules in the performance or accomplishment of an act. If these rules are not followed, they may, in their discretion, order the act undone or redone by their subordinates or even decide to do it themselves. On the other hand, supervision does not cover such authority. Supervising officials merely see to it that the rules are followed, but they themselves do not lay down such rules, nor do they have the discretion to modify or replace them. If the rules are not observed, they may order the work done or redone, but only to conform to such rules. They may not prescribe their own manner of execution of the act. They have no discretion on this matter except to see to it that the rules are followed.

While the members of the Cabinet are subject to the power of control of the President, the people elect the heads of political subdivisions. As such, local officials derive powers from the electorate "to whom they are directly accountable." Thus, "the President may not withhold or alter any authority or power given them by the Constitution and the law."

Extent of Local Autonomy

The Court also touched on the policy of ensuring local autonomy, and explained that local autonomy signified "a more responsive and accountable local government structure instituted through a system of decentralization." Autonomy, according to the Court, is intended to "break up the monopoly of the national government over the affairs of local governments, not to end the relation of partnership and interdependence between the central administration and local government units."

Under the Philippine concept of local autonomy, the national government has not completely relinquished all its powers over local governments:

Only administrative powers over local affairs are delegated to political subdivisions. The purpose of the delegation is to make governance more directly responsive and effective at the local levels. In turn, economic, political and social development at the smaller political units are expected to propel social and economic growth and development. But to enable the country to develop as a whole, the programs and policies effected locally must be integrated and coordinated towards a common national goal. Thus, policy-setting for the entire country still lies in the President and Congress...

Having laid down the parameters of local autonomy law, the Court then proceeded to assess the validity of Administrative Order No. 372.

Pimentel pointed out that the President failed to comply with these requisites before the issuance and the implementation of the Order. The Supreme Court, however, saw nothing wrong with Section 1:

While the wordings of Section 1 of AO 372 have a rather commanding tone, and while we agree with petitioner that the requirements of Section 284 of the Local Government Code have not been satisfied, we are prepared to accept the solicitor general's assurance that the directive to "identify and implement measures x x x that will reduce total expenditures x x x by at least 25% of authorized regular appropriation" is merely advisory in character, and does not constitute a mandatory or binding order that interferes with local autonomy. The language used, while authoritative, does not amount to a command that emanates from a boss to a subaltern.

The Court explained that the provision is merely "an advisory to prevail upon local executives to recognize the need for fiscal restraint in a period of economic difficulty," and that no legal sanction may be imposed upon LGUs and their officials who do not follow such advice.