INTERNAL REVENUE ALLOTMENT (National Tax Allotment)
The Internal Revenue Allotment (IRA) is a local government unit's (LGU) share of
revenues from the Philippine national government. Provinces, independent cities,
component cities, municipalities, and barangays each get a separate allotment.
What is the difference between national tax allotment and internal revenue allotment?
(b) "National Tax Allotment" or "NaTA", previously referred to as the "Internal Revenue
Allotment (IRA), shall refer to the just share of LGUs from all national taxes or revenues
actually realized or collected by the national government, including those collected by the
Bureau of the Internal Revenue (BIR), Bureau of Customs and others
National Tax Allotment
I. LEGAL BASIS
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Section 6, Article X of the 1987 Philippine Constitution provides that, “local
government units LGUs shall have a just share, as determined by law, in the
national taxes which shall be automatically released to them.”
Section 284 of the Local Government Code of 1991 (Republic Act RA No.
7160 provides that LGUs shall have a forty percent (40%) share in the
national internal revenue taxes (NIRT) based on the collection of the third
fiscal year preceding the current fiscal year.
However, the Supreme Court (SC) En Banc, in its 10 April 2019 Resolution
in the case of “Congressman Hermilando I. Mandanas, et al. vs. Executive
Secretary Paquito N. Ochoa, Jr., et al.” (Mandanas-Garcia Case), declared as
unconstitutional the phrase “internal revenue” appearing in pertinent
sections of RA No. 7160, and ordered the Secretaries of Finance and Budget
and Management and Commissioners of Internal Revenue and Customs, and
the National Treasurer to include all collections of national taxes in the
computation of the base of the just share of the LGUs according to the ratio
provided in the LGC starting FY 2022.
Hence, starting in the FY 2022 General Appropriations Act (GAA), the
nomenclature in lieu of the term “Internal Revenue Allotment” (IRA) shall
be “National Tax Allotment” (NTA) consistent with the SC Decision on the
MandanasGarcia Case.
Sections 18 and 286 of RA No. 7160 and Articles 383 and 390 of its
Implementing Rules and Regulations specify that the share of LGUs shall be
automatically and directly released to the provincial, city, municipal or
barangay treasurer without need of any further action, and shall not be
subject to any lien or holdback that may be imposed by the National
Government.
RA No. 9358, appropriating a supplemental budget for FY 2006, provides, in
part, the following:

That the IRA [NTA] is considered automatically appropriated and

that future local government share in the national taxes shall be
automatically appropriated (Section 4); and
That the amounts appropriated in the said law, to include shares of
LGUs in IRA (NTA) and other shares therein), shall be released by
the DBM in accordance with budgeting laws, rules and regulations
(Section 5).
Internal Revenue Allotment (IRA) Computation
Amidst various proposals to increase the IRA share of LGUs, it may be important to
examine the various items deducted from the national internal revenues prior to the 60:40
sharing of the national government (NG) and local government units (LGUs
FORMULA OR COMPUTATION for LGUs

Pursuant to Section 285 of the same law, the share of the LGUs in the NTA shall be
allocated in the following manner:
LGUs
% Allocation
Provinces
23%
Cities
23%
Municipalities
34%
Barangays
20%
Total

The distribution of shares of individual provinces, cities and municipalities is made
on the basis of the following formula:
Factor
Percentage Document
Population
Census of Population as declared
50% official for all purposes through a
Presidential Proclamation
Land Area
25%
Equal
Sharing
25%
Total

100%
Source
Philippine Statistics
Authority (PSA)
Official and Validated Master List of Lands Management
Land Area
Bureau (LMB)
100%
The share of each barangay is computed as follows:
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Php 80,000 for each barangay with a population of not less than one hundred
(100) inhabitants.
The balance is allocated as follows:
Population
60%
Equal Sharing
40%
Total



100%
The collecting agencies submit to the DBM a certification showing the
corresponding 40% shares of LGUs.
Based on the said certifications, the DBM computes and allocates the individual
share of LGUs based on the formula under Section 285 of RA No. 7160.
Subsequently, the DBM issues a local budget memorandum not later than June 15
of the current fiscal year to inform the beneficiary LGUs of their respective NTA
shares which shall be used in the preparation of their respective local annual
budgets.
USES OF FUND


Pursuant to Section 17 (g) of RA No. 7160, the NTA and other local resources shall
first cover the cost of providing the services and facilities enumerated under Section
17 (b) thereof, particularly those devolved by the National Government, before
applying the same for other purposes.
Section 287 of RA No. 7160 and Article 383 (b) of its IRR direct the LGUs to set
aside no less than twenty percent (20%) of their NTA to fund development projects
as identified in the LGUs’ development plans. The appropriation and utilization of
said no less than 20% of the NTA, which is commonly known as 20% Development
Fund, shall be governed by DBM - Department of Finance - Department of the
Interior and Local Government Joint Memorandum Circular No. 1 dated
November 4, 2020.
RELEASE PROCEDURE


Starting in the FY 2016 GAA, DBM prepares and releases the corresponding
Special Allotment Release Order and Notices of Cash Allocation to the Bureau of
the Treasury (BTr) and authorized government servicing banks, respectively, for
the comprehensive release of the amount automatically appropriated as reflected in
the pertinent General Appropriations Act.
The DBM submits to the BTr a list of the beneficiary LGUs, together with their
respective NTA shares and depository/servicing banks to serve as their basis to
undertake the processing of Authority to Debit Account (ADA) and Notice of ADA
Issued in order to effect the monthly downloading of funds to the respective
accounts of the beneficiary LGUs.

What is RA 7160 all about?
7160, otherwise known as the Local Government Code was enacted into law, transferring
control and responsibility of delivering basic services to the hands of local government
units (LGU). It aimed to enhance provision of services in the grass roots level as well as
improve the efficiency in resource allocation.
Where does the LGU money come from?
But what really funds LGUs' expenditures is their tax revenues, combined with their share from
national tax collections. A huge chunk of LGUs' funds are sourced from their internal revenue
allotment (IRA), which comes from national revenue taxes collected
What is the importance of internal revenue allotment?
The internal revenue allotment, or IRA, is a major aspect of intergovernmental relations in the
Philippine government. The IRA brings alive many local government units (LGUs) that depend
on the transfer up to 98% of their budget
Internal Revenue Allotment: Issues, Incursions and Implications
by Atty. Dan Gatmaytan
I.
INTRODUCTION
On July 19, 2000, the Supreme Court decided the case entitled Aquilino Q. Pimentel Jr., v. Hon.
Alexander Aguirre and Emilia Boncodin.i[i] In that decision, the Supreme Court ruled that the President
of the Philippines could not withhold the Internal Revenue Allotments (IRA) of local government
units.
Response to the decision varied. While majority favored the Court’s ruling, some government
officials expressed apprehension that they cannot comply with the Court’s ruling. In either case,
these reactions will show that very few correctly understood the implications of the Supreme Court’s
pronouncement.
President Estrada welcomed the decision—a surprising reaction considering that the Supreme Court
concluded that he violated the Constitution by preventing the release of five percent of the IRA of
local governments. More surprising is the fact that despite the statements of the President, other
government officials including the Solicitor General were reportedly preparing to ask the Supreme
Court to reconsider its decision.ii[ii]
Worse, Department of Budget Secretary Benjamin E. Diokno reportedly stated that the national
government will release 7.5-billion pesos to local governments. Diokno said that the release of the
LGU budget was in response to a Supreme Court ruling that declared a P 7.5 billion “soft cut” from
LGU allocations as unconstitutional.iii[iii] The report continued by saying that the amount,
representing the share of LGUs in national taxes, is part of P 10 billion slashed last January from this
year's P 629-billion national budget.
On the other hand, the Union of Local Authorities of the Philippines (ULAP) hailed the decision by
saying, “We have been right all along in our struggle against the illegal and whimsical intrusion by
Congress into the rightful share of LGUs.” ULAP leaders called the decision a “landmark ruling
because the principles enshrined in the Supreme Court's decision cover all cases concerning IRA
reduction which is now deemed violative of the Constitution.”iv[iv]
The problem is that there is no Supreme Court decision that said anything like the views expressed
in these statements. If Secretary Diokno and ULAP were referring to the case of Pimentel v. Aguirre,
the confusion is evident because Pimentel v. Aguirre dealt exclusively with the validity of
Administrative Order No. 372, issued by then President Ramos on December 27 1997, and
Administrative Order No. 43, which was issued by President Estrada on December 10, 1998.
Pimentel said absolutely nothing about the decision of Congress to slash the IRA of local government
units for the year 2000. Obviously, there is a need to clarify what the Supreme Court said in Pimentel
and what it did not.
II.
THE INTERNAL REVENUE ALLOTMENT
The IRA is mandated by the Constitution. Article X, Section 6 of the Constitution provides that
“Local government units shall have a just share, as determined by law, in the national taxes which
shall be automatically released to them.”
Congress determined the “just share” through the provisions of the Local Government Code of
1991. Under the provisions of the Code, local governments are now supposed to receive a yearly
share of 40% of the national internal revenue collected three years earlier. Indeed, the Local
Government Code of 1991 was praised for increasing the financial resources available to local
government units.v[v] The Code generated very high expectations from local officials and the
general public since the average IRA of local governments from 1987 to 1990 was around
12.7%.vi[vi]
The Code in part provides:
SECTION 284. Allotment of Internal Revenue Taxes. — Local government units shall
have a share in the national internal revenue taxes based on the collection of the
third fiscal year preceding the current fiscal year as follows:
(a)
On the first year of the effectivity of this Code, thirty percent (30%);
(b)
On the second year, thirty-five percent (35%); and
(c)
On the third year and thereafter, forty percent (40%).
Provided, That in the event that the national government incurs an unmanageable
public sector deficit, the President of the Philippines is hereby authorized, upon the
recommendation of Secretary of Finance, Secretary of 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 local
government units but in no case shall the allotment be less than thirty percent (30%)
of the collection of national internal revenue taxes of the third fiscal year preceding
the current fiscal year: Provided, further, That in the first year of the effectivity of
this Code, the local government units shall, in addition to the thirty percent (30%)
internal revenue allotment which shall include the cost of devolved functions for
essential public services, be entitled to receive the amount equivalent to the cost of
devolved personal services.vii[vii]
In addition, the Code reiterates the constitutional mandate for the automatic release of the IRA as
follows:
SECTION 286. Automatic Release of Shares. — (a) The share of each local
government unit shall be released, without need of any further action, directly to the
provincial, city, municipal or barangay treasurer, as the case may be, on a quarterly
basis within five (5) days after the end of each quarter, and which shall not be subject
to any lien or holdback that may be imposed by the national government for
whatever purpose.
(b) Nothing in this Chapter shall be understood to diminish the share of local
government units under existing laws.
The significance of the IRA cannot be understated. The allocation of internal revenue does not flow
from the generosity of central government—it is a right that accrues to local governments by virtue
of the additional responsibilities that they bear under the Constitution. The Supreme Court in
Alvarez v. Guingona, Jr.viii[viii] explained its importance in the following words:
The practical side to development through a decentralized local government system
certainly concerns the matter of financial resources. With its broadened powers and
increased responsibilities, a local government unit must now operate on a much
wider scale. More extensive operations, in turn, entail more expenses.
Understandably, the vesting of duty, responsibility and accountability in every local
government unit is accompanied with a provision for reasonably adequate resources
to discharge its powers and effectively carry out its functions. Availment of such
resources is effectuated through the vesting in every local government unit of (1) the
right to create and broaden its own source of revenue; (2) the right to be allocated a
just share in national taxes such share being in the form of internal revenue
allotments (IRAs); and (3) the right to be given its equitable share in the proceeds of
the utilization and development of the national wealth, if any, within its territorial
boundaries.
The funds generated from local taxes, IRAs and national wealth utilization proceeds
accrue to the general fund of the local government and are used to finance its
operations subject to specified modes of spending the same as provided for in the
Local Government Code and its implementing rules and regulations. For instance,
not less than twenty percent (20%) of the IRAs must be set aside for local
development projects. As such, for purposes of budget preparation, which budget
should reflect the estimates of the income of the local government unit, among
others, the IRAs and the share in the national wealth utilization proceeds are
considered items of income. This is as it should be, since income is defined in the
Local Government Code to be all revenues and receipts collected or received
forming the gross accretions of funds of the local government unit.
The IRAs are items of income because they form part of the gross accretion of the
funds of the local government unit. The IRAs regularly and automatically accrue to
the local treasury without need of any further action on the part of the local
government unit. They thus constitute income which the local government can
invariably rely upon as the source of much needed funds....
The impact of the increase in the internal revenue allotment is tremendous. From 1985-1991, total
receipts of local governments amounted to 1.7 percent of the gross national product (GNP). This
amount was divided equally between local and external sources of revenue, the latter being almost
exclusively from the IRA.ix[ix]
In 1992-1997, after the Local Government Code went into effect, external revenues expanded from
52.0 percent in the earlier period to 64.7 percent after 1992. Local government income from external
sources shot up from 0.9 percent to 2.2 percent of GNP. LGU local source revenues moved
upwards from 0.8 percent to 1.2 percent of GNP.x[x] The ratio of local revenue to the GNP
increased during the effectivity of the Code, only in cities.xi[xi] In every local government unit, the
share of externally-generated revenue expanded between 1992-1997.xii[xii]
In a study conducted by the Local Development Assistance Program noted that in the past decade,
the IRA accounted for at least 36% of the total local revenues. This went up to almost 56% in 1992,
after the Local Government Code took effect. The study noted that in lower income municipalities,
the IRA contributes from 65% to 90% of their total revenues.xiii[xiii] The IRA now remains a
major revenue source of local governments as their share to total local income swelled from 50.4%
in 1991 to 67.7% in 1994.xiv[xiv]
The increase in the IRA also produced some unintended effects.
Automatic appropriations obviously appeal to many politicians. The attractiveness and availability
of the IRA fuels the fragmentation of local government units. The Bureau of Local Government
Supervision in a recent study claimed that the proliferation of local government units (43,621 at
present) is fueled by parochial concerns—the product of a strong political lobby, which increased
after the enactment of the Local Government Code.xv[xv] In aiming for a piece of the IRA pie,
fragmentation of local government units ironically reduces the available IRA because a fixed amount
of money is now divided among several governments.xvi[xvi]
Worse, the limited tax base also accounts for the failure of local governments to generate local
income to match the IRA. In other words, without a corresponding increase in the number of
taxable entities, local governments cannot increase the locally-generated revenue.
This could help explain why—as officials of the Department of Finance claim— local government
officials are “totally dependent” on their IRA and are neglecting other revenue-generating
mechanisms that are available.xvii[xvii]
III.
THE CASE
On December 27, 1997, President Fidel V. Ramos issued Administrative Order No. 372, which
requires local government units to reduce their expenditures by 25% of their authorized regular
appropriations for non-personal services, and withholds 10% of the IRA of local government units.
On December 10, 1998, President Estrada issued Administrative Order No. 43 and reduced the
amount to be withheld from the LGUs to five percent.
The pertinent provisions of the Administrative Order No. 372 are as follows:
SECTION 1. All government departments and agencies, including state universities
and colleges, government-owned and controlled corporations and local governments
units will identify and implement measures in FY 1998 that will reduce total
expenditures for the year by at least 25% of authorized regular appropriations for
non-personal services items, along the following suggested areas...
SECTION 4. Pending the assessment and evaluation by the Development Budget
Coordinating Committee of the emerging fiscal situation, the amount equivalent to
10% of the internal revenue allotment to local government units shall be withheld.
Aquilino Pimentel who was the principal author of the Local Government Code, filed a Petition
with the Supreme Court, asking it:
a.
to annul Section 1 of AO No. 372, insofar as it requires local government units to
reduce their expenditures by 25 percent of their authorized regular appropriations
for non-personal services; and
b. to enjoin respondents from implementing Section 4 of the Order, which withholds a
portion of their internal revenue allotments.
The Issues
The main issue in the case is the validity of Administrative Order No. 372 insofar as LGUs are
concerned.
Senator Pimentel was of the opinion that Section 1 of the Order is in effect a form of “control” over
local government officials prohibited by the Constitution. On the other hand, the government
claimed that Section 1 of the Order was a mere act of “supervision”.
Pimentel also claimed that Section 4 violates the Constitution and the Local Government Code,
because it prevents the automatic release of the IRA. The government defended Section 4 by saying
that there is no violation of the laws because the withholding was merely temporary.
Before resolving the main issue, the Court reviewed the scope of the President's power of general
supervision over local governments, and the extent of the local governments' autonomy under
Philippine law.
Scope of President's Power of Supervision Over LGUs
Section 4 of Article X of the Constitution confines the President's power over local governments to
one of general supervision. It provides that, “The President of the Philippines shall exercise general
supervision over local governments. x x x”
According to the Court, this provision excludes the power of control. The Court distinguished them
as follows:
x x x In administrative law, supervision means overseeing or the power or authority
of an officer to see that subordinate officers perform their duties. If the latter fail or
neglect to fulfill them, the former may take such action or step as prescribed by law
to make them perform their duties. Control, on the other hand, means the power of
an officer to alter or modify or nullify or set aside what a subordinate officer ha[s]
done in the performance of his duties and to substitute the judgment of the former
for that of the latter.”xviii[xviii]
The Supreme Court explained that supervisory power is the power of mere oversight over an
inferior body; it does not include any restraining authority over such body.
Officers in control lay down the rules in the performance or accomplishment of an
act. If these rules are not followed, they may, in their discretion, order the act
undone or redone by their subordinates or even decide to do it themselves. On the
other hand, supervision does not cover such authority. Supervising officials merely
see to it that the rules are followed, but they themselves do not lay down such rules,
nor do they have the discretion to modify or replace them. If the rules are not
observed, they may order the work done or redone, but only to conform to such
rules. They may not prescribe their own manner of execution of the act. They have
no discretion on this matter except to see to it that the rules are followed.
While the members of the Cabinet are subject to the power of control of the President, the people
elect the heads of political subdivisions. As such, local officials derive powers from the electorate
“to whom they are directly accountable.” Thus, “the President may not withhold or alter any
authority or power given them by the Constitution and the law.”
Extent of Local Autonomy
The Court also touched on the policy of ensuring local autonomy,xix[xix] and explained that local
autonomy signified “a more responsive and accountable local government structure instituted
through a system of decentralization.” Autonomy, according to the Court, is intended to “break up
the monopoly of the national government over the affairs of local governments, not to end the
relation of partnership and interdependence between the central administration and local
government units.”
Under the Philippine concept of local autonomy, the national government has not completely
relinquished all its powers over local governments:
Only administrative powers over local affairs are delegated to political subdivisions.
The purpose of the delegation is to make governance more directly responsive and
effective at the local levels. In turn, economic, political and social development at the
smaller political units are expected to propel social and economic growth and
development. But 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. Thus, policy-setting for the entire country still lies in the President and
Congress...
Having laid down the parameters of local autonomy law, the Court then proceeded to assess the
validity of Administrative Order No. 372.
Pimentel pointed out that the President failed to comply with these requisites before the issuance
and the implementation of the Order. The Supreme Court, however, saw nothing wrong with
Section 1:
While the wordings of Section 1 of AO 372 have a rather commanding tone, and while we
agree with petitioner that the requirements of Section 284 of the Local Government Code
have not been satisfied, we are prepared to accept the solicitor general's assurance that the
directive to “identify and implement measures x x x that will reduce total expenditures x x x
by at least 25% of authorized regular appropriation” is merely advisory in character, and
does not constitute a mandatory or binding order that interferes with local autonomy. The
language used, while authoritative, does not amount to a command that emanates from a
boss to a subaltern.
The Court explained that the provision is merely “an advisory to prevail upon local executives to
recognize the need for fiscal restraint in a period of economic difficulty,” and that no legal sanction
may be imposed upon LGUs and their officials who do not follow such advice.
Withholding a Part of LGUs' IRA
On the other hand, Section 4 of Administrative Order No. 372 violates “a basic feature of local
fiscal autonomy”, which is the automatic release of the shares of local governments in the national
internal revenue. The Section, violates the Constitution and the Local Government Code.
According to the Court, the Local Government Code specifies that the release of the IRA shall be
made directly to the LGU concerned within five days after every quarter of the year. The Code also
provides that the IRA “shall not be subject to any lien or holdback that may be imposed by the
national government for whatever purpose.” The Court held that the word “shall” is a word of
command that must be given a compulsory meaning. “The provision is, therefore, imperative.”
The Court also brushed aside the government’s defense that the withholding of the IRA was merely
temporary.
Although temporary, it is equivalent to a holdback, which means “something held
back or withheld, often temporarily.” Hence, the “temporary” nature of the
retention by the national government does not matter. Any retention is prohibited.
...Section 4 thereof has no color of validity at all. The latter provision effectively
encroaches on the fiscal autonomy of local governments. Concededly, the President
was well-intentioned in issuing his Order to withhold the LGUs' IRA, but the rule of
law requires that even the best intentions must be carried out within the parameters
of the Constitution and the law.
Justice Kapunan's Dissent
The Court’s decision was not unanimous. Associate Justice Santiago M. Kapunan, who was joined
by Associate Justices Fidel P. Purisima and Consuelo Ynares-Santiago, dissented on the grounds
that:
(1)
the Petition is premature;
(2)
the Order falls within the powers of the President as chief fiscal officer; and
(3)
the withholding of the LGUs' IRA is implied in the President's authority to adjust it
in case of an unmanageable public sector deficit.
The majority of the Court, however, refuted the dissent.
On the premature filing of the case.
The majority said that the issue is whether the Constitution and the law were violated by Section 4
of Administrative Order No. 372. “[W]hen an act of the legislative department is seriously alleged
to have infringed the Constitution, settling the controversy becomes the duty of this Court. By the
mere enactment of the questioned law or the approval of the challenged action, the dispute is said to
have ripened into a judicial controversy even without any other overt act. Indeed, even a singular
violation of the Constitution and/or the law is enough to awaken judicial duty.
By the same token, when an act of the President, who in our constitutional scheme is
a coequal of Congress, is seriously alleged to have infringed the Constitution and the
laws, as in the present case, settling the dispute becomes the duty and the
responsibility of the courts.
Besides, the issue that the Petition is premature was not raised by the parties in the case, and
it is deemed waived.xx[xx]
On the President's power as chief fiscal officer of the country.
Justice Kapunan also claimed that Section 4 is consistent with the President's role as chief fiscal
officer, who “is clothed by law with certain powers to ensure the observance of safeguards and
auditing requirements, as well as the legal prerequisites in the release and use of IRAs, taking into
account the constitutional and statutory mandates.”
The majority responded by saying that such powers have specifically been authorized by law and
have not been challenged as violative of the Constitution. On the other hand, Section 4 contravenes
provisions of the Local Government Code and the Constitution. Unlike the acts alluded to in the
Justice Kapunan’s Dissent, which are authorized by law, Section 4 is bereft of any legal or
constitutional basis.
On the President's authority to adjust the IRA of LGUs in
case of an unmanageable public sector deficit.
This Court explained that in striking down Section 4 as unconstitutional, it did not rule out any form
of reduction in the IRAs of LGUs. But this can be done consistently with Section 284 of the Local
Government Code. The reduction is subject to consultation with the presiding officers of both
Houses of Congress and, more importantly, with the presidents of the leagues of local governments.
IV.
STANDING TO SUE
There is one other issue that has to be addressed. The Supreme Court deliberated on the question
of whether Mr. Pimentel had the standing to bring the case, despite the fact that his personality to
do so was not challenged by the government. The Court did not resolve the issue because, said the
Court, “the intervention of Roberto Pagdanganan has rendered academic any further discussion on
this matter.” In short, the Supreme Court did not determine whether Mr. Pimentel had the standing
to file the case because Mr. Pagdanganan was allowed to intervene in the case.
The Court explained that on November 17, 1998, Roberto Pagdanganan filed a Motion for
Intervention, and that, “At the time, intervenor was the provincial governor of Bulacan, national
president of the League of Provinces of the Philippines and chairman of the League of Leagues of
Local Governments.” In a footnote, the Court explained that:
Issues of mootness and locus standi were not raised by the respondents. However, the
intervention of Roberto Pagdanganan, as explained in the main text, has stopped any
further discussion of petitioner's standing. On the other hand, by the failure of
respondents to raise mootness as an issue, the Court thus understands that the main
issue is still justiciable. In any case, respondents are deemed to have waived this
defense or, at the very least, to have submitted the Petition for resolution on the
merits, for the future guidance of the government, the bench and the bar.
Still, it should be noted that at the time the Motion for Intervention was filed, Mr. Pagdanganan was
no longer a local official and he longer held any of the positions that the Supreme Court listed.
How the intervention mooted the question of standing, therefore, remains a mystery.
The above-quoted portions of the decision are susceptible of two interpretations. The first is that
the Supreme Court was mistaken when it said that Mr. Pagdanganan was still a local official on
November 17, 1998.
The second is that the Court is saying that a former local official has standing to question official
actions that were promulgated while he was still in office.
In any case, it should be emphasized the Court did not make any ruling on standing because the issue was
never raised by the government. Supreme Court decisions do not amount to doctrine unless they
are intended to resolve an issue that was raised by the parties.
V. THE OTHER CASE
As illustrated, there is nothing in Pimentel, which remotely dealt with the congressional slash of the
IRA. That issue arose out of the preparation of the national budget for the year 2000, long after
Pimentel filed his case with the Supreme Court.
During the preparation of the 2000 budget, a Senate Finance Committee plan to slash the internal
revenue share of local governments by some 30 billion pesos provoked a confrontation between
ULAP and the Senate.
In response to the proposed cut, ULAP launched a campaign to compel the Senate Finance
Committee to abort its plan. In their official statement,xxi[xxi] ULAP appealed to Congress to
observe and “respect the Constitutional provision and its implementing law on the share of local
governments from the national internal revenue taxes and its possible adjustments in case of an
unmanageable public sector deficit.” ULAP claimed that the cut would disrupt the delivery of basic
services throughout the country, especially in the 5th and 6th class LGUs.xxii[xxii]
Congress ignored the local officials’ position and decided to preserve the reduction of the IRA.
On February 16, 2000, President Estrada signed the national budget into law. The President vetoed
some items, but did not touch the P10 Billion cut imposed by Congress. The General
Appropriations Act (Republic Act No. 8760) in part provides:
XXXVII.
ALLOCATIONS TO LOCAL GOVERNMENT UNITS
A. INTERNAL REVENUE ALLOTMENT
For apportionment of the shares of local government units in the internal revenue taxes in
accordance with the purpose indicated hereunder
P111,778,000,000
xxx
xxx
xxx
The amount withheld by Congress was moved under “unprogrammed funds”. This is not a
harmless window dressing because it has serious implications on the availability of the said amount.
The special provisions of Section 1, LIV, on the other hand, provides:
LIV.
UNPROGRAMMED FUND
xxx
xxx
xxx
Special Provisions
1.
Release of the Fund. The amounts herein appropriated shall be released only when
the revenue collections exceed the original revenue targets submitted by the President of the
Philippines to Congress pursuant to Section 22, Article VII of the Constitution or when the
corresponding funding or receipts for the purpose have been realized except in the special cases
covered by specific procedures in Special Provision Nos. 2, 3, 4, 5, 7, 8, 9, 13 and 14 herein:
PROVIDED, That in cases of foreign-assisted projects, the existence of a perfected loan agreement
shall be sufficient compliance for the issuance of a Special Allotment Release Order covering the
loan proceeds: PROVIDED, FURTHER, That no amount of the Unprogrammed Fund shall be
funded out of the savings generated from programmed items in this Act....
4.
Additional Operational Requirements and Projects of Agencies. The appropriations
for Purpose 6 – Additional Operational Requirements and Projects of Agencies herein indicated
shall be released only when the original revenue targets submitted by the President of the Philippines to Congress
pursuant to Section 22, Article VII of the Constitution can be realized based on a quarterly assessment of the
Development Budget Committee, the Committee on Finance of the Senate and the Committee on Appropriations of
the House of Representatives and shall be used to fund the following:
xxx
xxx
xxx
Internal Revenue Allotments
Maintenance and Other Operating Expenses
P10,000,000,000
-------------------Total, IRA
P10,000,000,000
--------------------
The P10 billion, which should have been given to local governments, therefore, has been
conditioned upon the realization of the original revenue targets of the President. In short, this
amount will not be released if revenue generation goals are not met. This allocation of funds under
unprogrammed funds, therefore, makes the release of the fund conditional upon revenue collection
efficiency.
As of this writing, the constitutionality of the congressional cut has never been questioned in court.
Local officials decided not to file a case after the President announced that he would release P 2.5
billion pesos representing the first quarter share of the IRA. Thereafter, the President also said that
the IRA would no longer be included in the national budget to be submitted to Congress, but will
now be “released automatically’”.xxiii[xxiii]
What “released automatically” means remains unclear. In the 2001 budget submitted by the
President to Congress, an allocation for the IRA amounting to P131, 917,470,000 was still included.
The only difference is that it is placed under the sub-heading “Automatic Appropriations”. Whether
Congress will trifle with this amount remains to be seen.
VI.
THE IMPLICATIONS OF PIMENTEL
After analyzing the Supreme Court’s decision in Pimentel v. Aguirre, it becomes apparent that there are
those who fail to correctly appreciate the implications of the case.
On the Acts of the Executive Branch
In reality, as important as Pimentel is, the impact of the case is very limited. In that case, the Supreme
Court merely struck down Section 4 of Administrative Order No. 273 as invalid because it violated
the constitutional mandate for the automatic release of the IRA, and because it violated the
provisions of the Local Government Code. The Supreme Court said that the President could not
withhold part of the IRA already allocated by Congress, no matter how commendable the motives
for the holdback may have been.
Without a doubt, the principles adopted by the Supreme Court may be extended to all forms of
control of the IRA, but it cannot be done automatically. In other words, the Executive Branch of
government should be wary about issuing guidelines on the release and use of the IRA because they
make likewise amount to a violation of the Constitution. Thus, even seemingly innocuous orders or
directives may now be scrutinized under the standards set by the Supreme Court in Pimentel. Do
these orders or directives likewise amount to a violation of the Constitution and the Local
Government Code? Do they amount to a withholding of the entire or part of the IRA?
Pimentel should be used to challenge all other orders that have the effect of withholding or
conditioning the release of the IRA. Here lies the value of the Supreme Court’s decision.
Unfortunately, under Philippine law, there is no such thing as an automatic application of a Supreme
Court doctrine even to other orders that are similar to Administrative Order No. 273. In every case,
a government directive may be challenged as unconstitutional, but a case has to be filed in court to
resolve the validity of the directive.
To be clear, the President is not under any legal obligation to release any amount beyond the five
percent that he withheld under Administrative Order No. 43. Pimentel does not compel the President
to release an amount equivalent to the P10 billion, which Congress placed under “unprogrammed
funds” because there is nothing in the decision that remotely implicates any act of Congress. He is
not obligated to restore the “soft cut” engineered by Congress.
On the Acts of the Congress
The Supreme Court said nothing about the manner in which Congress moved 10 billion pesos of
the IRA to “unprogrammed funds”. This is an entirely different issue that may be phrased in this
manner: whether Congress may place part of the IRA under “unprogrammed funds” without
violating the Constitution.
It may be argued that Congress’ decision to place a portion of the IRA under “unprogrammed
funds” is also unconstitutional because it amounts to placing conditions on its release. It may be
argued that placing this amount under “unprogrammed funds” transgresses the “automatic release”
provisions of the law.
The fact is that there is no ruling from the Supreme Court on this issue as of now. Congress is not
under any legal obligation to allocate an additional 10 billion pesos to cover the amount that was
placed under “unprogrammed funds” in the national budget. To put it bluntly, Pimentel does not
concern the actions of Congress.
Indeed, there is still a possibility that despite the designation of the IRA under the 2001 budget as
“automatic appropriations” Congress will toy with the amount. Again, it is because the Supreme
Court has not said anything on what Congress can or cannot do regarding the allocation of the IRA
under the budget.
If there is a view that Congress violated the Constitution by placing conditions on the release of the
IRA, then similar cases may have to be filed in court to challenge its actions.
As momentous as Pimentel is, it is simply not enough.
i[i] G.R. No. 132988, July 19, 2000.
ii[ii] See Cecile S. Visto, Supreme Court rules against order on IRA cuts, BusinessWorld, July 20, 2000, p. 1, 10.
iii[iii] Dymphna R. Calica, Gov't to cut capital outlay for PhP7.5-B LGU allocation, BusinessWorld, August 7, 2000, p. 2.
iv[iv] Local execs laud SC ruling on IRA, Manila Bulletin, July 21, 2000.
v[v] Alex B. Brillantes, Jr., Local Governments in a Democratic Polity: Trends and Prospects, in DEMOCRATIZATION: PHILIPPINE
PERSPECTIVES 83, 85 (Miranda ed., 1997).
vi[vi] Rosario G. Manasan, Fiscal Decentralization and the Local Government Code, in DECENTRALIZATION AND ECONOMIC DEVELOPMENT
IN THE PHILIPPINES 83, 84 (Joseph Y. Lim & Katsumi Nozawa, eds. 1992).
vii[vii] The Code further provides:
SECTION 285. Allocation to Local Government Units. — The share of local government units in the internal
revenue allotment shall be collected in the following manner:
(a)
Provinces — Twenty-three percent (23%);
(b)
Cities — Twenty-three percent (23%);
(c)
Municipalities — Thirty-four percent (34%); and
(d)
Barangays — Twenty percent (20%)
Provided, however, That the share of each province, city, and municipality shall be determined on the basis
of the following formula:
(a)
Population — Fifty percent (50%);
(b)
Land Area — Twenty-five percent (25%); and
(c)
Equal sharing — Twenty-five percent (25%)
Provided, further, That the share of each barangay with a population of not less than one hundred (100)
inhabitants shall not be less than Eighty thousand (P80,000.00) per annum chargeable against the twenty
percent (20%) share of the barangay from the internal revenue allotment, and the balance to be allocated
on the basis of the following formula:
(a)
(b)
(c)
On the first year of the effectivity of this Code:
(1)
Population — Forty percent (40%); and
(2)
Equal sharing — Sixty percent (60%)
On the second year:
(1)
Population — Fifty percent (50%); and
(2)
Equal sharing — Fifty percent (50%)
On the third year and thereafter:
(1)
Population — Sixty percent (60%); and
(2)
Equal sharing — Forty percent (40%).
Provided, finally, That the financial requirements of barangays created by local government units after the effectivity of this
Code shall be the responsibility of the local government unit concerned.
viii[viii] G.R. No. 118303, January 31, 1996.
ix[ix] William Loehr & Rosario Manasan, Fiscal Decentralization and Economic Efficiency: Measurement and Evaluation, CAER II
Discussion
Paper
No.
38
(February,
1999),
p.
24,
available
at
<http://www.hiid.harvard.edu/groups/macro/da21/papers/paper38/paper38.html>.
x[x] Id.
xi[xi] Id.
xii[xii] Id., at 25.
xiii[xiii] Id.
xiv[xiv] Jocelyn C. Cuaresma & Simeon A. Ilago, Scope and Pattern of Local Fiscal Administration, in 1 LOCAL GOVERNMENT IN THE
PHILIPPINES: A BOOK OF READINGS 335, 343 (Proserpina Domingo Tapales, et al., eds. 1998).
xv[xv] Bureau of Local Government Supervision, Department of Interior and Local Government, Fragmentation vs.
Consolidation: The Case of Philippine Local Governments, SANGGUNIAN, June 2000, p. 14.
xvi[xvi] Id., at 51.
xvii[xvii] Manolo A. Serapio, Jr., Most local government execs 'totally dependent' on IRA, BusinessWorld, November 1, 1994,
available at <http://codex.bworldonline.com/codex.others.html>.
xviii[xviii] Citing, Mondano v. Silvosa, 97 Phil. 143, (1955).
xix[xix] CONST., art II, § 25 and art. X, § 2.
xx[xx] Incidentally, the effect of Adminiistrative Order No. 372, is clear in Local Budget Memorandum No. 29, dated May 15,
1998, which provided that a total of P 8.099 billion was withheld from the IRA of local governments that were allocated under
the 1998 budget.
xxi[xxi] See, Union of Local Authorities of the Philippines, Ours is a system of laws and not of men, Position Paper on the Senate
Finance Committee’s Proposal to Reduce the Internal Revenue Allotment (IRA) Share of Local Government Units, December 9,
1999, available at <http://www.ulap.org.ph/appeal.htm>.
xxii[xxii] Id.
xxiii[xxiii] Patricio S. de Quiros, An IRA Update, SANGGUNIAN, May 2000, p. 10.