G.R. No. 118303 ; January 31, 1996
SENATOR HEHERSON T. ALVAREZ, ET AL., petitioners, vs. HON. TEOFISTO T. GUINGONA, JR., ET AL., respondents.

FACTS

Petitioners assail the constitutionality of Republic Act No. 7720 , which converted the Municipality of Santiago, Isabela, into an independent component city. They raise two primary grounds. First, they argue that the Act did not originate exclusively in the House of Representatives as required by Section 24, Article VI of the 1987 Constitution for bills appropriating public money or generating revenue. They note that while House Bill No. 8817 was filed in the House, Senate Bill No. 1243, an identical counterpart bill, was filed in the Senate shortly after the House commenced hearings. The Senate ultimately passed the House Bill, but petitioners contend the process violated the constitutional origination clause.
Second, petitioners claim the Municipality of Santiago failed to meet the minimum average annual income requirement of Twenty Million Pesos under the Local Government Code for cityhood. They assert that the certification from the Bureau of Local Government Finance, which showed compliance, erroneously included Internal Revenue Allotments (IRAs). Petitioners argue IRAs are mere budgetary transfers from the national government and should be excluded from the income computation, which would render Santiago’s average annual income deficient.

ISSUE

The issues are: (1) Whether RA 7720 is unconstitutional for allegedly violating the constitutional requirement that bills of revenue or appropriation must originate exclusively in the House of Representatives; and (2) Whether the Municipality of Santiago validly qualified for conversion by meeting the average annual income requirement, specifically regarding the inclusion of Internal Revenue Allotments in such computation.

RULING

The Supreme Court dismissed the petition, upholding the constitutionality of RA 7720. On the first issue, the Court ruled that the Act did not violate the constitutional origination clause. The clause applies only to bills that generate revenue or appropriate public funds. RA 7720 is a law creating a city; it does not appropriate money, raise revenue, or increase taxes. It is a purely local legislation. Even assuming the clause applied, the Court, citing Tolentino v. Secretary of Finance, held that the constitutional requirement is satisfied if the bill originates in the House before it is passed by Congress. The existence of a Senate counterpart bill does not negate this, provided Senate action on the House bill is withheld until its receipt. The records show H.B. No. 8817 was duly passed by the House, transmitted to the Senate, and then passed by the Senate, complying with the procedure.
On the second issue, the Court held that Internal Revenue Allotments (IRAs) are correctly included in computing a local government unit’s annual income. The Local Government Code defines “income” broadly and includes “all revenues and receipts” collected or received. IRAs are a regular, recurring, and predictable source of revenue mandated by law, forming part of the genuine income of an LGU. Excluding them would contradict the Code’s intent to broaden the fiscal base of LGUs and enhance their autonomy. The certification from the competent authority, including IRAs, was thus valid. Consequently, Santiago met the income requirement. The Court emphasized the presumption of constitutionality accorded to every law, which petitioners failed to overcome with clear and convincing evidence of a constitutional breach.