By JEJOMAR C. BINAY
Former Vice President
The recent Supreme Court (SC) decision declaring that local government units (LGUs) are entitled to their “just share” of national taxes, not only taxes collected by the Bureau of Internal Revenue (BIR), corrects an injustice that has deprived LGUs of the means to fulfill their mandate and fully serve their constituents.
The high court acted on a petition filed six years ago by then congressman Hermilando Mandanas of Batangas.
Mandanas, now governor of the province, had said in his petition that the national government failed to release P500 billion to LGUs in 2012, which represents their just share of national taxes.
In light of the ruling, Mandanas is now urging the administration to revise the proposed 2019 budget to reflect the adjusted IRA.
According to estimates, this would mean an increase of around 50 percent in the P640.6 billion allotment to LGUs, with the inclusion of tariffs and customs duties collected by the Bureau of Customs in the formula.
The Batangas governor was quoted as saying that with increased funds, “the real needs of the community will be attended by the community. Shifting money from the national government to the local government will mean devolved services can now be really funded, and this will also reduce underspending and corruption.”
He also added that LGUs have yet to receive P1.5 trillion representing unreleased IRA from 1992. This is something that needs to be addressed by the present administration if only to validate its oft-repeated advocacy of empowering local governments.
I have always maintained that LGUs are the true engines of economic growth. If we want to fast-track social and economic development at the local level, Congress can introduce amendments to the Local Government Code. It is faster and less contentious than a protracted national debate on the merits of federalism.
For example, the revenue sharing formula between the national government and the local governments, presently at 60-40 in favor of the national government, needs to be reviewed. A larger share should be given to the local governments.
The existing criteria for determining the share of IRA, which is population and land area, also needs to be amended. It discriminates against smaller localities which are usually poorer localities with little or no internally generated sources of revenue.
As a result, bigger and highly developed cities mostly in Metro Manila receive higher IRAs because of their population and land area. On the other hand, smaller and less populated LGUs receive a much lower IRA based on the current formula. Most of these LGUs do not have a robust local economy. They depend on IRA for their salaries and other operating expenses.
Congress may consider a new criteria that indexes the revenue share to a local government’s Gross Domestic Product (GDP) or poverty rate. Localities with lower GDP and higher poverty rates will get bigger IRA allocations while those with higher GDPs and lower poverty rates smaller shares. As the locality improves economically and poverty is reduced, the assistance is automatically lowered. This is to prevent over-dependence on the IRA.
To ensure that the funds are spent judiciously, Congress can provide a menu of projects or programs that can only be funded from the allocations. The IRA should go to poverty alleviation or economic development programs. It should not be used to build waiting sheds or basketball courts.
Proponents of federalism, sad to say, continue to present federalism as providing immediate relief to poorer local governments and a ticket to increased local economic opportunities.
The reality is that investors would not come pouring into the proposed federal states immediately after the shift to federalism. Investors base their decisions on a host of factors, among them infrastructure, power, peace and order, and the quality of the labor force. It would be foolhardy to think that all these factors or conditions will magically appear in the other proposed states outside the National Capital Region, Calabarzon, and Central Visayas once we shift to federalism.
Another reality we have to confront is that the shift to federalism will be costly and disruptive. That is why I have strongly urged prudence on the part of its proponents. It bears repeating that federalism must ensure that prosperity, not misery, is shared among the member-localities of each proposed state.
The Local Government Code offers a real and easily attainable route to local empowerment and decentralization without the risk of disruption, instability, and confusion.
If the end goal is to decentralize and devolve governance, all we need to do is amend the Local Government Code.