PIMENTEL vs.

AQUIRRE
G.R. No. 132988
19 JULY 2000

FACTS:
Subject of this action is Administrative Order No. 372 (AO 372) requires local government
units (LGU) to reduce their expenditures by 25% of their authorized regular appropriations
for non-personal services (Sec. 1); and allows the LGUs to withhold a portion of their
internal revenue allotments.

Petitioner filed to the SC a petition for certiorari and prohibition, contending that the
President, in issuing the said AO, was in effect exercising the power of control over LGUs;
& that the directive to withhold a portion of their IRA is in contravention of Sec. 286 of the
LGC & Sec. 6, Art. X of the Constitution.

ISSUE: Whether Secs. 1 & 4 of AO 372 are valid exercises of the Presidents power of
general supervision over LGUs.

HELD: Sec. 1 YES; Sec. 4 NO

RATIO:
The Court held that Sec. 1 of AO 372, being merely an advisory is well within the powers of
the President. It is not a mandatory imposition, and such directive cannot be characterized
as an exercise of the power of control.

Local fiscal autonomy does not rule out any manner of national government intervention
by way of supervision, in order to ensure that local programs, fiscal and otherwise, are
consistent with national goals. The AO is intended only to advise all government agencies
and instrumentalities to undertake cost-reduction measures that will help maintain
economic stability in the country. It does not contain any sanction in case of
noncompliance.

The Local Government Code also allows the President to interfere in local fiscal matters,
provided that certain requisites are met:
o (1) an unmanaged public sector deficit of the national government;
o (2) consultations with the presiding officers of the Senate and the House of
Representatives and the presidents of the various local leagues;
o (3) the corresponding recommendation of the secretaries of the Department of
Finance, Interior and Local Government, and Budget and Management; and
o (4) any adjustment in the allotment shall in no case be less than 30% of the
collection of national internal revenue taxes of the third fiscal year preceding the
current one.

However, Sec. 4 of AO 372 cannot 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 the Constitution and the Local Government Code. Section 4 which orders
the withholding of a portion of the LGUs IRA clearly contravenes the Constitution and the
law.