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Budget Watch

Consensus Statement of the Local Governance Budget Forum


Petition for Certiorari Prohibition and Mandamus with Application for Temporary Restraining Order

On the Local Governmant Service Equalization Fund (Speech delivered by former Asst. Secretary Antonio E. Nery, August 8, 2000 in SULU Hotel)

 

 

On the Local Government Service Equalization Fund

Speech delivered by Former Asst. Executive Secretary Antonio E. Nery, August 8, 2000 in Sulo Hotel
(continued)


In 1999, the P 5.0 Billion LGSEF was allocated using the following schemes, namely:

a) For the lst tranche, P2.0 Billion was directly released to the LGUs. The distribution of the fund was done using the codal formula of the Internal Revenue Allotment (IRA) for LGUs.

Under this scheme, all 78 provinces got an aggregate amount of P 460 Million or 23% of total allocation and the individual share received by a province averages to about 5.8 Million. For the 84 cities, the aggregate amount was P460 Million or 23% of the total allocation and on the average, a total received about P 5.47 Million. For the 1,524 municipalities, the aggregate amount was P680 Million or 34% of total allocation, which means that on the average a municipality received about P447,000. For the 41,940 barangays received P10,000.

b) For the 2nd tranche amounting to an aggregate of P 1.725 Billion, distribution to LGUs was done using the modified Cost-of-Devolved-Functions (CODEF) formula based on the CODEF distribution at the level ending CY 1992.

Under this component, 40% of total was shared among 78 provinces, 20% of total shared among 84 cities and 40% of total shared among 1,524 municipalities. The average individual share received by a province was about P 8.8 Million; a city, P 4.1 Million; a municipalities, P 452,000.

c) Together with the 2nd tranche, financial amounting to a total of P 275 Million was distributed to affected LFGs as a local affirmative actio to cover the decrease in their IRA due to the reduction in their respective land area conponentr for computing the LGUs' IRA. Twenty-five (25) provinces, four (4) cities, and 85 municipalities were adversely affected by the implementation of the OCD Resolution No.99-001. This policy measure, which the OCD adopted, addresses the issues related to the cadastral surveys on the land areas of LGUs concerned which to date are still not final and not approved by the Land Management Bureau (LBM).

d) For the balance amounting to P 1.0 Billion, the distribution was done a project-based mechanism to enable disadvantaged LGUs to accessfunds assistance to support their local affirmative action projects (LAAP).

This LAAP mechanism is governed by a set of guidelines and procedures prescribed by the OCD pursuant to Resolution No. 99-003. The LAAPs by proponent LGUs were assessed and approved by the TWG and OCD en banc.

This LGSEF component supported 27 provinces, with an average share of about P 5.5 Million each; 33 cities, with an average share of about P 4.1 Million each; 352 municipalities, with an average share of about P 1.5 Million each; and 251 barangays, with an average share of about P 390,000 each.

For CY 2000, the amount of Two and a Half Billion Pesos (P 2.5 Billion) chargeable against the P 5.0 Billion LGSEF for CY 2000 has already been released directly to all the LGUs using the IRA codal formula. Under this distribution scheme,the individual share received by a province averages to about P 7.37 Million; a city, P 6.84 Million; a municipality, P 557,000; and a barangay, P11,900.

Given these statistics, it is obvious that the aggregate amount of P 5.0 Billion earmarked for access by LGUs each year under LGSEF is quite limited considering the number of LGUs that need assistance.

In fact, the OCD is flooded with the pending requests from LGUs all over the country for financial assistance to cover their local affirmative action projects. Based on the records of the Secretariat, 67 provinces have submitted project proposals worth P 2.3 Billion; 36 cities with submitted projects totaling to P 743 Million; 858 municipalities with requests amounting to P218 Million. We have with us more than P 18.9 Billion worth of proposals.You could imagine how full are the hands of the OCD given that only P 2.5 Billion remains unallocated under the LGSEF for CY 2000.

The seemingly endless flow of requests for funding assistance is indicative of a lot of things which, I believe, stand for what we share as common concerns.What more do the local governments need to uplift the lives of their people, many of whom are underserved and disadvantaged? How much extra support is needed to fulfill their mandates of service and plug the gap in resources to fully fulfill them? How fast and timely would these extra help come?

I daresay these are questions that the LGSEF continues to grapplke with for nearly two years now. The continuing calls of LGUs for additional resources resonate loud and clear. Until such time these calls are addressed, the LGSEF stands to serve as a stop gap measure for them to at least partially meet their mandates in the service of the people that we mutually serve.

It is significant to note that given a wide array of funds sources that LGUs can access, the LGSEF is deluged with all types of project proposals that otherwise can be supportedby other funding windows in government. Perhaps, the come-on lies on the transparent and fast processes undertaken by the OCD in the approval of projects as the immediate and direct releases of funds under the LGSEF.

Let me stress that these processes the active participation of the four major leagues of LGUs. Definitely, they stand strong and committed as the strong voices of all provinces, cities, municipalities and barangays. In most cases, their positions and policy initiatives define character of the LGSEF and how implementation proceeds.
PUTTING LGSEF IN THE CONTEXT OF THE FORUM'S THEME


Having said these, allow me to put the LGSEF in the context of forum's theme entitled, "WHO CONTROLS LOCAL GOVERNMENT FUNDS? GOVERNMENT INCURSIONS ON LOCAL FISCAL AUTONOMY." Sounds like a simple question, yet with a whip of critical perspective.

Ladies and gentlemen, with your indulgence, let me tackle this simply. After all, my preceding presentation has already drawn for you a clear picture of what the LGSEF is and did so far. As it is, you can affirm that the LGSEF is a nationwide funding program for local governments at all levels and across the country. Its P 5.0 Billion allocation was earmarked under the General Appropriations Act since 1999.

It is common knowledge that, at the level of the GAA processes, the control button is the responsibility of the Congress. But this is not completely true. While the GAA is considered as the national government instrument appropriate budgets to both national government agencies and local government units for its operations, the provision of this law are based on consultations and budget hearings involving all concerned agencies and units of government.

In the case of LGSEF, this fund found its way into the GAA as a result of the persistence of the LGUs with Gov. Joey Lina at their helm. At the time when President Estrada was also serving as t e Secretary of Interior and Local Government with Sec. Puno then as his undersecretary, a series of consultations between the DILG and ULAP was undertaken to define possible solutions to address the financial shortfall facing LGUs in the delivery of basic services, particularly those that were devolved to them pursuant to the Local Government Code of 1991. These initiatives led to the issuance of EO 48 establishing the LGSEF and reactivating the OCD in late 1998.

At that point the OCD Secretariat, in coordination with DILG undertook rapid survey of the actual costs incurred by LGUs in implementing devolved programs, projects and facilities for CY 1997 to derive an indicative costs of devolved perograms and facilities at the level of CY 1999. It also covered the estimation of how much additional funds the LGUs would need to fully and efficiently implement the functions, facilities and services devolved to them by the national government agencies concerned.

Significant findings of the survey shows that the indicative costs of devolved functions (CODEF), including the additional required amount to efficiently and fully deliver said services in the provinces, cities and municipalities at the 1999 level would total to about P 22.8 Billion, while the guaranteed CODEF which LGUs receive annually is fixed at P 6.5 Billion based at the level ending in December 1992.

The study revealed that the LGUs had assumed the average difference of what DBM would release to them. But, while these funding gaps maybe cover up by the incremental increase in IRA of LGUs, which was about P 12 Billion for CY 1999, as pointed out by the DBM, the LGUs, particularly the 5th and 6th class municipalities, would not be able to match these amounts with their already meager IRA.

The survey outputs indeed confirmed the clamor of LGUs for an augmentation fund to cover the inadequacy and the disparity in terms of the CODEF provisions as well as the inequity in relation to the fiscal capacity of LGUs as a result of an across-the-board IRA formula.

Given a solid justification, the OCD, with the strong endorsement of the leagues of LGUs, requested the Senate and the House of the Representatives to consider the resolution of the OCD for al allocation in the 1999 GAA. Said OCD resolution clearly stated that this allocation be separate and apart from the IRA share of the LGUs. Let me emphasize that this position remained in the succeeding requests made for CY 2000 and CY 2001.


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