Section 6, Article X, General Provisions of the 1987 Philippine Constitution, provides that the LGUs shall have a just share, as determined by law, in the national taxes which shall be automatically released.

Section 284 of RA No. 7160 provides that the LGUs shall have a 40 percent share in the national taxes based on the collections during the third fiscal year preceding the current fiscal year. 

Sections 18 and 286 of RA No. 7160 and Articles 383 and 390 of its Implementing Rules and Regulations (IRR) provide that the share of LGUs shall be automatically and directly released to the provincial, city, municipal, or barangay treasurer without the need for any further action, and shall not be subject to any lien or holdback that may be imposed by the NG.

Section 4 of RA No. 9358, appropriating a supplemental budget for FY 2006, provides, among others, that the IRA (Internal Revenue Allotment) is considered automatically appropriated and that future local government share

During the budget preparation phase, the BIR (Bureau of Internal Revenue), BOC (Bureau of Customs), and the BTr (Bureau of Treasury) submit to the DBM (Department of Budget and Management) a certification showing the corresponding 40 percent shares of LGUs in the collection of national taxes made in the third fiscal year preceding the budget year. 

Afterwards, the DBM computes and allocates the individual share of LGUs based on the formula provided under Section 285 of RA No. 7160 (kindly refer to Question No. 7), using as bases pertinent supporting documents/data including the approved Census of Population and approved Master List of Land Area. 

The 40 percent share is determined per Section 284 (Allotment of Taxes) of the LGC: Local government units shall have a share in the national taxes based on the collection of the third fiscal year preceding the current fiscal year as follows:

(a)  On the first year of the effectivity of this Code, thirty percent (30%)

(b)  On the second year, thirty-five percent (35%); and

(c)  On the third year and thereafter, forty percent (40%).

LGUs are mandated to utilize their NTA shares to deliver the basic services devolved under Section 17 of RA No. 7160. Furthermore, each LGU shall appropriate in its annual budget no less than 20 percent of its NTA for development projects pursuant to Section 287 of the same law.

Moreover, pursuant to Article 409 of the IRR of RA No. 7160, the DBM (Department of Budget and Management) issues a local budget memorandum not later than June 15 of every fiscal year to inform, among others, the beneficiary LGUs of their respective NTA shares and the guidelines in the preparation of their annual budgets, while also reiterating the provisions of existing laws and policies (i.e., LGC, executive issuances, etc.) on the allocation and utilization of their local budgets.

The share of LGUs in the national taxes is allocated in the following manner:

The distribution of the shares of individual provinces, cities, and municipalities is based on the following formula prescribed in Section 285 of the LGC (Local Government Code):

The share of each barangay is computed as follows:

• PhP80,000 for each barangay with a population of not less than one hundred (100) inhabitants
• The balance is allocated as follows: Population – 60% and Equal Sharing – 40%.

Yes, because the LDF comes from the NTA. As mandated in Section 287 of RA No. 7160, each LGU shall appropriate in its annual budget, no less than twenty percent (20%) of its annual NTA to LDF which shall only be used on development projects.

To promote greater autonomy, transparency, and accountability, the said development fund shall be utilized in accordance with DBM-Department of Finance (DOF)-Department of the Interior and Local Government (DILG) Joint Memorandum Circular (JMC) No. 1 dated November 4, 2020.

The said JMC sets the general policies and guidelines to be observed by the LGUs in identifying and implementing development projects, including the prescription of the prohibited expenditure items.

No. The increased local share will not perpetuate NTA dependency. In fact, when comparing the FY (Fiscal Year) 2020 figures from the projections for FY 2022, the share of the NTA in the LGUs’ (Local Government Units) total income is anticipated to increase from 81 percent to 87 percent for provinces, 81 percent to 85 percent for municipalities and 43 percent to 49 percent for cities. This means that LGUs will have significantly higher shares in 2022 compared to 2020 

Nonetheless, there have been continuous efforts in addressing concerns on NTA dependency. In particular, oversight agencies, especially the DOF-Bureau of Local Government Finance (BLGF), have been advocating for the strengthening of the LGUs’ own revenue-generating measures and borrowing capacity from the Government Financing Institutions (GFIs), as well as its ability to enter into public- private partnerships and joint ventures with the private sector.

That is why, the DOF-BLGF will be conducting capacity-building programs on revenue generation and fiscal management to enable LGUs to fund the devolved services on their own. This is also mandated under EO no. 138. LGUs will also be provided with technical assistance on public financial management processes, from local planning, investment programming, resource mobilization up to local budgeting.

In addition, the NG (National Government) is also pushing for the enactment of the passage of Package 3 of the Comprehensive Tax Reform Program (CTRP) on Real Property Valuation Reform. This reform will enable the development of a more efficient real property valuation system, which in turn will broaden the tax base of the LGUs without necessarily increasing tax rates. This reform, once in place, will favorably impact revenue mobilization at the local level, enabling LGUs to fund the growing needs of their constituents.

The increase in the NTA shares of the LGUs puts them in a better position to directly implement programs, projects, and interventions that are tailor-fit to the priorities and needs of their respective localities and constituents, thereby supporting the LGUs’ economic development and growth.

The PPAs that will be scaled down or phased out by the NGAs concerned are those which involve functions and services that have already been devolved to the local governments pursuant to Section 17 of the LGC and other pertinent laws (See Annex A). The final list of PPAs that will be scaled down/phased out by the NGAs will be based on their respective DTPs (Devolution Transition Plans) submission.

In view of the administrative autonomy afforded to the LGUs pursuant to the LGC, the NG (National Government) cannot directly impose on the local governments, which specific programs and services to fund. It is recognized that the LGUs may have different priorities considering the characteristics of their localities, the needs of their constituents, and their capacities. 

Nonetheless, the NG can, at most, encourage and coordinate the prioritization and spending of the LGUs on certain programs and services through the issuance of policies and guidelines. Hence, together with the DILG (Department of Interior and Loal Government), the NGAs have been encouraged to coordinate with the LGUs on the former’s devolution strategy, as stipulated under Joint Memorandum Circular No. 2021-2 dated August 12, 2021.

Likewise, the NG will continue to institute mechanisms that will encourage and support the LGUs to carry on the functions devolved to them. For instance, the NG is studying how the performance of the LGUs in implementing the devolved functions be incorporated among the performance indicators under the Seal of Good Local Governance (SGLG). Likewise, the DBM (Department of Budget and Management) is developing its eBudget System to present the proposed budget submitted by the LGUs. This is being linked with the eSRE (Eletroni Statement of Receipts and Expenditures) System of the DOF-BLGF (Department of Finance – Bureau of Local Government Finance) to facilitate the tracking of the budget submissions of the LGUs as they are implemented during the year.

There will be no new and/or additional functions in the set of devolved functions that the LGUs are encouraged to assume starting FY (Fiscal Year) 2022. The provision of basic services and facilities to be gradually phased out or scaled down by the NG (National Government) and assumed by the LGUs shall be consistent with Section 17 of the LGC (Local Government Code) and its IRR (Implementing Rules and Regulations) and other pertinent laws. 

However, the full assumption of devolved functions and services by the LGUs may require the modification of their organizational structure and competency requirements, that will consequently entail updating their Organizational Structure and Staffing Pattern and Capacity Development.

The differing level of financial capacity of LGUs is recognized. For instance, the increase in NTA (National Tax Allotment) share for some LGUs may be sufficient to carry out their devolved functions, while this may not be the case for some.

Hence, it is important for the LGUs to review their financial resources, as well as their expenditure requirements and absorptive capacities, to meet the urgent needs of their constituencies and local economies as well as to develop a transition strategy to be able to identify the gaps and on how to gradually address them.

This can start with the updating of the Comprehensive Development Plan, Comprehensive Land Use Plan, and Annual Investment Program needed for their 2022 budget preparation. The LGUs concerned can also start attending the seminars being conducted by the DOF-BLGF (Department of Finance – Bureau of Local Government Finance) and the Philippine Tax Academy on revenue and borrowing mobilization, as well as those being given by the Public- Private Partnership Center on developing public-private partnership projects.

No, there will be no automatic or mandatory transfer of NGA personnel to the LGUs. In fact the LGUs shall not be compelled to hire any affected personnel as determined by the NGAs covered by the devolution efforts. This is provided under Section 24 of the IRR (Implementing Rules and Regulations) of EO (Executive Order) No. 138 and indicated under DBM-DILG (Department of Budget and Management – Department of Interior and Local Government) JMC (Joint Memorandum Circular) No. 2021- 3.

However, should the LGUs choose to hire these personnel, it shall be subject to the pertinent provisions of RA No. 7160, and the Civil Service Law, rules, and regulations. The hiring of affected personnel shall also depend on the local development priorities/thrusts and financial capacity of the respective local government unit.

It may also be good to note that the affected personnel may apply to vacant positions that shall perform the devolved functions in the LGU. In this regard, they shall be subject to the compensation system of the LGU concerned, and that such reemployment shall be considered as a new entry to the civil service.

Central to the full devolution effort is the provision of capacity development (CapDev) interventions for the LGUs. 

Pursuant to Section 9 of EO (Executive Order) No. 138, and Rule 9 of its IRR (Implementing Rules and Regulations), a CapDev (Capacity Development) agenda for LGUs shall be formulated based on the assessment framework and guidelines to be issued by the DILG-LGA to enable them to absorb, manage, and sustain their responsibilities under a fully devolved set-up. In this regard, the DILG issued Memorandum Circular No. 2021-067 last June 24, 2021 which provides the guidelines on the Adoption of a Capacity Development (CAPDEV) framework in the planning, design and implementation of CAPDEV Interventions for LGUs.

Under EO No. 138, the DILG-LGA (Department of Interior and Local Government – Local Government Academy) shall oversee and harmonize the provision of technical assistance and capacity building interventions for all LGUs to ensure the efficient utilization of government resources on this effort, and the implementation and management of the devolved functions. 

Examples of CapDev interventions, per Section 31 of the IRR (Implementing Rules and Regulations), include public financial management processes, such as local planning, investment programming, budgeting, and revenue generation measures which shall be organized by the DILG, the DBM, and the DOF-BLGF. To facilitate the provision of capacity development interventions and technical assistance in the execution and management of the devolved activities, the LGUs may enter into memoranda of agreement with the NGAs, as may be necessary.

For the LGUs that are financially incapable of allocating funds and are technically weak in the implementation of devolved services (i.e., LGUs with high poverty incidences, low financial capacity), the Growth Equity Fund (GEF), is being established pursuant to Section 8 of EO 138 and Rule XIII of its IRR. The GEF shall be included in the proposed FY 2022 national budget and shall supplement NTA shares to enable LGUs to have supplementary funding for devolved functions and services pursuant to Section 17(b) of RA 7160, but subject and limited to identified priorities on the respective DTP (Devolution Transition Plan) of beneficiary LGUs. However, the GEF shall only be available for a fixed time period. Simultaneous with the establishment of the GEF is the conduct of capacity-building programs for revenue generation and fiscal management to be provided by DOF to enable them to fund the devolved services on their own.

Under Section 8 of EO (Executive Order) No. 138 and Section 40, Rule XIII of the IRR, the GEF was conceptualized to address issues on marginalization, unequal development, high poverty incidence, and disparities in the net income of the LGUs (Local Government Units). As such, it will be made available to the LGUs that are financially incapable of allocating funds and are technically weak in the implementation of devolved services to top up their NTA (National Tax Allotment). 

In this regard, a necessary amount constituting the GEF shall be included by the DBM (Department of Budget and Management) in the National Expenditure Program starting FY (Fiscal Year) 2022. Specifically, under Special Provision No. 3 of the Local Government Support Fund-Growth Equity Fund appropriated an amount of PhP 10 Billion, which shall be used as financial assistance to the identified poor, disadvantaged, and lagging LGUs for the implementation of various infrastructure projects to gradually enable the full and efficient implementation of the devolved functions and services to the LGUs.

Further, pursuant to Section 41 of the IRR of EO 138, the DBCC (Development and Budget Coordination Committee) shall issue guidelines on the release of the fund to the LGUs to ensure the equitable, performance-based, and time-bound allocation and distribution of the funds to the LGUs. 

Likewise, the implementation of the GEF shall be monitored by the Inter-Agency Steering Committee composed of the DBM, DILG (Department of Interior and Local Government), DOF (Department of Finance), and NEDA (national Economic Development Authority).

No. The GEF is only available to the poor, disadvantaged, and lagging LGUs with high poverty incidence, and low financial capacity, as provided under EO (Executive Order) No. 138.

The GEF shall be exclusively released to eligible provincial, city and municipal LGUs, with the exception of those under Bangsamoro Autonomous Region in Muslim Mindanao. The identification of eligible beneficiaries and the allocation of funds for GEF shall be determined based on the following prioritization criteria: (1) Poverty Incidence, and (2) Per capita NTA (National Tax Allotment) .

Per National Budget Memorandum (NBM) No. 138, the NGAs shall include in their FY 2022 budget proposals the funding requirements for the capacity building of the LGUs. Under this memorandum, the NGAs were also advised to focus on policy and service standards development, provision of technical assistance, monitoring, and performance assessment of the LGUs.

The DILG-LGA (Department of Interior and Local Government – Local Government Academy), in coordination with NGAs and oversight agencies concerned, shall implement the integrated capacity development program and technical assistance to all the LGUs to build the necessary competencies and capacities in implementing the devolved functions.

EO (Executive Order) 138 or its IRR (implementing rules and regulations) does not contain any provision on the entitlement of the members of the LGU Devolution Transition Committee (DTC) to honoraria. In the absence of any provision on the matter, the members of the DTC shall not be entitled to honoraria.

Nonetheless, the civil society organizations/ private sector representatives who are sitting as members of the Committee may be entitled to honoraria if they will serve as resource persons during the Committee meetings, by virtue of their expertise in a specific subject area, subject to the guidelines prescribed under DBM (Department of Budget and Management) Budget Circular No. 2007-15 dated April 23, 2007