DOJ Opinion No. 151, s. 1992

DOJ OPINION NO. 151 , s. 1992 October 29, 1992 Hon. Salvador M. Enriquez, Jr. Secretary Department of Budget and Management Malacaang, Manila Sir : This refers to your request for opinion on the legality/validity of Special Provision No. 1 of the Internal Revenue Allotment (IRA) of the CY 1993 National Expenditures Program (NEP) which earmarked the IRA as follows: (a) The sum of P31,439,345,000 for apportionment among local government units (LGUs) in accordance with the formula provided under Section 285 of the Local Government Code; and (b) The sum of P4,960,655,000 for augmentation of deficiencies in the costs of devolved functions and activities. LLpr You state that the Chairman and the members of the Appropriations Committee expressed the view that the "earmarking of five percent (5%) of the CY 1993 IRA in the amount of P4,960,655,000 to be used for the 'augmentation scheme' as conceptualized by the Special Provision in effect reduced the IRA shares of LGUs and, therefore, violative of Sections 284 and 285 of the Local Government Code which is not countenanced by rules of statutory construction and by Article 7 of the Revised Civil Code of the Philippines." It is the view, however, of the Department of Budget and Management that the Special Provision which reads, as follows: "1. Release of Funds.Of the amount herein appropriated and pursuant to Section 284 of R.A. No. 7160, the Local Government Code of 1991, the sum of P31,439,345,000 shall be apportioned among the local government units in accordance with the formula provided under Section 285 of the Code and shall be released directly by the Department of Budget and Management to the local government units concerned without need of any further action and which shall not be subject to any lien or holdback that may be imposed by the national government for whatever purpose. The remaining sum of P4,960,655,000 shall cover deficiencies in the cost of devolved functions and activities and shall be released to the concerned local government units in accordance with the actual locational distribution of concomitantly transferred personnel and facilities pursuant to such rules and regulations as may issued for the purpose by the Department of Budget and Management. is consistent with the legislative intent and spirit of the law, and a valid budgetary implementation of Section 284 of the Local Government Code. You further state that the Chairman of the House Appropriations Committee during the Budget Hearing last September 15, 1992 declared that the aforementioned IRA Provisions will not be incorporated in the CY 1993 General Appropriations Bill unless the DBM can secure this Department's opinion declaring that it is not violative of Sections 284 and 285 of the Local Government Code. Finally, you state that if the Special Provision is found legally tenable by this Department, another formula being considered by the DBM and which shall be proposed to Congress by way of amendment of the IRA provision under consideration, is as follows: prcd (a) The sum of P7.0 Billion to cover the cost of devolved functions and activities in accordance with the actual locational distribution; and (b) The sum of P29.0 Billion to be apportioned to the LGUs in accordance with the codal formula. and that the foregoing allocation which earmarks the total cost of devolved functions instead of only the amount to cover the deficiencies is believed the better budgetary approach to resolve the funding problems of LGUs arising from the devolution of functions as mandated by the Local Government Code. Section 284 of the Local Government Code reads, as follows: "SEC. 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 (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 essentials public services, be entitled to receive the amount equivalent to the cost of devolved personal services .(Italics supplied) prcd It is evident from the foregoing that for CY 1993, local government units are entitled to a share in the national internal revenue taxes corresponding to thirty-five percent (35%) of the IRA. The same section provides for only one instance wherein the share of LGUs in the IRA may be reduced and that is in the event that the national government incurs an unmanageable public sector deficit. It further provides that the authority given to the President of the Philippines to make the necessary downward adjustments of the LGUs share in the IRA after it has been determined that such deficit has been incurred, is subject to the following conditions: (1) It shall be upon the recommendation of: (a) the Secretary of Finance; (b) Secretary of the Interior and Local Government; (c) Secretary of Budget and Management; and (2) Subject to consultation with: (a) The presiding officers of both Houses of Congress; and (b) The presidents of the liga. Thus, it is believed that unless the existence of the abovementioned conditions has been first determined and the aforecited requirements have been duly complied with, the reduction of the LGU's share in the IRA as mandated under Section 284 of the Local Government Code cannot be validly sustained. These conditions are reiterated in Article 379, Rule XXXII of the Rules and Regulations Implementing the Local Government Code of 1991, which reads: "Art. 379. Adjustment in the Internal Revenue Allotment Share. (a) In the event that an unmanageable public sector deficit is incurred by the National Government, the Secretary of Finance, the Secretary of the Interior and Local Government, and the Secretary of Budget and Management shall submit to the President a joint recommendation that will institute necessary adjustments in the IRAs of LGUs. (b) Upon receipt of the joint recommendation of the Secretary of Finance, the Secretary of the Interior and Local Government, and the Secretary of Budget and Management and subject to consultation with the presiding officers of both Houses of Congress and the presidents of the leagues of LGUs, the President shall authorized the necessary adjustments of the total IRA to be distributed among LGUs for the given year, provided that in no case shall the adjusted amount be less than thirty (30%) of the national internal revenue tax revenue tax collections of the third fiscal year preceding the fiscal year during which the reduction is to be made. prcd (c) Adjustments to the IRA share of LGUs shall be made only after affecting a corresponding reduction of the National Government expenditures including cash and non-cash budgetary aids to GOCCs government financial institutions (GFIs),the Oil Price Stabilization Fund (OPSF),and the Central Bank (CB)." It bears emphasis that the provision of Section 284 is couched in mandatory language which accepts no other interpretation other than the percentage of IRA due the LGUs in the second year should be given intact to the LGUs concerned and subject only to the aforementioned circumstance and conditions. There is no mention that a certain percentage of the IRA should be allocated or set aside to cover the costs of devolved functions and activities. It is only in the first year (1992) of the effectivity of the new Local Government Code that the IRA of local government units shall include the cost of devolved functions for essential public services. prLL Clearly, therefore, there is no basis for DBM to set aside the sum of P4,960,655,000 for augmentation of deficiencies in the cost of devolved functions resulting to a reduction in the LGUs percentage share in the IRA. Stated otherwise, it is up to the LGUs concerned how much amount or what percentage of the IRA due them for CY 1993 should be set aside to cover the costs of devolved functions and activities subject only to the specific provision of Article 384 of the Rules and Regulations of the Local Government Code which provides: "Art. 384. Allocation of Twenty Percent (20%) IRA share of the LGUs for Development Projects. It shall be mandatory for each LGU to set aside in its annual budgets amounts no less than twenty percent (20%) of its IRA for the year as appropriation for local development projects that are embodied or contained in the local development plan. Copies of local development plan shall be furnished the DILG." In view of the foregoing, we agree with the position taken by the Chairman and members of the Appropriations Committee that the earmarking of five percent (5%) of the CY 1993 IRA in the amount of P4,960,655,000 to be used for the "augmentation scheme" as conceptualized by the Special Provision in effect reduced the IRA shares of the LGUs, and therefore, violative of Sections 284 and 285 of the Local Government Code. Please be guided accordingly. Very truly yours, (SGD.) FRANKLIN M. DRILON Secretary