Business World, 26 November 2014


The 2015 national budget is the last full budget that the Aquino III administration has submitted to Congress for authorization. By now, President Aquino III should know what he wants to do for the rest of his term. Yet, his 270-page Errata, and the hazy 2015 supplemental budget, are solid proof that the 2015 budget was crafted haphazardly.

He has entrusted to agencies headed by his closest political allies huge sums of money. Large appropriations for housing, water supply, and assistance to local governments have been allocated for the Department of Interior and Local Government (DILG).

Yet, the mandate of the DILG Secretary is simply supervision — not control — of provinces, cities and municipalities. It is clear that he has no technical expertise on water supply. That is the responsibility of the Local Water Utilities Administration (LWUA) and the Department of Public Works and Highways (DPWH).

He has no technical expertise on low-cost housing. That is the responsibility of the National Housing Authority.

The DILG Secretary’s mandates are supervision of local governments and peace and order. Right now, he is doing a poor job in the latter. He should focus on homeland security; on ensuring the lives of Filipinos in their places of residence, on the streets, and in their workplaces; on maintaining the integrity and good behavior of police officers.

Of course, broadening the coverage of the DILG is good politics. It makes local authorities politically indebted to the DILG Secretary. It is not good economics, however. Agencies that have the technical expertise to implement them, not by politicians who have shown indecisiveness, incompetence and vindictiveness, should implement water and housing projects.

It is poor management practice, too. More than two decades ago, by virtue of the Local Government Code of 1991, local government units (LGUs) were granted a steady source of predictable, formula-based and automatically released Internal Revenue Allotment (IRA). For 2015, the IRA will be P389.9 billion. In 1992, the allocation to LGUs was only P15.6 billion, and in 2000 it was only P121.4 billion.

In addition, provinces, cities, municipalities and barangays have been given enormous taxing powers. They can raise their own taxes.

The IRA was made unconditional and not discretionary. This is to make local authorities behave independently of the desire of central government officials.

The direction of the local government reform that was instituted by the late President Cory Aquino was clear: to empower local authorities, make them truly independent from the central government (and by implication, national politicians), by giving them a steady, sufficient and predictable source of their own revenues.

Nowadays, local officials have started to look for political largesse from national politicians — the President, Cabinet secretaries, senators, congressmen — rather than taking advantage of their IRA and their taxing powers. Instead of observing “hard budget constraint,” of living within their means, local authorities have become “beggars,” constantly asking for favors from national politicians.

This arrangement does not promote fiscal autonomy. On the contrary, this retards LGUs’ fiscal independence. But the DILG Secretary, with active support from the Budget Secretary, does not care. The more dependent local authorities are on political largesse funded by taxpayers’ money, the better the chances for the administration’s candidate winning the 2016 presidential elections.

The DILG management should focus on its mandate which are: to supervise (not control) local government units and to secure the life and property of every Filipino, no matter where they live, in urban centers or rural areas, and no matter what their political colors are, friends or foes alike. I have looked at the 2015 proposed budget. The following proposed cuts and changes appear reasonable (see table).

Local government units should feel more fiscally independent on the central government as a result of the Local Government Code of 1991. They have their own funds. In 2015, the total unconditional grant to local governments (IRA) is in the neighborhood of P400 billion. In addition, they have been granted local taxing powers.

Sadly, the Aquino III administration, through various discretionary funds, has made sure that local authorities remain dependent on the central government. With huge political largesse, local authorities grovel to Aquino-Abad-Roxas for extra money.

More than two decades after the passage of the Local Government Code of 1991, real fiscal autonomy remains illusive. The culprit is the political patronage that has returned in a big way under the Aquino III administration.

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