Institute of Politics and Governance

On the Local Government Service Equalization Fund

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

At any rate, believing in the intent of the LGSEF and the good that it will bring to the majority of LGUs that remain disadvantaged as far as their fiscal standing is concerned,
Senator Aquilino Pimentel, an old OCD member and Chairman of the Senate Committee on Local Government, sponsored and shepherded the inclusion of the LGSEF in the GAA in 1999 and 2000.

For CY 2001, Senator Pimentel has informed OCD, through his official representativein the OCD, Dir. Terry Dumogho, of his continuing support for the inclusion of the LGSEF in the GAA for CY 2001.His representation indicated that the LGSEF should be over and above the IRA share of LGUs and should be sourced from the operating budgetsof national government agencies,GOCCs, and other instrumentalities that have devolved functions and facilities as well as those which use local government facilities and resources to Resolution No. OCD-2000-026 dated 22 June 2000.

I share the belief that the inclusion of the LGSEF in the GAA in the succeeding years is a milestone for local government to push until such time that the IRA formula has been amended. In the 8 years of implementation of the code, the clamor to revise the formula and scheme for the determination of LGUs' IRA shares has never stopped.It woult seem that we are still in transition period for the devolution programas prescribed under the Code. Day-to-day attendant issues are raised by LGUs and continue to reach OCD.

While the conditions by which LGUs find themselves in have vastly changed since then, their needs have also changed. And, the nagging questions related to the fiscal autonomy fluctuate in accordance with who has more and who has less, between the national and local sectors in government and among the various levels of local governments. Can the playing fields be leveled?

Clearly, the intent of the OCD including its partners in Congress is not of control but mote of facilitation--- to bring resources where these are most needed. The OCD recognizes that a carefully designed intergovernmental transfer can be a tool to encourage sound fiscal management, efficient delivery of services and consequently good governance at the LGUs level.

Let me informs you that the OCD in partnership with the DILG is undertaking several studies to surface various aspects that have a bearing on our concern. These studies will be significant in providing a firm basis for short-term and long-term executive and legislative actions to address the limitations and shortcomings in the present revenue-raising and sharing schemes involving the LGUs.

We hope to draw out a basis for a rational and more efficient allocation of revenue between the national government and the LGUs. There are specific questions that need to have real and concrete answers: One is the IRA formula arbitrary and inequitable? Which LGUs have disproportionately large increases in IRA shares and which lost out? Two is the IRA codal formula reflective of the actual needs of the LGUs? Are there other measures to consider aside from the LGUs' population, land area and the equal sharing coomponents of the IRA formula? Three reports show that relative to the national budget, the IRA is miniscule. In 1997, the total IRA was only 14% of the national budget, while 86% was controlled and used by the national government agencies and offices. The question: Is the national revenue sharing scheme just and equitable?

When we have the answers to these questions, perhaps the path towards local fiscal autonomy will be rid of cobwebs, misconceptions, and all the myths that perpetuated the long-drawn transition towards real decentralization.

The OCD laid its stake to ensure that the goals of effective local governance and decentralization are achieved. It stands not to compromise the intent of the Code and the struggle of LGUs to attain their vision for local autonomy. Individually and collectively, the OCD asserts that local autonomy should and must be achieved.

But mere rhetorics and traditional ways can not go beyond the barriers that impinge upon our mutual goals towards local autonomy. And so, when we espouse this principle in the context of our respective perspectives, are we ready to assume new roles and pursue them as our strong incentives to play the part in this whole scheme or governance. The key stakeholders, including you and me, need to build and enhance our added value to the whole process. But to gauge our readiness requires a shift in perspectives --- from mere numbers and statistics to real human faces. Are these faces with leadership or less of it, with integrity or less or it, with fiscal management ability or less or it? Are these numbers for those who have less or for those with more to have more? In this arena, I think, the control button is the responsibility or each or us.
Who controls local government funds? As I am about to end my presentation, let me share you this one. This question is not a simple one at all. It is as complicated as synchronizing the diversified perspectives and interests involved in governance. Perhaps, our bid to get a clearer grasp of the issue at hand may only be as good as far as the limits of our own respective perspective and interest. Beyond that we find that we have only scratched the surface.

For now, the Supreme Court decision has made clear that the Executive Secretary and the Secretary of Budget and Management "are permanently prohibited from implementing Administrative Order Nos. 372 and 43, respectively dated December 27, 1997 and December 10, 1998, in so far as local government units are concerned."

Is Executive Order No. 58 and the special provisions of the GAA for CY 1999 and CY 2000 providing for the LGSEF appropriations another issue to be raised for clarification and decision by the Supreme Court? This was the question I asked myself after reading the SC ruling. Do you share the same one? Listen, let me confide a clue to a possible answer.

Allow me to share with you excerpts from the letter of the Union of Local Authorities of the Philippines (ULAP) to the OCD Chairman on their position regarding the LGSEF in the light of the Supreme Court Decision, as signed by the President of the major leagues of LGUs. It reads as follows:

Inasmuch as the Supreme Court had already ruled that any retention of the IRA is prohibited", we would like to reiterate the OCD resolution that the LGSEF for CY 2001 should be over and above the IRA, as initially intended under EO No. 48. And that henceforth, with the jurisprudence already established by the Supreme Court under G.R. 132988, dated July 19, 2000, the LGSEF should no longer be sourced from the IRA as this would be unconstitutional.