Province of Batangas Vs.

Romulo
G.R. No. 152774. May 27, 2004
Relevant Background:
It was a case filed by Hon. HERMILANDO I. MANDANAS, Governor of Batangas petitionfor certiorari, prohibition and
mandamus to declare as unconstitutional and void certainprovisos contained in the General Appropriations Acts
(GAA) of 1999, 2000 and 2001,insofar as they uniformly earmarked (allocated) for each corresponding year the
amount offive billion pesos (P5,000,000,000.00) of the Internal Revenue Allotment (IRA) for the LocalGovernment
Service Equalization Fund (LGSEF) and imposed conditions for the release
thereof.
It started in 1998 when then President Joseph Estrada issued Executive Order No. 48
entitledESTABLISHINGAPROGRAMFORDEVOLUTIONADJUSTMENTANDEQUALIZATION to facilitate the
process of enhancing the capabilities of local governmentunits in the discharge of the functions and services
devolved to them pursuant to the LocalGovernmentCode.Included in theEO No.48 isthe
appointmentoftheOversightCommitteeauthorizedtoissuetheimplementingrulesandregulationsgoverningtheequitable
allocation and distribution of said fund to the LGUs..Subject of the case are the resolutions passed by the Oversight
Committee (Chaired by theExecutive Secretary Ronaldo B. Zamora). These are the resolutions with numbers OCD-
99-005, OCD-99-006, and OCD-99-003. Further, these OCDs were approved by then Pres.Estrada on October 6,
1999. The guidelines along with these OCDs as formulated by theOversight Committee requires the LGUs to identify
the projects eligible for funding under theportion of LGSEF and submit the project proposals and other requirements
to the DILG forappraisal before the Committee serves notice to the DBM for the subsequent release ofcorresponding
funds.For the year 2000 and 2001, the same LGSEF of 1999 GAA were adopted due to failure ofCongress to enact
general appropriation laws.The standing point was when Gov. Mandanas received the LGSEF in the GAA of 1991.
The 5Billion LGESF for 2001 were as follows:
Modified Codal FormulaP3.0Billion
Priority ProjectsP1.9 Billion
Capability Building FundP0.1 Billion, Total = P5Billion
Furthere, the P3.0Billion of the abovementioned LGESF shall be allocated according to themodified codal formula
and be released to the four levels of LGUs.,ie., provinces, cities,municipalities and barangays as follos:
Provinces, 25%- P0.750Billion
Cities, 25%- 0.750
Municipalities, 35%- 1.050
Barangays, 15%- 0.450,
Total = P3Billion
ResolvedFurther,theP1.9BillionearmarkedforPriorityProjectsshallbedistributed
according to the following criteria:
1.For projects of the 4th, 5th, and 6th class LGUs, or
2.Projects in consonance with the Presidents SONA
Upon Upon receipt of a copy of the above resolution, Gov. Mandanas wrote to the individual
members of the Oversight Committee seeking the reconsideration of Resolution No. OCD-
2002-001. He also wrote to Pres. Macapagal-Arroyo urging her to disapprove said resolution
as it violates the Constitution and the Local Government Code of 1991 but otherwise,approved by Pres. Arroyo on
January 25, 2002.
The Petitioner Points the Following Issues:
1.Unconstitutionality and void provisos in the GAAs of 1999, 2000, and 2001.
2.Unlawful and illegal imposition of conditions issued by the Oversight Committeerequiring project proposals and
documentary requirements prior to the release ofLGUs just share in the IRA is an anathema to the principle of local
autonomy asembodied in the Constitution and the Local Government Code of 1991 (and that thepossible disapproval
by the Committee of the project proposals of the LGUs is adiminution to then latters share in the IRA).
The petitioner contends the following:
In issue No.1 & 3, the respondent theorized that Section 285 of the Local GovernmentCode of 1991 which provides
for the percentage sharing of the IRA among the LGUs wasnot intended to be a fixed determination of share in the
national taxes as the Congressmay enact other laws, including the aforementioned oppropriations law providing for
adifferent sharing formula. Section 285 merely intended to be the default share of theLGUs to do away with the
need to determine annually.
Further, the respondent avers that the petition has already been rendered as moot andacademic as it no longer
presents a justifiable controversy because the IRAs of the years1999, 2000 and 2001 have already been released
and therefore, nothing more to prohibit,aside from the fact that the petition should not have been filed with the
Supreme Courtbecause this court is not a trier of facts, but, the lower courts of jurisdiction.In
issueNo.2,theassailedresolutionsissuedbytheOversightCommitteearenotconstitutionally infirm. The respondents
stands thatSection 6 of Article Xof theConstitution does not specify the just share of the LGUs shall be determined
solely bythe Local Government Code of 1991 and that the phrase to be determined by law in thesame
provisionmeansthat there exists nolimitation on the powerof Congress todetermine what is the just share of the
LGUs in the national taxes. In effect, theCongress serves as the arbiter of what should be the just share.
Courts Ruling:
The Court finds the petition to involve a significant legal issue. Issue No.1 is the crux of theinstant
controversyascontainedintheGAAs of1999,2000and2001and theOCDresolutionsinfringe theConstitutionand the
LocalGovernment Code of 1991 andundoubtedly a legal question. However, the earmarking of the LGSEF, the
promulgation ofthe assailed OCD resolutions and the release of the LGSEF to the LGU following therequirements are
not disputed.Substantive issues stated above, in the course of the argument, although the superveningevents as the
IRA including the LGSEF for 1999, 2000 and 2001 had already been released,still, there was a compelling reason to
resolve the substantive issue raised in the instantpetition, whether intended or incidental, cannot prevent the Court
from rendering a decision ifgrave violation of the Constitution is proved even where the supervening events had
made thecases moot in order to resolve the legal or constitutional issues raised to formulate controllingprinciples to
guide the bench, bar and public.The court held that, the state shall ensure the autonomy of local governments. (Art.
II Sec.25 of the Constitution). Consistent with the principle of local autonomy, the Constitutionconfines the
Presidents power over the LGUs to one of general supervision and has nopower to
controlTheLocalGovernmentCodeof1991wasenactedtofleshoutthemandateoftheConstitution. The State policy on
local autonomy is amplified in Section 2 thereof:
Sec. 2.Declaration of Policy. (a) It is hereby declared the policy of the State that theterritorial and political
subdivisions of the State shall enjoy genuine and meaningful localautonomy to enable them to attain their fullest
development as self-reliant communities andmake them more effective partners in the attainment of national goals.
Toward this end, theStateshallprovideforamoreresponsiveandaccountablelocalgovernmentstructureinstituted through
a system of decentralization wherebylocal government units shall begiven more powers, authority, responsibilities,
and resources.Guided by these precepts, the Court shall now determine whether the assailed provisos in theGAAs of
1999, 2000 and 2001, earmarking for each corresponding year the amount of fivebillion pesos of the IRA for the
LGSEF and the OCD resolutions promulgated pursuantthereto, transgress the Constitution and the Local
Government Code of 1991.To the Courts mind, the entire process involving the distribution and release of the
LGSEF isconstitutionally impermissible. The LGSEF is part of the IRA or just share of the LGUs inthe national
taxes. To subject its distribution and release to the vagaries of the implementingrules and regulations, including the
guidelines and mechanisms unilaterally prescribed by theOversight Committee from time to time, as sanctioned by
the assailed provisos in the GAAsof 1999, 2000 and 2001 and the OCD resolutions, makes the release not
automatic, a flagrantviolation of the constitutional and statutory mandate that the just share of the LGUs
shallbeautomatically released to them. The LGUs are, thus, placed at the mercy of theOversight
Committee.That the automatic release of the IRA was precisely intended to guarantee and promote localautonomy
can be gleaned from the discussion below between Messrs. Jose N. Nolledo andRegalado M. Maambong, then
members of the 1986 Constitutional CommissionOur national officials should not only comply with the constitutional
provisions on localautonomy but should also appreciate the spirit and liberty upon which these provisions arebased.
WHEREFORE, the petition is GRANTED. The assailed provisos in the General
Appropriations Acts of 1999, 2000 and 2001, and the assailed OCD Resolutions, are declared
UNCONSTITUTIONAL