LGPF: Welcome Remarks

The IRA Cut: Threat to Local Governance and Democracy
Atty. Vincent Edward R. Festin and Atty. Marlon J. Manuel

INTRODUCTION

On the 10th of October 1991, Republic Act 7160, known as the Local Government Code (LGC) was signed into law by then President Corazon C. Aquino. The law was, to recall, an effort to give flesh to Article X of the 1987 Constitution, specifically Sec. 3 thereof. At the risk of sounding trite, we can safely say that the law's passage was greeted with much enthusiasm as it was widely perceived as a means of ending centralism in governance and opening up avenues for greater democratic participation and autonomy. Of course, the passage of the Code likewise carried with it greater responsibilities for local governments what with the devolution of a considerable number of tasks previously undertaken by the national government.

Necessarily, with the assumption of more and more duties comes the right to possess the wherewithal to effectively carry out these functions. Of the various sources of revenue mandated by the law, one such source has come to be relied upon most by the local governments, the Internal Revenue Allotment or IRA. So dependent have these local government units become to the IRA that it will not be surprising to find that a considerable chunk of their own budgets would be sourced from the IRA.

In December of the past year 1999, Senator John Osmeña, Chair of the Senate Finance Committee, announced that the government was faced with the prospect of incurring a severe deficit. It was hence necessary, to undertake measures to prevent such a deficit from occurring. By this he meant that certain budgetary items had to be reduced or cut and that others had to be placed in the item for "unprogrammed" expenses. Among other items that he targeted for reduction was an amount of P30B out of a total amount of P121.7B originally appropriated for the internal revenue allotment (IRA) of local government units.

Expectedly, local officials raised a howl over the proposal. In an act that was virtually unprecedented, these officials, through the Union of Local Authorities of the Philippines (ULAP), took to the streets and marched in protest against the proposed move. They likewise threatened a four-day work stoppage unless the P30B was restored as a regular appropriation. The show of force, and the veiled threat that the IRA's restoration was a condition precedent to local officials' support for Pres. Estrada's Constitutional Correction for Development or Concord, forced the hand of the Chief Executive to persuade the Senate to "reprogram" the amount. Local officials were exultant at their triumph. These, however, were but the first acts in an unfolding drama.

At the expected signing of the Bicameral Conference Committee report on the budget deliberations, Senator Osmeña decided to conveniently absent himself thereby derailing the signing of the report and creating an impasse on the issue. Soon thereafter, local officials' complaints and protests notwithstanding, a portion of the IRA amounting to P10B was still placed under "unprogrammed fund".

Senator Osmeña insists that no cut was ever made on the IRA. What he describes as real cuts were those imposed on other agencies such as those made on the budget for the Departments of Education, Culture and Sports, Agrarian Reform and the Interior and Local Government. He explains that the characterization of the P10B as "unprogrammed" funds is not, by and of itself, a cut and that Congress has not failed in its duty to appropriate funds for the IRA.

Local officials, however, have remained steadfast in their opposition to any limitation on the IRA. In the ensuing days, ULAP revealed the results of a study conducted on the proposed General Appropriations Act. ULAP divulged that the budget was bloated by items consisting of "pork barrel" funds for legislators. ULAP claimed that the "pork barrel" was unconscionable considering the "cut" in the IRA as well as other budgetary items. In reaction, President Estrada vowed to veto the items alleged to contain "pork," only to change his mind the following day and ask where the "pork" was in the budget.

The bickering between Congress, the President and Local Officials has occupied the headlines in the past few months. Nevertheless, the story, as it continues to develop, is not without precedent. In 1997, then President Fidel Ramos issued Administrative Order No. 372 which withheld 10% of the IRA without consultation and without premising his act on an "unmanageable public sector deficit" as required by the Local Government Code.

Based on these events, certain questions relative to the IRA cry out for answers. These pertain to: the characterization of the IRA under the law; what may be considered as cuts on the fund; the meaning of "automatic release" of the fund; and the requirements for legal and valid "cuts" on the same. The answers to these issues become urgent. Given the country's penchant for deficit spending, it is not unlikely that cuts on the IRA, as first done by the Ramos Administration and now by Congress, will become a recurring practice by the national government and will constitute a threat to local autonomy.

It is in the light of these circumstances that this study is being conducted. This paper shall show that the delineation of P10B for the IRA to "unprogrammed" funds is actually a cut on the IRA of the local governments. It shall also show that the cut was improper, violating as it does, both the Constitution and the Local Government Code. It shall then proceed to display the effects of the cut on the effectivity of governance and its implications on autonomy and development at the local level.