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Brief Description of the Country and its
National/State Government Structure
Demography
The Philippines is an archipelago country of 7,100 islands
with a land area of 30 million hectares. Its population is
70 million with an annual growth rate of 2.5 per cent. Most
of the population is concentrated in the twenty largest islands
with about 54 per cent of the country's total population living
on the island Luzon, 32 per cent in the central part of the
country (Visayas), while the island Mindanao in Southern Philippines
accommodates some 14 per cent. 55 per cent of the population
is estimated to live in urban areas while 45 per cent lives
rural areas. Continuous migration to highly urbanized centres
has increased the number of urban dwellers who flocked to
cities looking for employment opportunities in the industry,
commercial and service sectors. In large cities like Metro
Manila and Cebu, urban dwellers represent about 59 per cent
of the city's population.
National governmental and political structure
The Philippines is a republic with a presidential system.
The national government has three branches: the executive
branch headed by the President, the legislative branch and
the judicial branch. The executive branch consists of 26 cabinet
secretaries and equivalent ranks in specialized agencies,
the national bureaucracy and the military, of which the President
is Commander in Chief. The legislative branch or Congress
is a two-chamber legislature. There are 24 senators in the
Philippines Senate, while there are 220 Congressmen or House
Representatives. The judicial branch consists of the Supreme
Court, the Court of Appeals, Regional Trial Courts and other
special courts (i.e. juvenile, family or sharing courts).
Each branch of the national government is coequal to each
other. The Philippines' Constitution of 1987 also provides
for the creation of the following constitutional commissions:
- Commission on Elections;
- Commission on Audit;
- Civil Service Commission; and
- Ombudsman.
The Philippines has a multi party democracy. The Constitution
provides for the same term limits for elected public officials.
The people elect the President, Vice President, all members
of the national legislature, Provincial Governors, City and
Municipal Mayors, members of the local councils and the Barangay
officials. Political parties at the local level are generally
extensions of political parties engaged in national politics.
For the purpose of administration and development planning,
the Philippines is divided into 15 administrative regions.
In each regional capital, the 26 departments of the national
government have their regional offices. The political subdivisions
of the nation state are:
- 78 Provinces;
- 67 Cities;
- 1,600 Municipalities; and
- 42,000 Barangays.
These political subdivisions are guaranteed in the Constitution.
Likewise the following political units have been created:
- Metropolitan Manila Development Authority (MMDA);
- Autonomous Region of Muslim Mindanao (ARMM); and
- Cordillera Administrative Region (CAR).
The MMDA is the metropolitan government for Manila and its
environs covering 8 cities and 9 municipalities. The ARMM
is a regional government in the Muslim Region of Southern
Mindanao while the CAR is a special region for the high landers
in Northern Luzon and Cordillera. Philippine cities are classified
into:
- Highly urbanized cities independent from the province;
- Component cities under supervision of the province; and
- Independent component cities in which residents can vote
for the provincial officials.
Except for the Barangays, all local governments in
the Philippines undergo classification every four years based
on their individual incomes. Classification ranges from first
class, having the highest income to sixth class, having the
lowest income. Cities like Manila and Quezon City are classified
as special cities under this classification system.
Evolution of Local Governments, its Legal
and Political Background
Local governments in the Philippines have their roots in
the colonial administration of Spain, which lasted in the
Philippines for some 327 years. These three centuries under
Spanish government were characterized by a highly centralized
regime. The Spanish Governor General in Manila actually governed
the provinces and cities in the whole country. After Spain,
the US came in the early 1900s and Filippinized local government
administration. The last 50 years of the present century saw
several developments towards decentralization. The Local Autonomy
Act of 1959, the passage of the Barrio Charter and the Decentralization
Act of 1967 were all incremental national legislations in
response to the clamour for a self-rule concept. The Philippine
Constitutions of 1972 and 1987 also significantly influenced
the movement for political devolution. The most significant
constitutional provisions (Article 10 on Local Government)
are the following: "The Congress shall enact a local government
code which shall provide for a more responsive and accountable
local government structure instituted through a system of
decentralization with effective mechanisms of recall, initiative
and referendum, allocate among the different local government
units their powers, responsibilities and resources and provide
for the qualifications, election, appointment, removal, terms,
salaries, powers, functions and duties of local officials
and all other matters relating to the organization and operation
of the local units". The legislative initiative promoting
local autonomy was strongly supported by academics and public
servants who spearheaded the necessary reforms in changing
the structure and organization of local governments and included
new functions to enable local governments to address a changing
environment. The struggle for decentralization that lasted
more than 50 years culminated in the passage of the Local
Government Code in October 1991. The Local Government Code
is a most comprehensive document on local government touching
on structures, functions and powers, including taxation and
intergovernmental relations.
Local Government Categories and Hierarchies
The categories of local authorities in the Philippines are
as follows:
- 1 Metropolitan Government;
- 1 Autonomous Regional Government;
- 1 Special Administrative Region;
- 78 Provinces;
- 67 Cities;
- 1,600 Municipalities; and
- 42,000 Barangays
Local Government Functions
Local governments have four major categories of functions:
- Efficient service delivery;
- Management of the environment;
- Economic development; and
- Poverty alleviation.
The Local Government Code Section 447 (Municipal Governments),
section 458 (City Governments) and section 468 (Provincial
Governments) define the functions and powers of the different
local authorities. The provisions are standard and descriptive
of the functions and powers of local government and are similar
to the provisions of Section 468 for Provinces. They stipulate
that: "The Sangguniang Panlalawigan, as the legislative body
of the province, shall enact ordinances, approve resolutions
and appropriate funds for the general welfare of the province
and its inhabitants pursuant to Section 16 of this code and
in proper exercise of the corporate powers of the province
as provided for under Section 22 of this code and shall:
- Approve ordinances and pass resolutions necessary for
an efficient and effective provincial government and, in
this connection, shall:
- Review all ordinances approved by the sanggunians of
component cities and municipalities and executive orders
issued by the Mayors of said component units to determine
whether these are within the scope of the prescribed powers
of the sanggunian and of the mayor;
- Maintain peace and order by enacting measures to prevent
and suppress lawlessness, disorder, riot, violence, rebellion
or sedition and impose penalties for the violation of
said ordinances;
- Approve ordinances imposing a fine not exceeding five
thousand Pesos (P 5,000.00) or imprisonment not exceeding
one (1) year, or both in the discretion of the court,
for the violation of a provincial ordinance;
- Adopt measures to protect the inhabitants of the province
from the harmful effects of man-made or natural disasters
and calamities and to provide relief services and assistance
for victims during and in the aftermath of said disasters
and calamities and in their return to productive livelihood
following said events;
- Enact ordinances intended to prevent, suppress and impose
appropriate penalties for habitual drunkenness in public
places, vagrancy, mendicancy, prostitution, establishment
and maintenance of houses of ill repute, gambling and
other prohibited games of chance, fraudulent devices and
ways to obtain money or property, drug addiction, maintenance
of drug dens, drug pushing, juvenile delinquency, the
printing, distribution or exhibition of obscene or pornographic
materials or publications and such other activities inimical
to the welfare and morals of the inhabitants of the province;
- Protect the environment and impose appropriate penalties
for acts which endanger the environment, such as dynamite
fishing and other forms of destructive fishing, illegal
logging and smuggling of logs, smuggling of natural resource
products and of endangered species of flora and fauna,
slash and burn farming and such other activities which
result in pollution, acceleration of eutrophication of
rivers and lakes or of ecological imbalance;
- Subject to the provisions of this code and pertinent
laws, determine the powers and duties of officials and
employees of the province;
- Determine the positions and the salaries, wages, allowances
and other emoluments and benefits of officials and employees
paid wholly or mainly from provincial funds and provide
for expenditures necessary for the proper conduct of programmes,
projects, services and activities of the provincial government;
- Authorize the payment of compensation to a qualified
person not in the government service who fills up a temporary
vacancy, or grant honorarium to any qualified official
or employee designated to fill a temporary vacancy in
a concurrent capacity, at the rate authorized by law;
- Provide a mechanism and the appropriate funds therefor,
to ensure the safety and protection of all provincial
government property, public documents, or records such
as those relating to property inventory, land ownership,
records of births, marriages, deaths, assessments, taxation,
accounts, business permits and such other records and
documents of public interest in the offices and departments
of the provincial government; and
- When the finances of the government allow, provide for
additional allowances and other benefits to judges, prosecutors,
public elementary and high school teachers and other national
government officials stationed or assigned to the province;
- Generate and maximize the use of resources and revenues
for the development plans, programme objectives and priorities
of the province as provided for under Section 18 of this
code, with particular attention to agro-industrial development
and country-wide growth and progress and relative thereto,
shall:
- Enact the annual and supplemental appropriations of
the provincial government and appropriate funds for specific
programmes, projects, services and activities of the province,
or for other purposes not contrary to law, in order to
promote the general welfare of the province and its inhabitants;
- Subject to the provisions of Book II of this code and
applicable laws and upon the majority vote of all the
members of the sangguniang panlalawigan, enact ordinances
levying taxes, fees and charges, prescribing the rates
thereof for general and specific purposes and granting
tax exemptions incentives or relieves;
- Subject to the provisions of Book II of this code and
applicable laws and upon the majority vote of all the
members of the sangguniang panlalawigan, authorize the
provincial governor to negotiate and contract loans and
other forms of indebtedness;
- Subject to the provisions of Book II of this code and
applicable laws and upon the majority vote of all the
members of the sangguniang panlalawigan, enact ordinances
authorizing the floating of bonds or other instruments
of indebtedness, for the purpose of raising funds to finance
development projects;
- Appropriate funds for the construction and maintenance
or the rental of buildings for the use of the province;
and upon the majority vote of all the members of the sangguniang
panlalawigan, authorize the provincial governor to lease
to private parties such public buildings held in a proprietary
capacity, subject to existing laws, rules and regulations;
- Prescribed reasonable limits and restraints on the use
of property within the jurisdiction of the province;
- Review the comprehensive land use plans and zoning ordinances
of component cities and municipalities and adopt a comprehensive
provincial land use plan, subject to existing laws; and
- Adopt measures to enhance the full implementation of
the national agrarian reform programme in coordination
with the Department of Agrarian Reform;
- Subject to the provisions of Book II of this code, grant
franchises, approve the issuance of permits or licenses,
or enact ordinances levying taxes, fees and charges upon
such conditions and for such purposes intended to promote
the general welfare of the inhabitants of the province and
pursuant to this legislative authority; shall:
- Fix and impose reasonable fees and charges for all services
rendered by the provincial government to private persons
or entities; and
- Regulate and fix the license fees for such activities
as provided for under this code;
- Approve ordinances which shall ensure the efficient and
effective delivery of basic services and facilities as provided
for under Section 17 of this code and, in addition to said
services and facilities, shall:
- Adopt measures and safeguards against pollution and
for the preservation of the natural ecosystem in the province,
in consonance with approved standards on human settlements
and environmental sanitation;
- Subject to applicable laws, facilitate or provide for
the establishment and maintenance of a waterworks system
or district waterworks for supplying water to inhabitants
of component cities and municipalities;
- Subject to the availability of funds and to existing
laws, rules and regulations, provide for the establishment
and operation of vocational and technical schools and
similar post-secondary institutions and, with the approval
of the Department of Education, Culture and Sports and
subject to existing laws on tuition fees, fix reasonable
tuition fees and other school charges in educational institutions
supported by the provincial government;
- Establish a scholarship fund for the poor but deserving
students in schools located within its jurisdiction or
for students residing within the province;
- Approve measures and adopt quarantine regulations to
prevent the introduction and spread of diseases within
its territorial jurisdiction;
- Provide for the care of paupers, the aged, the sick,
persons of unsound mind, abandoned minors, abused children,
disabled persons, juvenile delinquents, drug dependents
and other needy and disadvantaged persons, particularly
children and youth below eighteen (18) years of age and
subject to the availability of funds, establish and support
the operation of centres and facilities for said needy
and disadvantaged persons and facilitate efforts to promote
the welfare of families below the poverty threshold, the
disadvantaged and the exploited;
- Establish and provide for the maintenance and improvement
of jails and detention centres and institute a sound jail
management programme and appropriate funds for the subsistence
of detainees and convicted prisoners in the province;
- Establish a provincial council whose purpose is the
promotion of culture and the arts, coordinate with government
agencies and non-governmental organizations and, subject
to the availability of funds, appropriate funds for the
support and development of the same;
- Establish a provincial council for the elderly which
shall formulate policies and adopt measures mutually beneficial
to the elderly and to the province and subject to the
availability of funds, appropriate funds to support programmes
and projects for the elderly and provide incentives for
non-governmental agencies and entities to support the
programmes and projects of the elderly; and
- Exercise such other powers and perform such other duties
and functions as may be prescribed by law or ordinance".
Functions of local governments or their so-called traditional
responsibilities include construction and maintenance of city/municipal
or provincial roads, provision of health services and agricultural
extension work. There are shared services that local authorities
perform or share with the central government. An example is
secondary education. Another is poverty alleviation. A new
function that has been devolved to local governments in the
Local Government Code is environmental management. Another
is licensing fishing vessels below 3,000 tons in weight.
Other devolved functions require local governments to improve
their overall capabilities to perform. To achieve cost effectiveness
in service delivery and in other local ventures, intermunicipal
cooperation is highly encouraged. Section 13 Article X (Local
governments) of the 1987 Constitution provides that: "Local
government units may group themselves, consolidate or coordinate
their efforts, services and resources for purposes commonly
beneficial to them in accordance with law." The functional
dichotomy or relationship between the local chief executives
and their deputies is quite distinct. The provincial governor
or city and municipal mayor manage their political units including
their respective bureaucracies. The vice-governor or vice
city or municipal mayor acts as presiding officers of the
local legislative councils. Local policy formulation is a
shared responsibility between the local chief executives and
the members of the councils.
Table 1. Functions of Local Government Officials
|
| Local Chief Executives |
Deputies |
|
| Supervise local department's performance |
Oversee the local bureaucracy |
| Formulate plans and programmes |
General supervision over component local governments |
| Preside over the local legislative council |
Exercise regulatory powers through the council |
| Approve local budget |
Review local ordinances |
|
Local Government Finances
Intergovernmental fiscal relations
Fiscal relations between national and local government centre
on the following major areas of fiscal administration:
- Allotment of internal revenue shares;
- Shares of local governments in national wealth exploitation;
- Shares of earnings of government agencies or government-owned
or controlled corporations engaged in the utilization and
development of national wealth;
- Local government borrowing; and
- Review of local government budgets.
Local governments have their shares in the national internal
revenue taxes, representing 40 per cent) of the total internal
revenue collections based on the third preceding year (Section
284). The distribution of the Internal Revenue Allotment to
local governments is as follows:
- Provinces 23 %
- Cities 23 %
- Municipalities 34 %
- Barangays 20 %
The share of each province, city and municipality is as follows:
- By population 50 %
- By land area 25 %
- By equal sharing 25 %
Each Barangay should at least receive eighty thousand Pesos
per annum. The Local Government Code provides that local governments
shall have an equitable share in the proceeds derived from
the utilization and development of national wealth within
their respective areas and sharing these with the inhabitants
by way of direct benefits (Section 289). Local governments,
in addition to the internal revenue allotment, have a share
of 40 per cent of the gross collection derived by the national
government from the preceding fiscal year from mining taxes,
royalties, forestry and fishery charges, other taxes, fees,
or charges, including related surcharges, interests or fines
and from its share in any co-production, joint venture or
production sharing agreement in the utilization and development
of the national wealth within their territorial jurisdictions
(Section 290). Local governments likewise have a share based
on the preceding fiscal year from the proceeds derived from
any government agency or government-owned or controlled corporation
engaged in the utilization and development of the national
wealth based on the following formula whichever will produce
a higher share for the local government unit:
- 1 per cent of the gross sales or receipts of the preceding
calendar year; or
- 40 per cent of the mining taxes, royalties, forestry and
fishery charges and such other taxes, fees or charges, including
related surcharges, interests, or fines the government agency
or government-owned or controlled corporation would have
paid if it were not otherwise exempt (Section 291).
At the same time local governments are authorized to issue
bonds, debentures, securities, collateral notes and other
obligations to finance self-liquidating, income-producing
development and livelihood projects. However the power given
to local governments in the issuance of bonds and other long-term
securities is subject to the rules and regulations of the
Central Bank and the Securities and Exchange Commission (Section
299). The Department of Budget and Management has the power
to review appropriation ordinances of provinces, highly urbanized
cities, independent component cities and the municipalities
within the Metropolitan Manila Area (Section 326). An important
provision in local fiscal administration within the context
of intergovernmental relations is a provision that national
planning be bottom-up to ensure that the needs and aspirations
of the people, as articulated by the local governments in
their respective local development plans, are considered in
the formulation of budgets of national line agencies or offices
(Section 350 K).
Local taxes
Local government taxation and other fiscal matters are contained
in Book II of the Local Government Code. These include real
property taxation, shares of local governments in the proceeds
of national taxes, credit financing and local budgets including
property and supply management. Some illustrative revenue
raising powers of local governments are:
Provinces:
- Real property tax;
- Tax on transfer of real property ownership;
- Tax on business of printing and publication;
- Franchise tax;
- Sand and gravel tax;
- Professional tax;
- Amusement tax on admission; and
- Annual fixed tax per delivery truck or van of manufacturers
or producers of or dealers in certain products.
Municipalities:
- Tax on business;
- Fees and charges;
- Fishery rental or fees and charges;
- Fees for sealing and licensing of weights and measures;
and
- Community tax.
Cities:
- The city may levy and collect among others any of the
taxes, fees and other impositions that the province or municipality
may levy and collect.
Barangays:
- Taxes and fees;
- Service charges; and
- Contributions.
Table 2. Comparative Local Government Income
Profiles
1992-1995 (in million Pesos)
| Income category |
1992 |
Profile |
1995 |
Profile |
Income
Local taxes
Taxes
Real property taxes
Business taxes
Non-taxes
Fees/charges
Economic enterprises
Loans/borrowing
Others
Allotment and aids
Internal revenue allotment
Aids |
27,703.5
11,846.6
7,416.7
3,922.9
3,493.8
4,429.9
855.3
1,485.8
392.9
1,695.9
15,856.9
15,473.2
383.7 |
100.00%
42.76%
26.77%
14.16%
12.61%
15.99%
3.09%
5.36%
1.42%
6.12%
57.24%
55.85%
1.39% |
77,006.9
22,976.9
14,904.1
7,932.1
6,972.0
8,072.8
1,879.5
2,286.1
1,408.9
2,498.3
54,030.0
51,925.0
2,105.0 |
100.00%
29.84%
19.35%
10.30%
9.05%
10.48%
2.44%
2.97%
1.83%
3.24%
70.16%
67.43%
2.73% |
Source: Department of Finance
A comparison of the income profiles of local governments
for the year 1992 (first year of Local Government Code implementation)
and year 1994 showed a decrease in income from local sources
and an increase in national aid and allotments. In 1992 the
income from local sources represented 42.76 per cent of total
local revenues (taxation 26.77 per cent and non-tax revenues
15.99 per cent). During the same year aid and allotments from
the national government represented 57.24 per cent of the
total local revenues, which came from statutory allotments
or internal revenue allotments. However, income from local
sources represented only 29.84 per cent of the total income
in 1995, a decrease of 30 per cent from the 1992 level. Taxes
from real properties decreased from 14.16 per cent to 10.30
per cent. This can be attributed to the codal provision that
broadens tax exemptions for real properties. Residential properties
with market value of 175,000 Pesos and below were exempted
from payment of taxes. This codal provision significantly
eroded the property tax base. Likewise national subsidies
represented 70 per cent of the local total income in 1995.
This 24 per cent increase of the statutory allotment was due
to the implementation of the 40 per cent Internal Revenue
Allotment (IRA) shares of local governments that became effective
on the third year of implementation of the Local Government
Code. While the national subsidy increased from 57.24 per
cent to 70.16 per cent, the income from local sources decreased
from 42.76 per cent to 29.84 per cent. One possible explanation
for the decrease in incomes from local sources is the suspicion
that local governments became complacent in collecting taxes
after receiving the maximum IRA shares allowed in the Local
Government Code. In effect, the significant increase in the
IRA of Local Government Units (LGUs) exhibited substitutive
effect in terms of local tax collection. The other logical
explanation is that local governments were still in transition
and the exercise of the local taxing powers by local authorities
were not optimized.
Table 3. Share of LGUs to Total Budget (in
billion Pesos)
| Year |
Assistance to LGUs |
Total budget |
Percentage/share |
| 1992 |
20.3 |
295.2 |
6.7 |
| 1993 |
37.0 |
313.7 |
11.8 |
| 1994 |
47.4 |
369.0 |
12.8 |
| 1995 |
57.3 |
372.1 |
15.4 |
| 1996 |
62.3 |
445.7 |
14.0 |
| 1997 |
76.0 |
476.2 |
16.0 |
| 1998 |
86.2 |
540.8 |
15.9 |
Table 4. Actual Revenues of Local Government
Units (1991-1995)
| Source |
Actual revenue (in million
pesos) |
| 1991 |
1992 |
1993 |
1994 |
1995 |
| Revenue from taxation |
6,457.24 |
7,416.78 |
10,277.38 |
12,584.94 |
14,904.10 |
| Real property tax |
3,672.20 |
3,922.94 |
4,940.64 |
5,996.69 |
7,932.10 |
| Business taxes |
2,785.04 |
3,493.84 |
5,336.74 |
6,588.25 |
6,972.00 |
| Non-tax revenues |
6,988.54 |
4,429.89 |
6,106.84 |
8,330.29 |
8,072.80 |
| Receipts from economic enterprises |
1,553.2 5 |
1,485.82 |
1,812.33 |
2,369.74 |
2,286.10 |
| Fees/charges |
729.98 |
855.29 |
1,406.74 |
1,621.13 |
1,879.50 |
| Loans and borrowing |
390.80 |
392.93 |
1,315.41 |
2,105.22 |
1,408.90 |
| Other receipts |
4,314.51 |
1,695.85 |
1,572.36 |
2,234.20 |
2,498.30 |
| Aids and allotments |
10,536.35 |
15,856.90 |
27,962.53 |
34,061.09 |
54,030.00 |
| BIR allotments |
9,751.62 |
15,473.18 |
27,456.28 |
33,381.97 |
51,925.00 |
| National aids |
784.73 |
383.72 |
506.25 |
679.12 |
2,105.00 |
| Total income |
23,982.130 |
27,703.57 |
44,346.75 |
54,976.32 |
77,006.00 |
Table 5. Growth Rates of Local Government Units (1991-1995)
| Source |
Growth rates (percentage) |
| 1991-1992 |
1992-1993 |
1993-1994 |
1994-1995 |
Average |
| Revenue from taxation |
14.86 |
38.57 |
18.34 |
18.43 |
22.55 |
| Real property tax |
6.83 |
25.94 |
17.61 |
32.27 |
20.66 |
| Business taxes |
25.45 |
52.75 |
19.00 |
5.82 |
25.76 |
| Non-tax revenues |
-36.61 |
37.86 |
26.69 |
-3.09 |
6.21 |
| Receipts from economic enterprises |
-4.34 |
21.98 |
23.52 |
-3.53 |
9.41 |
| Fees/charges |
17.17 |
64.48 |
13.22 |
15.94 |
27.70 |
| Loans and borrowing |
|
234.77 |
37.52 |
-33.06 |
79.74 |
| Other receipts |
-60.69 |
-7.28 |
29.62 |
11.82 |
-6.63 |
| Aids and allotments |
50.50 |
76.34 |
17.90 |
58.63 |
50.84 |
| BIR allotments |
58.67 |
77.44 |
17.75 |
55.55 |
70.92 |
| National aids |
-51.10 |
31.93 |
25.46 |
209.96 |
54.06 |
| Total income |
15.52 |
60.08 |
23.97 |
40.70 |
34.91 |
Growth rates of local revenues/IRA
(1991-1995)
The growth rate of local revenue sources during
1992-1995 indicated an erratic performance apparently due
to the pains of the transition to decentralization. For
the period 1992-1995 revenues from taxation had an average
growth of 22.55 per cent compared to the growth rate of
non-tax revenues that was only 6.21 per cent. Meanwhile
aid and allotments had a growth rate of 50.84 per cent for
the same period. There is a need to reverse this trend of
increasing dependence of LGUs on IRA in order to provide
the decentralization scheme with a solid financial base
that will institutionalize local autonomy in the long run.
Local income should be raised to a higher level than the
IRA a local government receives from the national government.
An ideal initial percentage ratio between local sources
and grants or subsidies from the national government is
50-50. However, local governments in the long run should
aim for at least a 70 to 30 per cent ratio in favour of
local sources to be truly autonomous and self-reliant. This
could be achieved under an appropriate and more responsive
policy environment on fiscal federalism.
Table 6. IRA Percentages of Provinces in
Relation to Total IRA
|
| NCR |
8.92 |
| Region I |
34.06 |
| Region II |
38.67 |
| Region III |
33.81 |
| Region IV |
33.62 |
| Region V |
36.44 |
| Region VI |
28.88 |
| Region VII |
25.53 |
| Region VIII |
32.89 |
| Region IX |
25.16 |
| Region X |
29.41 |
| Region XI |
29.18 |
| Region XII |
29.78 |
|
Table 7. IRA as Percentage of GDP (Value
in billion Pesos)
| Year |
GDP |
Year |
IRA |
IRA/GDP |
| Amount |
Growth % |
Amount |
Growth % |
| 1988 |
799.182 |
|
1988 |
3.223 |
|
0.40% |
| 1989 |
925.444 |
15.80 |
1989 |
4.2232 |
31.31 |
0.46% |
| 1990 |
1,077.237 |
16.40 |
1990 |
6.018 |
42.20 |
0.56% |
| 1991 |
1,248.011 |
15.85 |
1991 |
8.535 |
41.82 |
0.68% |
| 1992 |
1,351.559 |
8.30 |
1992 |
19.878 |
132.90 |
1.47% |
| 1993 |
1,474.457 |
9.09 |
1993 |
37.072 |
86.50 |
2.51% |
| 1994 |
1,692.932 |
14.82 |
1994 |
46.753 |
26.11 |
2.76% |
| 1995 |
1,906.328 |
12.61 |
1995 |
51.925 |
11.06 |
2.72% |
| 1996 |
2,189.873 |
14.87 |
1996 |
56.695 |
9.19 |
2.59% |
Specific revenue sharing
Some programmes and projects for LGUs are
based on certain specific grant criteria/formula such as
urban population, incidence of poverty, population growth
rate, annual average income, degree of urban environmental
degradation, deficiencies in basic services such as sanitation
and waste water disposal, storm drainage and flood prevention,
solid waste collection and disposal, roads/traffic, water
supply, public markets, slaughterhouses, bus terminals,
etc. The above-mentioned criteria are basically used by
the World Bank funded Municipal Development Project (MDP)
providing local authorities with loans and grants on a 70
to 30 per cent ratio respectively in order to address municipal
infrastructure requirements.
In the social sector, some education and health
projects of LGUs are also provided with central government
grants based on their needs. Besides selected LGUs are required
to put-up equity for the project to ensure goal congruence
between national and local authorities. A similar financing
scheme is also used in the case of environmental and agricultural
projects that fall within the ambitions of the national
government social reform agenda. LGUs are provided fund
support based on differentiated schedules of loans, grants
and an equity mix depending on the income level of LGUs
and the nature of a particular project or sub-project component
(i.e. revenue generating or non-revenue generating). Higher
subsidy is given to lower class LGUs and for non-revenue
generating projects.
However, national government grants to LGUs
for certain devolved responsibilities and activities have
to be rationalized in terms of equity, externalities and
economies of scale. Loans and grants for these projects
are channelled through the Municipal Development Fund (MDF)
that is administered by the Bureau of Local Government Finance
of the Department of Finance (BLGF-DOF). Another form of
central government grant is the Local Government Empowerment
Fund (LGEF); an intervention mode of lowering the incidence
of poverty in 20 identified poorest provinces in the country.
Specific needs have to be addressed such as agro-industrialization,
community health services and other related concerns.
Figure 2. Growth Rates of Revenues of Local
Government Units
Figure 3. Internal Revenue Allotment Sharing
as to Municipalities, Cities and Provinces (1995) (000's
million)
Personnel Systems in Local
Government
The local government personnel system is primarily
governed by personnel policies of the Civil Service Commission
and the applicable provisions of the Local Government Code,
i.e. the Creation of Local Personnel Board and the Policy
on Human Resource Development. The merit system is the guiding
principle in the selection, recruitment and promotion of
the officers and employees of the local government bureaucracy.
Most locally appointed officers and employees are career
personnel with security of tenure who can only be removed
for cause. All local government employees are covered with
limited medical care and are insured in the Government Service
Insurance System. Discipline over career employees is lodged
with the local chief executives and the Civil Service Commission.
Central-Local Links
After the approval of the Local Government
Code in 1991, intergovernmental relations tilted more towards
local autonomy and decentralization. Most departments of
the national government are now primarily responsible for
policy formulation and standard setting in addition to implementing
national sectoral or departmental programmes after consultation
with local governments. The power of general supervision
by the President over local governments as provided for
in the Constitution is now limited and extends only to Provincial
Governors and Mayors of highly urbanized cities. General
supervision over lower level local officials is entrusted
to the Provincial Governor and to some extent to the local
legislative councils. The national government has no control
over local governments except for the power of general supervision.
The national government cannot abolish a local government.
The legislature can pass a law abolishing a local government
but only after the law is approved by the people through
a referendum. Political jurisdictions are governed with
full administrative autonomy. However, the national government
still exerts influence and regulatory powers in financial
matters as far as the review of local budgets and the utilization
of national government subsidies are concerned. National
government under certain circumstances likewise guarantees
loan application of local governments and regulates the
issuance of local government bonds.
(See
chart of Historical Trends in Central-Local Relations)
Extent of Public Participation
Public private partnership at the local levels
is very much alive and well. The Constitution and the Local
Government Code have provisions on the concept of the three
P's (Public Private Partnership). The 1987 Constitution
has a separate provision on the roles and rights of People's
Organizations (POs) in public affairs and in local governance.
It states that the State shall respect the role of independent
POs to enable the people to pursue and protect, within the
democratic framework, their legitimate and collective interests
and aspirations through peaceful and lawful means.
POs are bona fide associations of citizens
with demonstrated capacity to promote the public interest
and with identifiable leadership, membership and structure.
The right of people and their organizations to effective
and reasonable participation at all levels of social, political
and economic decision-making shall not be abridged. The
State shall by law facilitate the establishment of adequate
consultation mechanisms. Likewise, the Local Government
Code of 1991 has similar provisions as those of the Constitution.
Sections 34, 35 and 36 of Chapter IV of the Local Government
Code, entitled Relations with People and Non-Governmental
Organizations states the following provisions: "Local government
units shall promote the establishment and operation of POs
and NGOs to become active partners in the pursuit of local
autonomy (section 34). Local government units may enter
into joint ventures and such other cooperative arrangements
with POs and NGOs to engage in the delivery of certain basic
services, capability-building and livelihood projects and
to develop local enterprises designed to improve productivity
and income, diversify agriculture, spur rural industrialization,
promote ecological balance and enhance the economic and
social well-being of the people (section 35). A local government
unit may, through its local chief executive and with the
concurrence of the sanguine concerned, provide assistance,
financial or otherwise to such POs and NGOs for economic,
socially-oriented, environmental or cultural projects to
be implemented within its territorial jurisdiction (section
36)".
Civil societies are represented in various
local development councils. Several administrative orders
of the central government implementing the constitutional
provision and the intention of the Local Government Code
regarding public participation in general, require that
all local councils in all levels should be represented by
various NGOs and POs such as farmer cooperatives, fishermen's
associations etc. Several sectors of society like youth;
women, farmers and other special groups have voices in the
process of public decision making. A mandatory provision
insofar as membership of POs and NGOs in development councils
in all levels states is concerned is that they should represent
25 per cent of the total membership of these councils. Local
legislative councils do not act local laws like tax ordinances
with finality unless public hearings are conducted first.
The idea of consulting people first before any taxes is
adopted by the local legislative bodies is to operationalise
the concept of representation by the constituencies through
public hearings and consultation before the imposition of
proposed local taxes. NGOs and POs are likewise very active
in local development activities. These institutions work
very closely with local authorities in attaining mutual
community interests. Some 16,000 NGOs and POs undergo a
process of accreditation that determines the types and classes
of NGOs existing in all regions. The process includes the
determination of the subjects and ideas NGOs advocate, such
as environmental protection, legal issues and rights to
development including lobbying efforts to protect/promote
specific sectoral interests.
The Barangay Justice Programme is the largest
community voluntarism programme involving some one million-community
mediators. It is a system of settling disputes outside the
judicial courts without the coercive power of the state
and by the people themselves under whose initiative community
and individual disputes are amicably settled. This paralegal
system has saved the government billions of pesos in adjudication
costs besides an equally important contribution of maintaining
peace and order at community level. The administration of
justice is characterized by an over clogging of dockets
in the courts, resulting in the delay in the dispensation
of justice. To remedy this situation, the government established
the Barangay Justice Programme in 1978 which involves 42,000
Barangays organizing mediation boards which are mediating
disputes outside the courts. The review tier of local law
stops at the Provincial Government. Municipal laws or those
of component cities are subject to review by the Provincial
Legislative Council. Barangays ordinances are likewise
subject to review by component cities or municipalities
to which they belong. Except for controversial local tax
laws, the national government has no control or supervision
on local legislative making. The power of general supervision
by the President as provided for in the Constitution has
been decentralized and so there is tiering in the exercise
of power of general supervision now shared by the President,
Governors, City and Municipal Mayors.
The Way Ahead
Despite some improvements in local fiscal
administration, some patterns and problems remain. Local
governments continue to treat IRA as dole out and LGUs increasing
dependence on IRA has been observed as a proof that IRA
has become more regular and predictable. LGUs have not exerted
greater effort in raising revenues through the exercise
of their taxing powers. The absence of straightforward performance
indicators in Revenue Sharing Allocation, could undermine
LGUs tax effort and operational efficiency and accountability.
Likewise, such unconditional grants cannot stimulate LGUs
to engage in long-term capital investments and other development
projects beyond the required basic services. However, as
LGUs confront the challenges of devolution and as they become
increasingly aware of the extent of their responsibilities,
there is now a growing clamour to revise the present IRA
formula because it has resulted in inequitable increments
for the different levels of LGUs. More and more LGUs especially
the urbanizing ones are beginning to realize the importance
of mobilizing local revenues and even availing of credit
financing to underwrite the massive financial requirements
of devolution and development. Besides, the mandatory review
of the Local Government Code after 5 years of implementation
is underway. This is now the opportune time to revisit the
present IRA formula as contained in the code.
The issue of fiscal federalism is central
to the success of the decentralization programme in the
country. The fact that there are gainers and losers among
different levels of LGUs under the new IRA formula and that
national government continues to fund some devolved responsibilities,
strongly suggests the need to review the present expenditure
assignments between national and local governments to once
and for all minimize if not totally eliminate the overlaps
and duplications currently existing resulting in economic
inefficiency. To rationalize the IRA formula, there is a
need to establish certain minimum standards of service delivery
by sector upon which the IRA formula should be partly fashioned.
Apart from the minimum standards of service delivery, an
incentive feature should also be present in the formula
to encourage LGUs to exert greater tax effort and embark
on development projects beyond the basic services they are
supposed to deliver. Administrative and operational efficiency
should also be rewarded using the national grant through
special projects. A portion of the IRA could be transformed
into a specific grant tied to tax effort or its variant.
Provision of national government grants over and above the
IRA, for devolved activities should be strictly justified
on the basis of equity, externality and economy of scale
and such intervention should be in a form of matching grant
and must be specific and time bounded. The LGUs must put
up equity to the grant in order to have a sense of ownership
of the project and also to ensure goal congruence.
The Philippines may have taken significant
strides in the implementation of devolution. Power relations
between the national and local governments have been reconfigured.
However, five years later in spite of the gains achieved
by devolution, there are still a number of issues to be
addressed. Foremost is the issue of fiscal federalism and
central to this issue is the IRA formula. The formula is
devoid of any performance indicator, thus threatening the
agenda of devolution in terms of equity, fiscal performance
and efficiency in service delivery. It is imperative therefore
to establish certain parameters/indicators of performance
to apply to the Revenue Sharing Allocations in order to
ensure vertical and horizontal balances as well as fiscal
empowerment of LGUs as these are the heart of decentralization.
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