A legal clash is in the offing between the Department of Budget and Management (DBM) and local government executives over the disposition of the National Tax Allocation (NTA) worth P1.19 trillion.

Batangas Vice Governor Hermilando Mandanas and the Philippine Councilors League (PCL) filed a petition before the Supreme Court seeking the full implementation of the automatic release of local government units’ share of taxes and not to subject the amount to the discretion of the executive.

On 27 January, the Marcos administration said P1.19 trillion will be released to LGUs “under the 2026 budget.”

The DAILY TRIBUNE warned in an editorial that the distribution of the huge amount might be used for patronage — to favor those close to the Palace and its political allies — that would result in a local version of the pork barrel system.

In their 32-page petition, Mandanas and the PCL sought clarification and the enforcement by the tribunal of the constitutional mandate of an automatic release of the NTA to LGUs.

The petitioners argued that if the NTA is treated as an appropriation item under the GAA, it becomes subject to the President’s veto power.

They asked the Supreme Court to declare null and void all “acts, practices, policies, and mechanisms” of the national government that treat the NTA for LGUs as subject to the General Appropriations Act (GAA) before the national government can release their share of national taxes.

The DBM sought to appease the local officials, saying that including the large amount in the budget does not mean it is “a discretionary appropriation under the General Appropriations Act.”

“It is a constitutional obligation implemented in coordination with, but not created by, the annual budget law,” the agency said in a statement.

In its 32-page petition, the PCL argued that the NTA is not a national expenditure subject to legislative appropriation but a constitutionally mandated share that must be automatically released to LGUs.

Named respondents in the case were Executive Secretary Ralph Recto, Finance Secretary Frederick Go, DBM Acting Secretary Rolando Toledo, National Treasurer Sharon Almanza, and Economy, Planning and Development Secretary Arsenio Balisacan.

Should not be appropriated

The petition before the SC argued that the NTA is not a national expenditure subject to legislative appropriation, but rather a constitutionally mandated share that must be automatically released to LGUs.

“Treating the National Tax Allotment as an appropriation negates and violates the declared policy of the State to ensure local autonomy, as it subjects the LGUs just share to executive veto, constitutional reenactment, and budget execution controls, thereby defeating the mechanical, perfunctory, and unconditional nature of automatic release mandated by the Constitution and the Local Government Code,” the petition read.

The petition sought the Court’s ruling on whether the respondents committed grave abuse of discretion in disregarding Section 6, Article X of the Constitution.

The provision states: “Local government units shall have a just share, as determined by law, in the national taxes which shall be automatically released to them, which gives LGUs a just share in the national taxes.”

Further, the petition alleged that the respondents committed a grave abuse of discretion in misapplying Section 29(1), Article VI of the Constitution to the NTA, despite Section 283 of the National Internal Revenue Code (NIRC) which states that LGUs’ share of national taxes does not accrue to the National Treasury.

Section 29, Article VI of the Constitution provides that “no money shall be paid out of the Treasury except in pursuance of an appropriation made by law.”

The petitioners said Section 29(3), Article VI, provides an exception because it mandates that “money collected for a special purpose shall be treated as a special fund and paid out for such purpose only.”

According to the petitioners, this constitutional provision is reinforced by Section 283 of the NIRC.

“By statutory command, the Local Government Units’ share in national taxes is excluded from the National Treasury and is otherwise specially disposed of by law, confirming that such share never becomes part of the general funds of the National Government subject to appropriation or discretionary budgetary control,” the petition read.

“Such treatment is fundamentally incompatible with Section 6, Article X of the Constitution, which commands that the Local Government Units’ just share in national taxes shall be automatically released,” it added.

Transfer based on Charter

The DBM stressed that reflecting the NTA amount in the annual budget does not convert it into a discretionary fund.

Presenting the NTA in the national expenditure program promotes transparency and fiscal discipline by ensuring full disclosure of government fiscal flows, accurate deficit and cash programming computations, and compliance with constitutional requirements governing disbursements from the National Treasury.