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
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.
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.
