C.

Decentralization and Devolution, Distinguished

President issued AO 372 providing that all government offices and LGUs must - The Court starts off, in true Panganiban fashion, of the concepts of the scope of the
identify and implement measures to reduce the expenditures for the year by at least President’s power of supervision and the extent of the local government’s autonomy
25% (Sec 1), and an amount equivalent to 5% of the IRA will be withheld from the
LGUs (Sec 4). Scope of President’s power of supervision over LGUs
HELD: Sec 1 is VALID; Sec 4 is INVALID - Court cited jurisprudence to clarify the meaning of the President’s general
supervision over the LGUs under Article X Section 4 of the Constitution.
- In Taule v Santos, the Ct held that the President wielded only the authority of check-
DOCTRINE in whether LGUs or their officials were performing their duties as provided by law. He
The Constitution vests the President with power of SUPERVISION, not CONTROL, cannot interfere with local governments, as long as they act within the scope of their
over LGUs. Such power enables him to see to it that LGUs and their officials execute authority
their tasks in accordance with law. While he may issue advisories and seek their - In Drilon v Lim, the Court ruled that while officers in control can undo the acts of
cooperation in solving economic difficulties, he cannot prevent them from performing their subordinates and substitute their own if they wanted to, supervising officials
their tasks using available resources to achieve their goals. He may not withhold or merely see to it that the rules are followed. If the rules are not observed, they may
alter any power or authority given to them by the law. Thus, the withholding of a only order the work redone, and they cannot substitute their own judgment for that of
portion of internal revenue allotments legally due to them cannot be directed by the subordinate
administrative fiat. - Why is this so? It’s because although the members of the Cabinet and other
executive officials are subject to the control of the President, the leaders of political
FACTS subdivisions are elected by the people. They are directly accountable to the people
1. December 27 1997, President Ramos issued AO 372. The AO cited current and their sovereign powers emanate from them, not the President.
economic difficulties (example, devaluation of the peso), which called for cash
management measures from all government agencies. The provisions important Extent of Local Autonomy
to our case are: - Ganzon v CA explained that local autonomy signified a more responsive and
a. Section 1 of the AO: All government departments and agencies, accountable local government structure instituted through a system of
including state universities and colleges, GOCCs, and LGUs will decentralization. Decentralization on the other hand means the devolution of national
identify and implement measures in Fiscal Year 1998 that will reduce administration, not power, to local governments.
total expenditures for the year by at least 25% of authorized regular - Under the Philippine concept of local autonomy, the national government has not
appropriations for non personal-service items completely relinquished all its powers over local governments. Only admin powers
b. Section 4 of the AO: Pending the assessment am devaluation by the over local affairs are delegated so that LGUs are more responsive and effective at
Development Budget Coordinating Committee of the emerging fiscal the local levels. Still, to enable the country to develop as a whole, the programs and
situation, the amount equivalent to 10% of the internal revenue policies effected locally must be integrated and coordinated towards a common
allotment IRA to LGUs shall be withheld (this was later amended by national goal
AO 43 of ERAP which reduced the amount of IRA to be withheld to
5%) What about Fiscal Autonomy of LGUs?
2. Petitioner contests the provisions for being: - Court next discussed the fiscal autonomy of LGUs, which they enjoy in addition to
a. In effect an exercise of control of the President over the LGUs administrative autonomy. Fiscal autonomy means that LGUs have the power to
b. For being in contravention of Section 26 of the LGC and of Section 6 create their own sources of revenue in addition to their equitable share in the national
Article X of the 1987 Constitution providing for the automatic release to taxes released by the national government as well as the power to allocate their
each of the units its share in the national internal revenue resources in accordance with their own priorities.
3. OSG, in defense of the government, claims that AO 372 was issued to alleviate - Local autonomy however, does not rule out any manner of national government
the economic difficulties brought about by the peso devaluation. intervention by way of supervision.
a. It doesn’t violate local autonomy because it merely directs local  For one, the President, according to the Constitution, is still the head of the
governments to identify measures that can reduce total expenditures. NEDA, the economic and planning agency of the government, primarily
b. It doesn’t violate the prohibition against imposition of holdbacks responsible for formulating and implementing integrated social and
because the withholding is only temporary in nature economic policies plans for the entire country. The formulation and
ISSUE with HOLDING implementation of the policies and programs however are subject to
1. WON Section 1 of AO 372 is valid. YES
 consultations with the appropriate public agencies, private sectors and - Although the requisites were not complied with before AO 372 was implemented,
LGUs. the SC agreed with the OSG in that AO 372 is merely directory and was intended
 This Constitutional directive was followed in the LGC Section 284 which only to advise all government agencies and instrumentalities to undertake cost-
provides that: reduction measures. It doesn’t even mention any sanction in case of noncompliance.
“In the event that the national government incurs an unmanaged public It merely tells the LGUs to identify and implement measures that will reduce total
sector deficit, the President of the PH is hereby authorized, upon the expenditures by 25%
recommendation of the Secretary of Finance, Secretary of the Interior and
Local Government and Secretary of Budget and Management, and subject 2. WON Section 4 of AO 372 is valid. NO
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 Section 4 is invalid for being a holdback imposed by the national government
revenue allotment of LGUs but in no case shall the allotment be less than on the IRA
30% of the collection of national internal revenue taxes of the third fiscal
year preceding the current fiscal year” - As for Section 4, Court cited the Section 6 Art X of the Constitution and Section 286
of the LGC . The IRA shall be released directly to the LGU concerned within 5 days
- Before the President may therefore interfere in local fiscal matters: after every quarter of the year and shall not be subject to any lien or holdback that
1) There must be an unmanaged public sector deficit in the national may be imposed by the national government for whatever purpose (since shall is
government used, as a rule the provision is compulsory in character)
2) Consultations must be had with the presiding officers of Senate and the - The withholding under Section 4 of AO 372 thus contravenes the Constitution and
House and the presidents of the various local leagues the LGC. Although temporary, it is equivalent to a holdback, which means something
3) Recommendation must be obtained from Secretaries of the DILG, DoF and held back or withheld, often temporarily. Any retention is prohibited.
DBM
4) Any adjustment shall in no case be less than 30% of the national internal
revenue taxes collected of the 3rd fiscal year preceding the current one DIGESTER: GDR