Facts:
The case centers around Administrative Order No. 372 issued by President Fidel V. Ramos on December 27, 1997, as a fiscal management measure to address the economic challenges posed by the peso’s depreciation. The order directed all government agencies, including local government units (LGUs), to identify and implement measures to reduce their expenditures by at least 25% of their authorized regular appropriations for non-personal services items. Further, Section 4 of AO 372 mandated the withholding of 10% of the internal revenue allotments (IRAs) due to LGUs, pending evaluation by the Development Budget Coordinating Committee on the fiscal situation. This provision was later amended by President Joseph Estrada through AO No. 43, reducing the withholding to 5% and ordering its release before December 25, 1998.
Subsequently, Senator Aquilino Pimentel Jr. filed a petition for Certiorari and Prohibition, challenging the legality of specific sections of AO 372. The Supreme Court’s jurisdiction was invoked directly due to the significance and urgency of the issues. The petitioner argued that President’s directives overstepped the constitutional limits of his supervisory authority over LGUs and infringed upon the autonomy and fiscal independence guaranteed to them by the law, particularly the Local Government Code and the Constitution.
Issues:
1. Whether the President, by issuing AO 372, exercised control rather than supervision over LGUs in violation of their fiscal autonomy.
2. Whether the withholding of 10% (later amended to 5%) of LGUs’ IRAs under Section 4 of AO 372 is lawful.
Court’s Decision:
The Philippine Supreme Court held that while Section 1 of AO 372, which advised LGUs to reduce their expenditures by 25%, was within the President’s supervisory powers and merely advisory in character, Section 4, which ordered the withholding of a portion of the IRAs, was unconstitutional. The Court distinguished the power of supervision from the power of control, finding that the President could not interfere with the autonomy of LGUs by withholding funds due to them, as this action contravened the constitutional guarantee of automatic release of LGUs’ shares in the national internal revenue.
Doctrine:
The decision reiterates the doctrine that the President of the Philippines exercises general supervision, not control, over local government units. Additionally, it underscores the principle of local autonomy, particularly in fiscal matters, against unwarranted interference by the national government, ensuring the automatic release of LGUs’ shares in national taxes.
Class Notes:
– The Philippine Constitution distinguishes between supervision and control, with the President having only supervision over LGUs.
– Local Government Code secures fiscal autonomy for LGUs, including the automatic release of their IRA shares without any lien or holdback by the national government.
– Supervision entails overseeing the performance of duties and ensuring compliance with law, without the authority to coerce or make decisions for the supervised entity.
Historical Background:
The context of this case springs from the 1997 Asian Financial Crisis, which significantly affected the Philippine economy. AO 372 was issued in response to economic difficulties, aiming for fiscal consolidation across all levels of government. However, its application to LGUs raised significant constitutional issues regarding local autonomy and the scope of presidential supervision, leading to this landmark decision by the Supreme Court that reinforced the fiscal independence of local governments and refined the boundaries of executive supervision over LGUs, rooted in earlier legal and constitutional principles.
Leave a Reply