PROVINCE OF BATANGAS v.

ROMULO
G.R. No. 152774, May 27, 2004
CALLEJO, SR., J.:

FACTS:

E.O. No. 48 entitled Establishing a Program for Devolution Adjustment and Equalization was
established to facilitate the enhancement of the capacities of LGUs in the functions and services
devolved to them by the Nat’l Government Agencies concerned pursuant to the LGC. The Oversight
Committee (Section 533[b] of LGC of 1991) is tasked to formulate and issue the appropriate rules and
regulations necessary for its effective implementation. The Devolution Adjustment and Equalization
Fund was then created to address the funding shortfalls of functions and services devolved to the
LGUs and other funding requirements of the program. The initial fund was to be sourced from the
available savings of the nat’l government for CY 1998. From 1999 onwards, it should be incorporated
in the annual GAA.

R.A. No. 8745 (GAA of 1999) was renamed LGSEF, and the allotted money for the LGUs was P96,
780,000,000. It contained a special provision saying that P5, 000,000,000 shall be earmarked for the
LGSEF for funding requirements of projects and activities arising from the full and efficient
implementation of devolved functions and services of LGUs pursuant to LGC to 1991. IRA will be
released to the LGUs subject to the implementing rules and regulations prescribed by the Oversight
Committee, and it shall be released directly by DBM to the LGUs.

Allocation scheme: (1) PHP2 Billion shall be allocated in accordance w/ the codal formula sharing
scheme. (2) PHP 2 Billion shall be allocated in accordance with a modified CODEF sharing formula.
(3) Remaining PHP 1 Billion shall be earmarked to support LAAP and other priority initiatives, and
can only be accessed if eligible for funding according to a criterion set by the Oversight Committee.
Further, for approval, the LGU must submit the following:
a. Letter Request for Funding Support from the Affirmative Action Program under LGSEF, duly
signed by concerned LGUs; endorsed by cooperators and/or beneficiaries
b. Duly signed Resolution of Endorsement by respective Sanggunians of LGUs concerned.
c. Submit Project Request using OCD Project Request Form No. 99-02.

The same situation applies in 2000 with different particulars (R.A. No 8760 [GAA of 2000], different
allocated amount, different allocation schemes). In 2001, however, since the Congress failed to enact
the GAA for 2001, the GAA of 200 was deemed re-enacted.

The petitioner contends the Constitutionality of the provisos on the grounds that:
 The imposed conditions for the release of the IRA violate the Constitution and the LGC of
1991.
 Guidelines imposed by OC contravene the explicit directive of the Constitution that the LGUs
share in the nat’l taxes “shall be automatically released to them.”
 OC’s authority to determine the distribution and release of LGSEF is anathema to the principle
of local autonomy as embodied in the Constitution and LGC of 1991.
 OCD resolutions on the allocation formula were improperly amended or modified;
 And thus the modifications constitute an illegal amendment by the executive branch of a
substantive law.

The respondents urge the Court to dismiss the petition on the following grounds:
 SUBSTANTIVE
 o Sec. 6 Art. X of the Constitution does not specify that the “just share” of LGUs shall be
determined solely by the LGC of 1991.
o No limitation on the power of Congress to determine what is the just share of the LGUs
in the nat’l taxes (Congress may provide a different sharing formula; what was provided
in the LGC of 1991 was just a “default share”; Congress may increase or decrease the
“just share” depending on what it deems appropriate for their operation).
 PROCEDURAL
o Allegation that petitioner did not receive portions of the LGSEF (thus incurring injury and
damage) is subject to proof and must be substantiated in the lower courts.
o Petition rendered as moot and academic because 2003 because the gov’t is already
operating under the 2003 budget—there is nothing more to prohibit.
o Petitioner has no legal standing.

ISSUE:

Whether or not the provisions and resolutions are unconstitutional and void.

RULING: Assailed provisos in the GAAs of 1999, 2000, and 2001 and the assailed OCD
Resolutions are declared UNCONSTITUTIONAL.

(1) Petitioner has legal standing to maintain the present suit. The petitioner seeks to protect or
vindicate an interest of its own and of other LGUs (with the interest being the LGU’s share in
the nat’l taxes of IRA). The constitutional claim is that the assailed provisos infringe Sec. 6. Art
X of the Constitution (on the automatic release of just share).
(2) The petition involves a significant legal issue because the crux of the controversy is that the
provisos infringe the Constitution and the LGC of 1991. The petition does not need to be
handled by lower courts because there were facts that were not disputed (earmarking of P5
Billion, promulgation of OCD resolutions, release of LGSED only upon compliance with
imposed rules and regulations prescribed by OC). The issue needs proper legal interpretation
of constitution and statutory provisions, especially regarding the application of the
constitutional principle on local autonomy.
(3) Supervening events, whether intended or accidental, cannot prevent the Court from rendering
a decision if there is a grave violation of the Constitution. Further, a question may be capable
of repetition, yet evading review. As such, it justifies the resolution by this Court for the GAAs
in the coming years may contain provisos similar to those now being sought to be invalidated.
(4) Assailed provisos and OCD resolutions violate the constitutional precept on local autonomy.
LGUs shall have a (1) just share in the national taxes, which are (2) determined by law, and
such share must be (3) automatically released to the LGUs (Refer to Sec 18[Power to
Generate and Apply Resources], and Sec. 286[Automatic release, without need of further
action, on a quarterly basis within 5 days after the end of each quarter, not subject to any
holdback that may be imposed by the nat’l gov’t for whatever purpose]). To subject LGSEF’s
distribution and release to the vagaries of implementing rules and regulations makes the
release not automatic—a flagrant violation of the constitutional and statutory mandate.
(5) Assailed provisos and OCD resolutions cannot amend Section 285 of the LGC of 1991, which
provides that beginning the third year of its effectivity, the LGU’s share in the national internal
revenue taxes shall be 40%. Exemption made during an unmanageable public sector deficit.
Sec. 285 also gives an allocation scheme for LGUs, which is not followed by the GAAs of
1999, 2000, and 2001. Any provision, which is intended to amend another law, is considered
an “inappropriate provision.” To allow congress to amend Sec. 285 through the GAAs infringe
the fiscal autonomy of LGUs, which, if not resolved by the courts, puts the LGUs in jeopardy
every year.