Mandanas-Garcia Ruling; Unconstitutionality of the Internal Revenue Allotment (IRA); and the National Government and Fiscal Autonomy of Local Government Units

LGUs should not celebrate too early by embarking on expensive projects that they cannot sustain. LGUs should always review Art. 17 of RA 7160 to both guide them in choosing projects to implement and manage the expectations of their stakeholders.

One of the key features of the Philippine 1987 Constitution is its push towards decentralization of government and local autonomy. Local autonomy has two facets, the administrative and the fiscal. Fiscal autonomy means that local governments have the power to create their own sources of revenue in addition to their equitable share in the national taxes released by the National Government, as well as the power to allocate their resources in accordance with their own priorities. Such autonomy is as indispensable to the viability of the policy of decentralization as the other.

Implementing the constitutional mandate for decentralization and local autonomy, Congress enacted Republic Act No. 7160 (RA 7160), otherwise known as the Local Government Code (LGC), in order to guarantee the fiscal autonomy of the LGUs by specifically have a share in the national internal revenue taxes. The internal revenue allotment (IRA) is determined on the basis of the actual collections of the National Internal Revenue Taxes (NIRTs) as certified by the Bureau of Internal Revenue (BIR).

Mandanas and his group as well as Garcia challenged the national government by filing a case in the Supreme Court to address whether or not the exclusion of certain national taxes from the base amount for the computation of the just share of the LGUs in the national taxes is constitutional. Mandanas’ group and Garcia filed a petitioned to release the additional and unpaid IRA, respectively to LGUs.

Mandanas et. al Petition – Following the Petitioned Base Amount of LGU Shares in FY 2012
Release of the additional amount of to the LGUs as their IRA for FY 2012P60,750,000,000.00
Release of the  total unpaid IRA for FY 1992 to FY 2011P438,103,906,675.73

To know more about the Mandanas-Garcia Ruling check out https://cityplanningcoordinator.blog/2021/07/09/mandanas-garcia-vs-executive-secretary-case-digest/

Let us simplify the story.

Imagine you are the head of your family. A person promised to pay you yearly a certain amount that you will use to provide for the needs of your family. Eventually, you realized that the amount being paid to you for almost two decades is not the agreed amount that should have been given to you and your family. You filed a case in court and it took several years before the court decided that the amount being paid to you is not the right amount.

You started to look back and imagined how your family should have benefitted from the withheld payment. You thought that with the said amount, you could have provided your children very good education and health care as well as widened possible opportunities (opportunity cost). But, all is well, you’ve won, you are right in asserting what is just.

However, the court ruled that this person would not pay anymore the two decades withheld amount and will just give the correct (just share) amount the following year. You cannot argue with the court because that is their final decision and must respect it. You are excited that you’ve won your case, proved you are right, and will have more resources for your family the following year.

But there’s more, the person realized that since you will be getting more, there is a need to give you more responsibilities that will entail additional expenditures on your part. This person is thinking of ways on how to give you more/additional tasks or responsibilities so that your just share (not additional) is spent according to what they want you to spend on your family.

In fairness, in the last two decades, the said person, aside from giving you your yearly agreed support, helps your family by providing casual assistance in different forms.

This is the current situation of the Local Government Units (LGUs) in the Philippines. The family is the LGU, the person is the national government, the children are the LGU constituents, and the support is the Internal Revenue Allotment (IRA) which is now called the National Tax Allocation (NTA).

Executive Order 138

The National Government enacted Executive Order No. 138 entitled “Full Devolution of Certain Functions of the Executive Branch to Local Governments, Creation of a Committee on Devolution, and for other purposes” on June 1, 2021 in response to the Mandanas-Garcia ruling.

To know more about EO 138 check out https://www.officialgazette.gov.ph/2021/06/01/executive-order-no-138-s-2021/

The recitals of EO No. 138 state that in the Constitution, LGUs shall have a just share, as determined by law, in the national taxes which shall be automatically released to them and that the President shall exercise general supervision over local governments; that RA 7160 devolved the delivery of certain basic services from national to LGUS (Section 17, RA 7160) in accordance with established national policies, guidelines and standards; and that the total shares of the LGUs from the national taxes is expected to significantly increase starting FY 2022 in line with the implementation of the Mandanas ruling; among others.

The general policy of EO 138 is that the National Government (NG) is fully committed to the policy of decentralization enshrined in the Constitution and relevant laws which are aimed at the following:

  1. Developing capabilities of local governments to deliver basic social services and critical facilities to their constituents, increase productivity and employment, and promote local economic growth.
  2. Ensuring accountability, competence, professionalism and transparency of local leaders through the development of institutional systems that uphold good governance and strengthen their capacities for managing public resources.

According to the EO the role of the NG is to set the national policy, development strategy, and service delivery standards, and to assist, oversee and supervise the LGUs, complementary to the stronger implementing role that the LGUs shall assume by reason of devolution; to determine functional assignments between and among different levels of government; to formulate and pursue an institutional development program in collaboration and to support the LGUs in order to strengthen their capacities and capabilities to fully assume the devolved functions based on RA 7160 and other relevant laws; and to resolve any ambiguity as to the interpretation of the power granted to an LGU in favor of devolution.

According to EO 138, the role of LGUs include the preparation of their Devolution Transition Plans (DTPs) in Close Coordination with the NGAs concerned, formulation of their Capacity Development Agenda based on the assessment framework and guidelines issued by the Department of Interior and Local Government – Local Government Academy (DILG-LGA), and the formulation of their respective Communications Plans and Strategies which are aligned and complementary to the communications plan formulated and approved by the Committee on Devolution.

The Mandanas-Garcia ruling prompted the national Government to enact EO 138 to ensure full devolution of certain functions. However, specific functions were already devolved to LGUS in 1992 via RA 7160. Did RA7160 only mandate partial devolution? Why is it called full devolution? Is there something new to devolve?

For me, EO 138 showed obvious realities at the LGU levels.

First is that the NG is aware that there are LGUs that cannot provide all the required devolved services to them as enumerated in Sec. 17 RA7160 due to inadequate financial resources. This is the reason NG provides Assistance to LGU programs and projects.

Second is that the Mandanas-Garcia ruling will help promote LGUs further pursue their desired development. Align with the concept of local autonomy and with the just share of the national taxes, LGUs can now fund their needed projects.

Third is that with the transfer of the remaining “just share” of the LGUs from the NG, wherein the NGs enjoyed the said share for almost two decades, the NG is worried that some of their programs will be affected by the decrease in their available fund, thus, the NG is clearly delineating projects that will be funded by them and by the LGUs and in part ensure that the LGUs perform their devolved services or add to those already devolved services.

Department of Budget and Management Local Budget Memorandum No. 82-2021

The DBM LBM No. 82 – 2021 entitled “Indicative FY 2022 National Tax Allotment (NTA) Shares of LGUs and Guidelines on the Preparation of the FY 2022 Annual Budgets of LGUs” was released on June 14, 2021.

To know more about DBM LBM No. 82 – 2021 check out https://www.dbm.gov.ph/index.php/279-latest-issuances/local-budget-memorandum/local-budget-memorandum-2021/1887-local-budget-memorandum-no-82

According to DBM LBM No. 82 – 2021, the NTA shares of LGUs significantly increased in FY 2022 as a result of the implementation of the SC decision on the Mandanas-Garcia Case. Consequently, starting FY 2022, there shall be scaling down of the financial subsidy of National Government Agencies (NGAs) for local programs and projects of LGU.

However the memorandum reminds LGUs to consider the expected down trend of NTA in the succeeding years, specifically in FYs 2023-2024. This is because of the lower revenue collections of the Government in FY 2020 and possibly in FY 2021 as a result of the continuous imposition of community quarantines and restrictions on the mobility of the general public due to the COVID-19 pandemic.

DBM LBM No. 82 – 2021 showed the NTA allotment of LGUs for fiscal year 2022. LGUs will have more resources to fund their preferred projects (if not negatively affected by the impact of EO 138). However, LGUs should be very careful in choosing projects that will require the same resources to maintain or sustain. The memorandum warned LGUs that their just share in 2023-2024 will be lower than in 2022.

What are its implications?

First is if the LGU embarks on big projects like building hospitals, hiring more personnel, etc., it may afford to implement it on 2022 but will have difficulty sustaining it in 2023-2024.

Second is that the LGUs are still recovering from their unplanned expenses brought about by the illegal drug war and the pandemic. 2022 is the time wherein hopefully they can resume their programs related to their desired local development with the help of its “just share” from the NG.

The Pandemic displayed how LGUs stepped-up to the global problem by taking care of its constituents. The NG and LGUs partnered in delivering support (food and health) to ensure the survival of the people. It may be enough or ideal but I believe they are doing their best specially the LGUs.

Just Share and Beyond

The “just share” is not an additional fund. It is the right fund that should have been given to LGUs to ensure to reach their self-determination via their political and fiscal autonomy. It is not correct to treat it as an additional fund. It is also not proper to add responsibilities to the LGUs because they will now get what they should have gotten yearly in the past two decades.

LGUs should not celebrate too early by embarking on expensive projects that they cannot sustain. LGUs should always review Art. 17 of RA 7160 to both guide them in choosing projects to implement and manage the expectations of their stakeholders.

Devolved Services (RA 7160 Sec. 17)
BarangayMunicipalityProvince
(i) Agricultural support services which include planting materials distribution system and operation of farm produce collection and buying stations;   (ii) Health and social welfare services which include maintenance of barangay health center and day-care center;   (iii) Services and facilities related to general hygiene and sanitation, beautification, and solid waste collection;   (iv) Maintenance of katarungang pambarangay;   (v) Maintenance of barangay roads and bridges and water supply systems;   (vi) Infrastructure facilities such as multi-purpose hall, multi-purpose pavement, plaza, sports center, and other similar facilities;   (vii) Information and reading center; and   (viii) Satellite or public market, where viable;    

     
Devolved Services to Municipalities + Provinces
= Devolved Services to Cities
(i) Extension and on-site research services and facilities related to agriculture and fishery activities which include dispersal of livestock and poultry, fingerlings, and other seeding materials for aquaculture; palay, corn, and vegetable seed farms; medicinal plant gardens; fruit tree, coconut, and other kinds of seedling nurseries; demonstration farms; quality control of copra and improvement and development of local distribution channels, preferably through cooperatives; interbarangay irrigation systems; water and soil resource utilization and conservation projects; and enforcement of fishery laws in municipal waters including the conservation of mangroves;   (ii) Pursuant to national policies and subject to supervision, control and review of the DENR, implementation of community-based forestry projects which include integrated social forestry programs and similar projects; management and control of communal forests with an area not exceeding fifty (50) square kilometers; establishment of tree parks, greenbelts, and similar forest development projects;   (iii) Subject to the provisions of Title Five, Book I of this Code, health services which include the implementation of programs and projects on primary health care, maternal and child care, and communicable and non-communicable disease control services; access to secondary and tertiary health services; purchase of medicines, medical supplies, and equipment needed to carry out the services herein enumerated;   (iv) Social welfare services which include programs and projects on child and youth welfare, family and community welfare, women’s welfare, welfare of the elderly and disabled persons;  community-based rehabilitation programs for vagrants, beggars, street children, scavengers, juvenile delinquents, and victims of drug abuse; livelihood and other pro-poor projects; nutrition services; and family planning services;   (v) Information services which include investments and job placement information systems, tax and marketing information systems, and maintenance of a public library;   (vi) Solid waste disposal system or environmental management system and services or facilities related to general hygiene and sanitation;   (vii) Municipal buildings, cultural centers, public parks including freedom parks, playgrounds, and other sports facilities and equipment, and other similar facilities;   (viii) Infrastructure facilities intended primarily to service the needs of the residents of the municipality and which are funded out of municipal funds including, but not limited to, municipal roads and bridges; school buildings and other facilities for public elementary and secondary schools; clinics, health centers and other health facilities necessary to carry out health services; communal irrigation, small water impounding projects and other similar projects; fish ports; artesian wells, spring development, rainwater collectors and water supply systems; seawalls, dikes, drainage and sewerage, and flood control; traffic signals and road signs; and similar facilities;   (ix) Public markets, slaughterhouses and other municipal enterprises;   (x) Public cemetery;   (xi) Tourism facilities and other tourist attractions, including the acquisition of equipment, regulation and supervision of business concessions, and security services for such facilities; and   (xii) Sites for police and fire stations and substations and municipal jail;(i) Agricultural extension and on-site research services and facilities which include the prevention and control of plant and animal pests and diseases; dairy farms, livestock markets, animal breeding stations, and artificial insemination centers; and assistance in the organization of farmers’ and fishermen’s cooperatives and other collective organizations, as well as the transfer of appropriate technology;   (ii) Industrial research and development services, as well as the transfer of appropriate technology;   (iii) Pursuant to national policies and subject to supervision, control and review of the DENR, enforcement of forestry laws limited to community-based forestry projects, pollution control law, small-scale mining law, and other laws on the protection of the environment; and mini-hydroelectric projects for local purposes;   (iv) Subject to the provisions of Title Five, Book I of this Code, health services which include hospitals and other tertiary health services;   (v) Social welfare services which include programs and projects on rebel returnees and evacuees; relief operations; and population development services;   (vi) Provincial buildings, provincial jails, freedom parks and other public assembly areas, and similar facilities;   (vii) Infrastructure facilities intended to service the needs of the residents of the province and which are funded out of provincial funds including, but not limited to, provincial roads and bridges; inter-municipal waterworks, drainage and sewerage, flood control, and irrigation systems; reclamation projects; and similar facilities;   (viii) Programs and projects for low-cost housing and other mass dwellings, except those funded by the Social Security System (SSS), Government Service Insurance System (GSIS), and the Home Development Mutual Fund (HDMF); Provided, That national funds for these programs and projects shall be equitably allocated among the regions in proportion to the ratio of the homeless to the population;   (ix) Investment support services, including access to credit financing;   (x) Upgrading and modernization of tax information and collection services through the use of computer hardware and software and other means;   (xi) Inter-municipal telecommunications services, subject to national policy guidelines; and   (xii) Tourism development and promotion programs;
Devolved Services to LGUs (RA 7160)

Urban Planning in Local Government Units (LGUs)

Most of us when we envision the world of Urban Planning think of places like Singapore, Washington DC, Netherlands, and the likes. It is a good start but urban planning is not limited to grand urban designs. It is not limited to big urban planning firms. Actually, it is more felt and relevant at the local government unit (LGU) level.

What is an LGU? Why is it important? Why is it relevant? Does urban planning reach LGUs? How does it affect you as a constituent of your LGU?

LGUs are territorial and political subdivisions of the State that enjoys genuine and meaningful local autonomy which enables them to attain their fullest development as self-reliant communities and make them more effective partners in the attainment of national goals. – RA 7160 Declaration of Policy (Sec 22 a)

I believe I need to elaborate the definition of an LGU. First is a country is composed of LGUs. These LGUs have defined territories (land areas). Second is they are political subdivisions in a way that people in the LGUs vote for their governors, mayors, barangay captains and their councils. Third is it is the state’s policy is to provide LGUs genuine and meaningful local autonomy. It means that the state (national government) allows its LGUs to decide and formulate policies which are important and relevant to them. The objective is for the LGUs to achieve its desired development, self-reliance and decide what is good or beneficial (general welfare) to them. Fourth and last is to make LGUs effective partners of the state (national government) in the attainment of national goals. Take note that the word used was “partner” and not “subordinate”.

LGUs are lower government units that are not part or below the national government level. LGUs are composed of autonomous regions, provinces, cities, municipalities, and barangays. As of 2017, there are 81 provinces, 145 cities, 1,489 municipalities and 42,046 (year 2020) barangays which totals to 43,761 LGUs in the Philippines.

Now, let us look at some concepts related to LGUs. I learned these things when I studied Public Management. I’ll upload a slide presentation copy so you can review it later.

What are LGUs slides:

The most important concept when we talk about LGUs is decentralization. From the word itself we can easily say that it means moving away from the center. And you are right! So what is the center that we are talking about? It is the National Government. These are the Offices / Departments of our President and National Congress. The things being decentralized are the power, authority and responsibility to govern the people.

Decentralization generally refers to the systematic and rational dispersal of power, authority and responsibility from the center to the periphery, from top to lower levels, or from national to local governments (Raul de Guzman).

There are two main and obvious reasons for decentralization. First is it hastens decision-making processes by decongesting central (national) government and reducing red tape. Imagine if a simple change of street name, identification of garbage collection route, putting up of pedestrian lanes, designation of smoking areas, etc. are being sent to Congress or to the President for decision. It is not practical. Second is it increases citizen participation and empowers them by leading to a more open and democratic government. It is easier to talk to our mayors, council members, or LGU employees and demand for improvement of services or promote or rally against a policy than bringing them up to the national level. It gives people more power to participate, influence and be heard by the government at the LGU level.

There are three (3) major types of Decentralization in the Philippines. These are devolution, deconcentration and debureaucratization.

When we talk about decentralization of LGUs, we are talking about devolution. Devolution is the transfer of powers and authorities from the national government to lower level political or local government units. The LGU has an elected executive and local legislative body that passes laws or ordinances; has specific taxing powers; has jurisdiction over a certain defined geographical area; and is political in nature. In devolution there is an actual transfer of power and autonomy from the central government to its components.

In deconcentration, there is no transfer of power and autonomy but only transfer of functions. It is the transfer of functions to lower level administrative units designated by the central office. These are Regional or provincial offices of the departments of the national government like the Department of Public Works and Highways, Department of Trade and Industry, National Economic and Development Authority, etc. In deconcentration, the authority still rests in the central offices and the decentralization is mostly administrative in nature.

The last type decentralization is debureaucratization. It is the transfer of power and functions of the government to non-government institutions. The power is in the civil society organizations, non-government organizations, professional organizations, cooperatives, people’s organization and private sectors. We can appreciate debureaucratization in the following instances: awarding of service / management / lease Contracts; public-private partnerships; joint venture agreements; concessionaires, privatization / divestiture, etc.

“With great power comes great responsibility”— Peter Parker / Spiderman

The responsibilities of the LGUs are clearly presented in the Local Government Code of 1991 (Republic Act 7160). The Local Government Code of 1991 is known as the Bible guide of LGUs. The law provided the legal and institutional infrastructure for the participation of civil society in local governance, increased the financial resources available to LGUs and laid foundation for the development and evolution of more entrepreneurial-oriented local governments. (Brillantes, 1998)

Numerous aspects of basic services that earlier were the responsibility of the national government were devolved to LGUs as well as the enforcement of certain regulatory powers.

RA 7160 link: https://www.lawphil.net/statutes/repacts/ra1991/ra_7160_1991.html
There are two inherent characteristics (nature) of LGUs. These are political and corporate characteristics.

An LGU is a political subdivision of the national government. It is an instrument of the State to help carry out functions of the government. It is a Public or Government Agency. LGU has a public character (not private). Being a public agency its concern is to promote the general welfare of its constituents, deliver devolved function and collect taxes to fund the delivery of its services.
LGU as a corporate entity or corporation represents the inhabitants of its territory to administer its own private affairs / private character. It means that an LGU has a right of succession in its corporate (LGU) name, to hold and convey properties, borrow money, to sue and be sued, and to enter into contracts, etc.

Let’s go back to urban planning. Now that we know the powers, responsibilities and impact of LGUs in our everyday life, do you think it is important to have planners in each of the LGUs?

Urban planning is strong at the province, city and municipality levels (total of 1,715 LGUs).

LGUs are required to appoint a Local Planning and Development Coordinator (Planning Director) that is responsible for planning formulation and activities in their locality. These planning directors are required to be a licensed urban/environmental planners via Civil Service Commission Memorandum 1700294 entitled Amendment to the QS of the Local Planning and Development Coordinator Positions in the LGUs enacted on February 2, 2017. Imagine 1,715 Urban Planners leading their LGUs!

CSC Memorandum 1700294 Link: http://www.csc.gov.ph/phocadownload/MC2017/MC%20No.%2010,%20s.2017.pdf

“The whole is greater than the sum of its parts” – Aristotle

Having Urban Planners practicing urban planning knowledge and skills at the LGU level will surely positively influence the development of the country as a whole. Let us all get involved and participate in our municipalities and cities planning activities and determination of local policies.

Other related topics:

How to become an Urban (Environmental) Planner? – Qualifying for the Exam

What Does an Urban Planner Do?

What is Urban (Environmental) Planning?