The I.R.A. and Local Autonomy

At the heart of this issue is the question of local fiscal autonomy. Actually, from the point of view of the ULAP, the opposition to the cut was as much a question of the preservation of autonomy as it was a question of survival. From the official position of the ULAP which was certified by its national president, Gov. Joey D. Lina, and approved on the 9th of December 1999, the fact that the delivery of basic services would suffer from the I.R.A. cut was highlighted and the question of local fiscal autonomy was hardly touched, except for a note that the automatic release of the I.R.A. was guaranteed by the 1987 Constitution and the Local Government Code of 1991. One cannot help but agree with the ULAP The I.R.A. cut will amount to a substantial reduction of funds that will finance the many basic services that were devolved to them by the Code since 1992. Today, local government units (LGUs) are mandated to deliver health, agriculture, environment and social services that the national government agencies used to deliver. A reduction of their budgets will translate to a reduction of funds for health services, local infrastructure maintenance, day care services, disaster aid programs, and irrigation projects. The ULAP was right in emphasizing the fact that an I.R.A. cut would translate into a cut in basic services that LGUs provide for the poorest of their constituents. In a press statement issued by civil society groups in the Philippine Daily Inquirer dated 12 January 2000, they noted that the proposed cut to the I.R.A. would amount to the following: the share of provinces would be reduced by Php 103 million each, cities by Php 99 million each, municipalities by Php 8 million each, and barangays by Php 173,000 each. Specifically, they sited that the province of Cebu would lose Php 221-million, Ilo-ilo would lose Php 161 million, and Rizal Php 130 million. Cities like Manila would lose Php 364 million, Quezon City Php 445 million, and Las Piñas Php 111 million.

These cuts will certainly affect social services which already suffer with the spending habits of LGUs. In studies by Prof. Jocelyn Quaresma and Simeon Ilago made in 1996, they note that up to 1994 almost half of LGU spending goes to personnel services and about 30% goes to maintenance and other operating expenses, while social and economic services received less than 20% of expenses. At least this was the pattern up to 1994. Such spending patterns could be alarming because many of the personnel expenses fund casual employees: an item which Terrence R. George notes, is "a frequently used source of patronage to reward loyal followers." Quaresma and Ilago note that "…while more resources have come into the hands of local governments, expenditures on capital outlay, and economic and social services remain wanting." Dr. Rosario Manasan's paper "Local Government Financing of Social Service Sectors in a Decentralized Regime: Special Focus on Provincial Government in 1993 and 1994" notes that provincial government expenses on health was below the level needed to sustain expenses before devolution, and social welfare spending "declined in nominal terms" as well. With a 25% cut on their budgets, social service spending will suffer even more.
We must note though, that the I.R.A. cut is not only a threat to social services and the social and economic welfare of the constituents of local governments, this cut is also a threat to local autonomy itself. The I.R.A. is the just share of LGUs in the nation's internal revenue collections, e.g. "revenue from income tax from revenue income, business income, and corporate income; the 10% value-added tax; taxes on foreign trade; excise taxes on alcohol, tobacco, petroleum products, and the documentary stamp tax." This is part of what the Constitution calls the LGUs "just share, as determined by law, in the national taxes which shall be automatically released to them."(Art. X, Sec. 6) Republic Act 7160 or The Local Government Code of 1991 (The Code) is the law that determined that I.R.A. shares should mean this:

Further in Section 286, the Code makes this provision:

Thus, the Code fulfills the Constitutional mandate by providing a clear formula for the computation of the I.R.A. share and by providing for the automatic release of the shares.

The key issues in the I.R.A. cut controversy revolve around the fact that the Constitution and the Code recognize that local autonomy demands that local governments receive a fixed and predictable income that will be automatically released to them, without their being dependent on the national government's whims regarding its release or without just cause, i.e. an unmanageable budget deficit. If the idea of local autonomy is to give local government units the power and responsibility to provide for devolved, essential services for their constituents, to plan for the development of their localities, and to freely and effectively administer their political and administrative units, the LGU administrators need a source of income that is assured to them without their having to court the favor of the national government for projects or for a share of the national budget. As the Constitution makes clear, local governments shall have autonomy and they shall have a just share of the national taxes. Autonomy demands a just share of national taxes. After all, one cannot act autonomously if one does not have a reliable source of revenue. To be given the autonomy to administer their localities without the equivalent resources for such administration is an ineffective grant of autonomy. The Constitution and the Code wisely mandate the automatic release of the I.R.A. so that local governments can budget their administrations without needing to cater to the dictates of the national government, e.g. without mayors having to agree to support the CONCORD issue or to support the administration's candidates for elections to assure themselves of a budget. If these shares are not automatically released, national government can hold its release to make sure that LGUs tow the national government's line. Thus, the I.R.A. is to be released without lien or holdback and under a clear schedule.

The law does make provision for a cut in the I.R.A. share. Sec. 284 of the Code states: