C.
Decentralization and Devolution, Distinguished
GR 132988 – Pimentel v. Aguirre
Panganiban, J.
President issued AO 372 providing that all government offices and LGUs must
identify and implement measures to reduce the expenditures for the year by at least
25% (Sec 1), and an amount equivalent to 5% of the IRA will be withheld from the
LGUs (Sec 4).
HELD: Sec 1 is VALID; Sec 4 is INVALID
DOCTRINE
The Constitution vests the President with power of SUPERVISION, not CONTROL,
over LGUs. Such power enables him to see to it that LGUs and their officials execute
their tasks in accordance with law. While he may issue advisories and seek their
cooperation in solving economic difficulties, he cannot prevent them from performing
their tasks using available resources to achieve their goals. He may not withhold or
alter any power or authority given to them by the law. Thus, the withholding of a
portion of internal revenue allotments legally due to them cannot be directed by
administrative fiat.
FACTS
1. December 27 1997, President Ramos issued AO 372. The AO cited current
economic difficulties (example, devaluation of the peso), which called for cash
management measures from all government agencies. The provisions important
to our case are:
a. Section 1 of the AO: All government departments and agencies,
including state universities and colleges, GOCCs, and LGUs will
identify and implement measures in Fiscal Year 1998 that will reduce
total expenditures for the year by at least 25% of authorized regular
appropriations for non personal-service items
b. Section 4 of the AO: Pending the assessment am devaluation by the
Development Budget Coordinating Committee of the emerging fiscal
situation, the amount equivalent to 10% of the internal revenue
allotment IRA to LGUs shall be withheld (this was later amended by
AO 43 of ERAP which reduced the amount of IRA to be withheld to
5%)
2. Petitioner contests the provisions for being:
a. In effect an exercise of control of the President over the LGUs
b. For being in contravention of Section 26 of the LGC and of Section 6
Article X of the 1987 Constitution providing for the automatic release to
each of the units its share in the national internal revenue
3. OSG, in defense of the government, claims that AO 372 was issued to alleviate
the economic difficulties brought about by the peso devaluation.
a. It doesn’t violate local autonomy because it merely directs local
governments to identify measures that can reduce total expenditures.
b. It doesn’t violate the prohibition against imposition of holdbacks
because the withholding is only temporary in nature
ISSUE with HOLDING
1. WON Section 1 of AO 372 is valid. YES
Section 1 is valid since it merely advisory in character and doesn’t constitute a
mandatory or binding order that interferes with local autonomy
- The Court starts off, in true Panganiban fashion, of the concepts of the scope of the
President’s power of supervision and the extent of the local government’s autonomy
Scope of President’s power of supervision over LGUs
- Court cited jurisprudence to clarify the meaning of the President’s general
supervision over the LGUs under Article X Section 4 of the Constitution.
- In Taule v Santos, the Ct held that the President wielded only the authority of check-
in whether LGUs or their officials were performing their duties as provided by law. He
cannot interfere with local governments, as long as they act within the scope of their
authority
- In Drilon v Lim, the Court ruled that while officers in control can undo the acts of
their subordinates and substitute their own if they wanted to, supervising officials
merely see to it that the rules are followed. If the rules are not observed, they may
only order the work redone, and they cannot substitute their own judgment for that of
the subordinate
- Why is this so? It’s because although the members of the Cabinet and other
executive officials are subject to the control of the President, the leaders of political
subdivisions are elected by the people. They are directly accountable to the people
and their sovereign powers emanate from them, not the President.
Extent of Local Autonomy
- Ganzon v CA explained that local autonomy signified a more responsive and
accountable local government structure instituted through a system of
decentralization. Decentralization on the other hand means the devolution of national
administration, not power, to local governments.
- Under the Philippine concept of local autonomy, the national government has not
completely relinquished all its powers over local governments. Only admin powers
over local affairs are delegated so that LGUs are more responsive and effective at
the local levels. Still, 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
What about Fiscal Autonomy of LGUs?
- Court next discussed the fiscal autonomy of LGUs, which they enjoy in addition to
administrative autonomy. Fiscal autonomy means that LGUs 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.
- Local autonomy however, does not rule out any manner of national government
intervention by way of supervision.
 For one, the President, according to the Constitution, is still the head of the
NEDA, the economic and planning agency of the government, primarily
responsible for formulating and implementing integrated social and
economic policies plans for the entire country. The formulation and
implementation of the policies and programs however are subject to
 consultations with the appropriate public agencies, private sectors and
LGUs.
 This Constitutional directive was followed in the LGC Section 284 which
provides that:
“In the event that the national government incurs an unmanaged public
sector deficit, the President of the PH is hereby authorized, upon the
recommendation of the Secretary of Finance, Secretary of the 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 LGUs but in no case shall the allotment be less than
30% of the collection of national internal revenue taxes of the third fiscal
year preceding the current fiscal year”
- Before the President may therefore interfere in local fiscal matters:
1) There must be an unmanaged public sector deficit in the national
government
2) Consultations must be had with the presiding officers of Senate and the
House and the presidents of the various local leagues
3) Recommendation must be obtained from Secretaries of the DILG, DoF and
DBM
4) Any adjustment shall in no case be less than 30% of the national internal
revenue taxes collected of the 3rd fiscal year preceding the current one
- Although the requisites were not complied with before AO 372 was implemented,
the SC agreed with the OSG in that AO 372 is merely directory and was intended
only to advise all government agencies and instrumentalities to undertake cost-
reduction measures. It doesn’t even mention any sanction in case of noncompliance.
It merely tells the LGUs to identify and implement measures that will reduce total
expenditures by 25%
2. WON Section 4 of AO 372 is valid. NO
Section 4 is invalid for being a holdback imposed by the national government
on the IRA
- As for Section 4, Court cited the Section 6 Art X of the Constitution and Section 286
of the LGC . The IRA shall be released directly to the LGU concerned within 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 (since shall is
used, as a rule the provision is compulsory in character)
- The withholding under Section 4 of AO 372 thus contravenes the Constitution and
the LGC. Although temporary, it is equivalent to a holdback, which means something
held back or withheld, often temporarily. Any retention is prohibited.
DIGESTER: GDR