The poorest local governments in the country will divide among themselves P1.25 billion in the first-of-its-kind growth equity fund (GEF) so they can catch up to the bigger roles they assumed amid the devolution of previously national government functions.
A July 7 local budget circular issued by Budget Secretary Amenah Pangandaman showed that among the beneficiaries of this year’s GEF were the provinces of Batanes, Siquijor, and Camiguin. These three provinces will get a combined 10 percent of the GEF or P125 million.
The seven cities listed down by the Department of Budget and Management (DBM) will receive a total of P125 million; the municipalities, the largest chunk of P875 million; and barangays, the remaining P125 million.
Pangandaman said the GEF “shall be used as financial assistance to the identified poor, disadvantaged, and lagging local government units for the implementation of priority projects to gradually enable the full and efficient implementation of the functions and services of concerned LGUs as provided under Section 17 of the Local Government Code of 1991.”
Despite the record P5.02-trillion 2022 national budget approved by former President Rodrigo Duterte, the first-ever GEF he green-lit was eight times smaller than the originally proposed P10-billion funding. Militant legislators had flagged the GEF as “pork.”
The GEF was supposed to help LGUs implement Duterte’s Executive Order (EO) No. 138, which transferred to them the responsibility to spend on local infrastructure, agriculture, social welfare, healthcare, and livelihood, among other sectors included in the Local Government Code. EO 138 was issued to address the national government’s reduced fiscal space with the implementation of the Supreme Court’s Mandanas-Garcia ruling in full swing this year.
In former President Duterte’s earlier budget message in the then-proposed 2022 national expenditure plan (NEP) submitted to Congress last year, he had said at least 16 provinces and 258 municipalities should benefit from the GEF if it amounted to P10 billion.
Last year, the Cabinet-level Development Budget Coordination Committee (DBCC) said the GEF was aimed at “addressing the problems of marginalization, unequal development, and high poverty incidence” among poorer LGUs.
“The GEF is a top-up to the national tax allotment (NTA) that LGUs will be receiving, and it will be made available to LGUs that are financially incapable of allocating funds and are technically weak in the implementation of devolved services,” Budget Undersecretary Rolando Toledo told the Inquirer last January.
To recall, the Supreme Court granted in 2018 and reaffirmed a year later the petitions of Batangas Gov. Hermilando Mandanas and former Bataan Gov. Enrique Garcia Jr., which stated that the LGUs’ share should come from 40 percent of the collection of all national taxes — the Bureau of Internal Revenue’s (BIR) tax take, as well as the Bureau of Customs’ (BOC) collections of import duties and other taxes.
As such, LGUs’ NTA jumped to a record P959.04 billion in 2022 based on all 2019 tax collections, from their formerly called internal revenue allotment (IRA) amounting to P695.49 billion last year, which was equivalent to two-fifths of national internal revenue taxes collected only by the BIR.
While the Mandanas-Garcia ruling will give LGUs more money, they were expected to struggle spending their higher budgets to implement big-ticket programs and projects devolved by the national government under EO 138. The World Bank had estimated that LGUs may fail to spend as much as P155 billion from their NTA this year.
Due to the drop in tax revenues collected by the government in 2020 at the onset of this prolonged COVID-19 pandemic, LGUs’ NTA in the proposed P5.268-trillion 2023 national budget will be a lower P820.3 billion.
Last month, Pangandaman said the DBM under her watch will look closely into how LGUs were spending their larger budget share.
Pangandaman had said the DBM will monitor if LGUs have been spending — or not — their NTAs, which, just like their IRA in the past, they usually commingled with other funds they get from the national budget. “LGUs have budget surpluses,” she had noted.
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