GENERAL WELFARE CLAUSE

Section 16 (The General Welfare Clause) of Republic Act 7160 also known as Local
Government Code of 1991 expressly grants and mandates LGUs powers and functions which
are necessary, appropriate, or incidental to efficient and effective governance.

SUPERVISORY POWER OF THE PRESIDENT OVER LGUs

power of supervision
The Constitution vests the President with the power of supervision, not control, over local
government units (LGUs). Such power enables him to see to it that LGUs and their officials
execute their tasks in accordance with law.

The President shall exercise general supervision over autonomous regions to ensure that laws
are faithfully executed. Section 17. All powers, functions, and responsibilities not granted by
this Constitution or by law to the autonomous regions shall be vested in the National
Government.

FISCAL AUTONOMY

Fiscal autonomy means that local governments 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.

DECENTRALIZATION VS DEVOLUTION (DISOMANGCOP VS DATUMANONG)

A necessary prerequisite of autonomy is decentralization.

Decentralization is a decision by the central government authorizing its subordinates, whether

geographically or functionally defined, to exercise authority in certain areas. It involves
decision-making by subnational units. It is typically a delegated power, wherein a larger
government chooses to delegate certain authority to more local governments. Federalism
implies some measure of decentralization, but unitary systems may also decentralize.

Decentralization differs intrinsically from federalism in that the sub-units that have been
authorized to act (by delegation) do not possess any claim of right against the central
government.

Decentralization comes in two forms—deconcentration and devolution.

Deconcentration is administrative in nature; it involves the transfer of functions or the
delegation of authority and responsibility from the national office to the regional and local
offices. This mode of decentralization is also referred to as administrative decentralization.

Devolution, on the other hand, connotes political decentralization, or the transfer of powers,
responsibilities, and resources for the performance of certain functions from the central
government to local government units.This is a more liberal form of decentralization since
there is an actual transfer of powers and responsibilities.  It aims to grant greater autonomy to
local government units in cognizance of their right to self-government, to make them self-
reliant, and to improve their administrative and technical capabilities.

PRINCIPLE OF LOCAL AUTONOMY

The principle of local autonomy under the 1987 Constitution simply means "decentralization"
(III Records of the 1987 Constitutional Commission, pp. 435-436, as cited in Bernas, The
Constitution of the Republic of the Philippines, Vol. II, First Ed., 1988, p. 374). It does not make
local governments sovereign within the state or an "imperium in imperio." (BASCO VS PAGCOR)

Local Government has been described as a political subdivision of a nation or state which is
constituted by law and has substantial control of local affairs. In a unitary system of
government, such as the government under the Philippine Constitution, local governments can
only be an intra sovereign subdivision of one sovereign nation, it cannot be
an imperium in imperio. Local government in such a system can only mean a measure of
decentralization of the function of government. (emphasis supplied)
1. BASCO VS PAGCOR

Re: Principle of Local Autonomy

FACTS:

The PH Amusement and Gaming Corp. was created by PD 1067-A and granted a franchise under
PD 1067-B. Subsequently, under PD 1869, the Government enabled it to regulate and centralize
all games of chance authorized by existing franchise or permitted by law, under declared policy.
But the petitioners think otherwise, that is why, they filed the instant petition seeking to annul
the PAGCOR Charter — PD 1869, because it is allegedly contrary to morals, public policy and
order, and because of the following issues:

ISSUES:

(1) WON it waived the Manila City gov't's right to impose taxes and license fees, which is
recognized by law.

(2) WON it has intruded into the LGUs' right to impose local taxes and license fees, and thus
contrary to the principle of local autonomy enshrined in the Constitution.

(3) WON it violates the equal protection clause as it allows some gambling acts but also
prohibits other gaming acts.

(4) WON it violates the Cory  gov't's policy of being away from monopolistic and crony
economy, and toward free enterprise and privatization.

HELD:

(1) No. The fact that PAGCOR, under its charter, is exempt from paying tax of any kind is not
violative of the principle of local autonomy. LGUs' have no inherent right to impose taxes. LGUs'
power to tax must always yield to a legislative act which is superior having been passed by the
state itself which has the inherent power to tax. The charter of LGUs is subject to control by
Congress as they are mere creatures of Congress. Congress, therefore, has the power of control
over LGUs. And if Congress can grant the City of Manila the power to tax certain matters, it can
also provide for exemptions or even take back the power.

(2) No. LGUs' right to impose license fees on "gambling", has long been revoked. As early as
1975, the power of local governments to regulate gambling thru the grant of "franchise,
licenses or permits" was withdrawn by P.D. No. 771 and was vested exclusively on the National
Government. Furthermore, LGUs' have no power to tax instrumentalities of the gov't such as
PAGCOR which exercises governmental functions of regulating gambling activities.

(3) No.  The clause does not preclude classification of individuals who may be accorded
different treatment under the law as long as the classification is not unreasonable or arbitrary.
A law does not have to operate in equal force on all persons or things to be conformable to
Article III, Section 1 of the Constitution. The Constitution does not require situations which are
different in fact or opinion to be treated in law as though they were the same.

(4) No. The judiciary does not settle policy issues. The Court can only declare what the law is
and not what the law should be. Under our system of government, policy issues are within the
domain of the political branches of government and of the people themselves as the repository
of all state power. On the issue of monopoly, the same is not necessarily prohibited by the
Constitution. The state must still decide whether public interest demands that monopolies be
"regulated" or prohibited. Again, this is a matter of policy for the Legislature to decide. The
judiciary can only intervene when there are violations of the statutes passed by Congress
regulating or prohibiting monopolies.
LINA, JR. V. PAÑO, G.R. NO. 129093, [AUGUST 30, 2001]

DOCTRINE: The game of lotto is a game of chance duly authorized by the national government
through an Act of Congress. Republic Act 1169, as amended by Batas Pambansa Blg. 42, is the
law which grants a franchise to the PCSO and allows it to operate the lotteries. This statute
remains valid today. While lotto is clearly a game of chance, the national government deems it
wise and proper to permit it. Hence, the Sangguniang Panlalawigan of Laguna, a local
government unit, cannot issue a resolution or an ordinance that would seek to prohibit permits.
Stated otherwise, what the national legislature expressly allows by law, such as lotto, a
provincial board may not disallow by ordinance or resolution.

FACTS:

Respondent (Tony Calvento) was appointed agent by the Philippine Charity Sweepstakes Office
(PCSO) to install Terminal OM 20 for the operation of lotto. He asked Mayor Calixto Cataquiz,
Mayor of San Pedro, Laguna, for a mayor’s permit to open the lotto outlet. This was denied by
Mayor Cataquiz in a letter dated February 19, 1996. The ground for said denial was an
ordinance passed by the Sangguniang Panlalawigan of Laguna. entitled Kapasiyahan Blg. 508, T.
1995 which was issued on September 18, 1995. The ordinance reads:

ISANG KAPASIYAHAN TINUTUTULAN ANG MGA “ILLEGAL GAMBLING” LALO NA ANG LOTTO SA
LALAWIGAN NG LAGUNA

SAPAGKA’T, ang sugal dito sa lalawigan ng Laguna ay talamak na;

SAPAGKA’T, ang sugal ay nagdudulot ng masasamang impluwensiya lalo’t higit sa mga

kabataan;

KUNG KAYA’T DAHIL DITO, at sa mungkahi nina Kgg. Kgd. Juan M. Unico at Kgg. Kgd. Gat-Ala A.
Alatiit, pinangalawahan ni Kgg. Kgd. Meliton C. Larano at buong pagkakaisang sinangayunan ng
lahat ng dumalo sa pulong;

IPINASIYA, na tutulan gaya ng dito ay mahigpit na TINUTUTULAN ang ano mang uri ng sugal dito
sa lalawigan ng Laguna lalo’t higit ang Lotto;

IPINASIYA PA RIN na hilingin tulad ng dito ay hinihiling sa Panlalawigang pinuno ng Philippine

National Police (PNP) Col. [illegible] na mahigpit na pag-ibayuhin ang pagsugpo sa lahat ng uri
ng illegal na sugal sa buong lalawigan ng Laguna lalo na ang “Jueteng”. 3
As a result of this resolution of denial, respondent (Calvento) filed a complaint for declaratory
relief with prayer for preliminary injunction and temporary restraining order. In the said
complaint, respondent Calvento asked the Regional Trial Court of San Pedro Laguna, Branch 93,
for the following reliefs: (1) a preliminary injunction or temporary restraining order, ordering
the defendants to refrain from implementing or enforcing Kapasiyahan Blg. 508, T. 1995; (2) an
order requiring Hon. Municipal Mayor Calixto R. Cataquiz to issue a business permit for the
operation of a lotto outlet; and (3) an order annulling or declaring as invalid Kapasiyahan Blg.
508, T. 1995.

On February 10, 1997, the respondent judge, (Francisco Dizon Paño), promulgated his decision
enjoining the petitioners from implementing or enforcing resolution or Kapasiyahan Blg. 508, T.
1995.

ISSUE: WON the local government may deny the operation of lotto in the said locality.

HELD: NO. The ordinance, Kapasiyahan Blg. 508, T. 1995 of the Sangguniang Panlalawigan of
Laguna, merely states the “objection” of the council to the operation of lotto. It is but a mere
policy statement on the part of the local council, which is not self-executing. Nor could it serve
as a valid ground to prohibit the operation of the lotto system in the province of Laguna. Even
petitioners admit this in their petition. As a policy statement expressing the local government’s
objection to the lotto, such resolution is valid. This is part of the local government’s autonomy
to air its views which may be contrary to that of the national government’s. However, this
freedom to exercise contrary views does not mean that local governments may actually enact
ordinances that go against laws duly enacted by Congress. Given this premise, the assailed
resolution in this case could not and should not be interpreted as a measure or ordinance
prohibiting the operation of lotto. To conclude our resolution of the first issue, respondent
mayor of San Pedro cannot avail of Kapasiyahan Bilang 508, Taon 1995, of the Provincial Board
of Laguna as justification to prohibit lotto in his municipality. For said resolution is nothing but
an expression of the local legislative unit concerned. The Board’s enactment, like spring water,
could not rise above its source of power, the national legislature.

The game of lotto is a game of chance duly authorized by the national government through an
Act of Congress. Republic Act 1169, as amended by Batas Pambansa Blg. 42, is the law which
grants a franchise to the PCSO and allows it to operate the lotteries. This statute remains valid
today. While lotto is clearly a game of chance, the national government deems it wise and
proper to permit it. Hence, the Sangguniang Panlalawigan of Laguna, a local government unit,
cannot issue a resolution or an ordinance that would seek to prohibit permits. Stated
otherwise, what the national legislature expressly allows by law, such as lotto, a provincial
board may not disallow by ordinance or resolution.
In our system of government, the power of local government units to legislate and enact
ordinances and resolutions is merely a delegated power coming from Congress. Ours is still a
unitary form of government, not a federal state. Being so, any form of autonomy granted to
local governments will necessarily be limited and confined within the extent allowed by the
central authority. Besides, the principle of local autonomy under the 1987 Constitution simply
means “decentralization.” It does not make local governments sovereign within the state.

CSC VS. DBM, G.R. NO. 15879 – CASE DIGEST

The agencies which the Constitution has vested with fiscal autonomy should thus be
given priority in the release of their approved appropriations over all other agencies
not similarly vested when there is a revenue shortfall.

FACTS

The CSC filed a petition for mandamus which seeks to compel the DBM to release the balance
of its budget for fiscal year 2002 amounting to more than P5M. It alleged that its balance was
intentionally withheld by respondent on the basis of its “no report, no release”
policy whereby allocations for agencies are withheld pending their submission of some
documents DBM requires under National Budget Circular No. 478.

CSC contends that the application of the “no report, no release” policy upon CSC which is an
independent constitutional body is a violation of the principle of fiscal autonomy and,
therefore, unconstitutional.

DBM countered, among others, that there was a shortfall in revenues in justifying its action. It
also cited CSC’s failure to follow the doctrine on the exhaustion of administrative remedies and
the principle of hierarchy of courts.

ISSUE

Can the DBM deny CSC disbursement of its budget on the ground of shortfall in revenues?

RULING

NO. DBM’s “no report, no release” policy cannot be enforced against offices possessing fiscal
autonomy without violating Article IX (A), Section 5 of the Constitution which provides:

Sec. 5. The Commission shall enjoy fiscal autonomy. Their approved appropriations shall be
automatically and regularly released.
By parity of construction, “automatic release” of approved annual appropriations to petitioner,
a constitutional commission which is vested with fiscal autonomy, should thus be construed to
mean that no condition to fund releases to it may be imposed . This conclusion is
consistent with the Court’s ruling in Province of Batangas v. Romulo  Resolution of this Court
which effectively prohibited the enforcement of a “no report, no release” policy against the
Judiciary which has also been granted fiscal autonomy by the Constitution.

As to DBM’s justification for the withholding of funds from petitioner as due to a shortfall in
revenues, the same does not lie.

The agencies which the Constitution has vested with fiscal autonomy should thus be given
priority in the release of their approved appropriations over all other agencies not similarly
vested when there is a revenue shortfall.

A guiding principle on the Constitutional Mandate on the Judiciary’s Fiscal Autonomy that:

4. After approval by Congress, the appropriations for the Judiciary shall be automatically and
regularly released subject to availability of funds. (Italics supplied)

This phrase “subject to availability of funds” does not, however, contradict the present ruling
that the funds of entities vested with fiscal autonomy should be automatically and regularly
released, a shortfall in revenues notwithstanding. What is contemplated in the said quoted
phrase is a situation where total revenue collections are so low that they are not sufficient to
cover the total appropriations for all entities vested with fiscal autonomy.

CASE DIGEST (Transportation Law):

Bantangas CATV vs. C.A.
BATANGAS CATV, INC. vs. THE COURT OF APPEALS,
THE BATANGAS CITY SANGGUNIANG PANLUNGSOD and
BATANGAS CITY MAYOR [G.R. No. 138810. September 29,
2004]

FACTS:
On July 28, 1986, respondent Sangguniang Panlungsod
enacted Resolution No. 210 granting petitioner a permit to
construct, install, and operate a CATV system in Batangas
City. Section 8 of the Resolution provides that petitioner is
authorized to charge its subscribers the maximum rates
specified therein, “provided, however, that any increase of
rates shall be subject to the approval of the Sangguniang
Panlungsod.

Sometime in November 1993, petitioner increased its

subscriber rates from P88.00 to P180.00 per month. As a
result, respondent Mayor wrote petitioner a letter threatening
to cancel its permit unless it secures the approval of
respondent Sangguniang Panlungsod, pursuant to Resolution
No. 210.

Petitioner then filed with the RTC, Branch 7, Batangas City, a

petition for injunction alleging that respondent Sangguniang
Panlungsod has no authority to regulate the subscriber rates
charged by CATV operators because under Executive Order
No. 205, the National Telecommunications Commission
(NTC) has the sole authority to regulate the CATV operation
in the Philippines.

ISSUE :
may a local government unit (LGU) regulate the subscriber
rates charged by CATV operators within its territorial
jurisdiction?

HELD: No.
xxx

The logical conclusion, therefore, is that in light of the above

laws and E.O. No. 436, the NTC exercises regulatory power
over CATV operators to the exclusion of other bodies.

xxx

Like any other enterprise, CATV operation maybe regulated

by LGUs under the general welfare clause. This is primarily
because the CATV system commits the indiscretion of
crossing public properties. (It uses public properties in order
to reach subscribers.) The physical realities of constructing
CATV system – the use of public streets, rights of ways, the
founding of structures, and the parceling of large regions –
allow an LGU a certain degree of regulation over CATV
operators.

xxx

But, while we recognize the LGUs’ power under the general

welfare clause, we cannot sustain Resolution No. 210. We are
convinced that respondents strayed from the well recognized
limits of its power. The flaws in Resolution No. 210 are: (1) it
violates the mandate of existing laws and (2) it violates the
State’s deregulation policy over the CATV industry.

LGUs must recognize that technical matters concerning CATV

operation are within the exclusive regulatory power of the
NTC.

JUDGE DADOLE VS.

COMMISSION ON AUDIT
DOCTRINE: The President can only interfere in the affairs and activities
of a local government unit if he or she finds that the latter has acted
contrary to law. This is the scope of the President’s supervisory powers
over local government units. Hence, the President or any of his or her
alter egos cannot interfere in local affairs as long as the concerned local
government unit acts within the parameters of the law and the
Constitution. Any directive therefore by the President or any of his or her
alter egos seeking to alter the wisdom of a law-conforming judgment on
local affairs of a local government unit is a patent nullity because it
violates the principle of local autonomy and separation of powers of the
executive and legislative departments in governing municipal
corporations.

FACTS: In 1986, petitioners as RTC and MTC judges stationed in

Mandaue City received a monthly allowance of P1,260 each pursuant to
the yearly appropriation ordinance. Eventually, in 1991, it was increased
to P1,500 for each judge. However, The Department of Budget and
Management (DBM) issued Local Budget Circular No. 55 (LBC 55)
which provides that the additional monthly allowances to be given by a
local government unit should not exceed P1,000 in provinces and cities
and P700 in municipalities. Acting on the said DBM directive, the
Mandaue City Auditor issued notices of disallowance to herein
petitioners in excess of the amount authorized by LBC 55.

Thus, petitioners filed with the Office of the City Auditor a protest.
However, it was treated as a motion for reconsideration and was
endorsed to the Commission on Audit (COA) Regional Office No. 7. In
turn, the COA Regional Office referred the said motion to their Head
Office with recommendation that the same should be denied.
Accordingly, it was denied by the COA. Hence, petitioners filed the
instant petition. They argued, among others, that LBC 55 is void for
infringing on the local autonomy of Mandaue City by dictating a uniform
amount that a local government unit can disburse as additional
allowances to judges stationed therein. 

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ISSUE: WON a local government unit may provide an allowance

exceeding P 1,000.

HELD: YES. We recognize that, although our Constitution guarantees

autonomy to local government units, the exercise of local autonomy
remains subject to the power of control by Congress and the power of
supervision by the President. Section 4 of Article X of the 1987
Philippine Constitution provides that: “Sec. 4. The President of the
Philippines shall exercise general supervision over local governments. . .
.“

The President can only interfere in the affairs and activities of a local
government unit if he or she finds that the latter has acted contrary to
law. This is the scope of the President’s supervisory powers over
local government units. Hence, the President or any of his or her alter
egos cannot interfere in local affairs as long as the concerned local
government unit acts within the parameters of the law and the
Constitution. Any directive therefore by the President or any of his or her
alter egos seeking to alter the wisdom of a law-conforming judgment on
local affairs of a local government unit is a patent nullity because it
violates the principle of local autonomy and separation of powers of the
executive and legislative departments in governing municipal
corporations.

LBC 55 provides that the additional monthly allowances to be given by a

local government unit should not exceed P1,000 in provinces and cities
and P700 in municipalities. Section 458, par. (a)(1)(xi), of RA 7160, the
law that supposedly serves as the legal basis of LBC 55, allows the
grant of additional allowances to judges “when the finances of the city
government allow.” The said provision does not authorize setting a
definite maximum limit to the additional allowances granted to judges.
Thus, we need not belabor the point that the finances of a city
government may allow the grant of additional allowances higher than
P1,000 if the revenues of the said city government exceed its annual
expenditures. Thus, to illustrate, a city government with locally generated
annual revenues of P40 million and expenditures of P35 million can
afford to grant additional allowances of more than P1,000 each to, say,
ten judges inasmuch as the finances of the city can afford it.

Respondent COA failed to prove that Mandaue City used the IRA to
spend for the additional allowances of the judges. There was no
evidence submitted by COA showing the breakdown of the expenses of
the city government and the funds used for said expenses. All the COA
presented were the amounts expended, the locally generated revenues,
the deficit, the surplus and the IRA received each year. Aside from these
items, no data or figures were presented to show that Mandaue City
deducted the subject allowances from the IRA. In other words, just
because Mandaue City’s locally generated revenues were not enough to
cover its expenditures, this did not mean that the additional allowances
of petitioner judges were taken from the IRA and not from the city’s own
revenue. 

The DBM neither conducted a formal review nor ordered a disapproval

of Mandaue City’s appropriation ordinances, in accordance with the
procedure outlined by Sections 326 and 327 of RA 7160[.] . . . Within 90
days from receipt of the copies of the appropriation ordinance, the DBM
should have taken positive action. Otherwise, such ordinance was
deemed to have been properly reviewed and deemed to have taken
effect. Inasmuch as, in the instant case, the DBM did not follow the
appropriate procedure for reviewing the subject ordinance of Mandaue
City and allowed the 90-day period to lapse, it can no longer question
the legality of the provisions in the said ordinance granting additional
allowances to judges stationed in the said city.