By Luisa Maria Jacinta C. Jocson, Reporter
THE PROPOSED automatic income classification for local government units (LGUs) may not be able to take into account their specific needs and potentially limit their access to assistance, analysts said.
“There is a possibility that underdeveloped LGUs may not anymore be granted financial aid from the National Government merely because their income has been automatically reclassified. The bill is developmental in general, but the government should take note of these specific policy consequences,” Terry L. Ridon, a public investment analyst and convenor of think tank InfraWatch PH, said in an e-mail.
In his State of the Nation Address (SONA) on Monday, President Ferdinand R. Marcos, Jr. asked Congress to prioritize several measures including the LGU income classification bill.
The bill is also one of the 20 priority measures of the Legislative-Executive Development Advisory Council (LEDAC) that is targeted for Congress approval by December this year.
The House of Representatives last March approved on third reading House Bill No. 7006, which seeks to institutionalize the income classification of provinces, cities, and municipalities. The counterpart measure, Senate Bill No. 2165, is now up for second reading at the Senate.
Under the pending Senate bill, the LGUs will be classified into six classes according to income ranges based on the average annual regular income for three fiscal years preceding a general income reclassification.
Filomeno S. Sta. Ana III, coordinator of Action for Economic Reforms, said that the reclassification of LGU income may not take into consideration their specific needs.
“The downside is that very specific or peculiar conditions of LGUs might not be captured,” he said via Facebook Messenger chat.
On the other hand, Mr. Sta. Ana said that the proposal is “sensible” as it provides an objective criteria for decisions on budget and subsidies.
For Mr. Ridon, the automatic updating of the income status of LGUs will “prevent the stunting of income reclassification merely on the basis of bureaucratic delay or the absence of political will of involved executive agencies.”
“An automatic updating mechanism puts an active onus on involved executive agencies, such as the DoF (Department of Finance), to ensure that income classifications are based on actual development data and milestones,” he said.
“Failing to do so would mean that underdeveloped LGUs that had failed development milestones would still have their incomes reclassified even if ground-level data is not consistent to warrant a reclassification.”
Ateneo de Manila economics professor Leonardo A. Lanzona said that the LGU income classification is a welcome development if it will be able to prioritize lower-income regions.
“In most cases, what may seem efficient is not necessarily equitable. However, for human capital investments, what is equitable is also efficient since it is the poorer regions that can benefit more from human capital investments,” Mr. Lanzona said in an e-mail.
“Thus, the soundness of this measure depends on what is its ultimate objective. If the goal is to achieve equity through enhancing human capital investments, then I am all for it,” he added.
Bienvenido S. Oplas, Jr., president of a research consultancy and of the Minimal Government Thinkers think tank, said that the government should ensure that funds will be used judiciously and prioritize development programs.
“National Government (NG) transfers to LGUs should not be based on the level of poverty of the province, city and municipality. This scheme encourages more corruption among LGUs because the more corrupt they are, the poorer their people, the more money they get from the NG,” Mr. Oplas said in a Viber message.
“NG transfers (should) be based on how much increment or increase in local investments they get, measured in per capita investment. The more investment per capita, the more NG transfer via more infrastructure. This way, LGUs are rewarded for improving the income of their people, not for keeping them poor and marginalized,” he added.
Under the pending Senate bill, the proposed income classification will serve as the basis of determining administrative and statutory aid, financial grants, and other forms of assistance, as well as the financial capability of LGUs to undertake developmental programs and priority projects.
The bill also allows the Finance secretary to review and make “appropriate changes or revisions” to the income ranges.
The secretary will also undertake the regular income reclassification once every three years so that the income ranges “may continue to conform with prevailing economic conditions and other financial status of local governments.”
“That in cases of unmanageable public sector deficit, the Secretary of Finance is authorized to recompute and revise the income classification of LGUs to reflect their actual financial situation,” the bill added.
The government is working on devolving NG functions and programs to LGUs to give them the capacity to govern. Under the Supreme Court’s Mandanas-Garcia ruling, LGUs were granted a larger share of national taxes to support them in the devolution.
