LGPF: Welcome Remarks

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

The IRA as a Legal Mandate

It is necessary to first settle the characterization of the IRA. Indeed, a degree of leveling-off is required if the recurrence of this issue is to be avoided.

It is noteworthy that in the approved General Appropriations Act of 1998, the IRA was referred to as "assistance" to local government units. Therein lies the rub. The term "assistance" lends itself to an interpretation that the fund may be withdrawn at the pleasure or caprice of both the executive and legislative branches. In a sense, the IRA is deprived of its mandatory nature if and when it is considered as assistance. Against this notion, however, can be found explicit provisions in both the Constitution and the Local Government Code clearly characterizing the IRA as mandatory. On this matter, the Constitution provides as follows:

ART. X. Sec. 6. Local Governments shall have a just share, as determined by law, in the national taxes which shall be automatically released to them. (emphasis supplied).

The Local Government Code, on the other hand states the following:

Sec. 284. Allotment of Internal Revenue Taxes. Local government units shall have a share in the national internal revenue taxes based on the collection of the third fiscal year preceding the current fiscal year as follows:

Sec. 286. Automatic Release of Shares.

(a) The share of each local government unit shall be released, without need of any further action, directly to the provincial, city, municipal or barangay treasurer, as the case may be on a quarterly basis within (5) days after the end of each quarter, and which shall not be subject to any lien or holdback that may be imposed by the national government for whatever purpose.

(b) Nothing in this Chapter shall be understood to diminish the share of local government units under existing laws. (Emphasis Supplied).

The unifying theme behind all of the provisions cited is the emancipation of the IRA from any form of interference and/or control from the national government. This merely echoes the very underpinnings of the Local Government Code in the first place. Clearly, the IRA is not assistance nor is it subject to any form of control, save only in exceptional circumstances. It is a Constitutional and legal mandate and an imperative for effective governance at the local level.

Not only the law, but jurisprudence as well has given the IRA its rightful characterization. In the case of Alvarez v. Guingona, the Supreme Court had the following to say:

The practical side to development through a decentralized local government system certainly concerns the matter of financial resources. With its broadened powers and increased responsibilities, a local government unit must now operate on a much wider scale. More extensive operations, in turn, entail more expenses. Understandably, the vesting of duty, responsibility and accountability in every local government unit is accompanied with a provision for reasonable adequate resources to discharge its powers and effectively carry out its functions. Availment of such resources is effectuated through the vesting in every local government unit of (1) the right to create and broaden its own source of revenue; (2) the right to be allocated a just share in national taxes, such share being in the form of internal revenue allotments (IRAs); and the right to be given its equitable share in the proceeds of the national wealth, if any, within its territorial boundaries.

Significant in the quote is that the Supreme Court has spelled out several "rights" pertaining to local government units. One such right is the IRA. Moreover, the same case distinguishes the IRA from funds that may be treated as aid when it states that:

…To reiterate, IRAs are a regular, recurring item of income; nil is there a basis too, to classify the same as a special fund or transfer, since IRAs have technical definition and meaning all its own as used in the local government code that unequivocally makes it distinct from special funds or transfers referred to when the Code speaks of "funding support from the national government, its instrumentalities and government-owned -or controlled corporations."

The discussion above makes the following points plainly evident: first, the fund is not assistance; second, the fund should be automatically released to local government units; and third, the IRA is a right that pertains to local government units.

A "Cut" By Any Other Name…

We can see that the IRA is not an amount that can be reduced through ordinary means and under slight pretenses. Any attempt, therefore, to reduce the IRA or subject the same to any condition should prompt one to declare that there has been a violation of the law. The Constitution and the Statute are rather clear when they state that the IRA should be automatically released and should be free from any lien or holdback.

Moreover, it should be remembered that the IRA is based on revenue collections of the third preceding fiscal year prior to that of the current fiscal year. The amount of the IRA, therefore, has already been collected and should rightfully accrue to the local government units. In other words, it is money that has been earmarked for their expenditures. This fact only serves to highlight what was stated in the case of Alvarez v. Guingona, as quoted earlier, that the entitlement to the IRA is a matter of right.

Congress' act of placing the P10B in unprogrammed funds is therefore a violation of this right. Contrary to the claim of Congress, a cut has in fact been imposed on the IRA. The fact that the release of the IRA is subject to a condition - availability of funds -runs counter to the absolute language employed in the Constitution and the law, that the IRA should be released automatically. It is, to employ the language of the law itself, subject to a "holdback".