IRA REDUCTION, THE BIGGEST CHALLENGE

IRA REDUCTION, THE BIGGEST CHALLENGE

The year 2012 saw the reduction in the internal revenue allotment (IRA) of the local government units (LGU).    The lower revenues collected by the Bureau of Internal Revenue in 2009 prompted the Department of Budget and Management (DBM) to reduce the IRA share of the LGUs by 4.8%.  The decline was the result of the global economic recession and revenue cuts imposed.  

“It is unfortunate that revenues in 2009 declined, but that is the legally-mandated base year for computing the IRA for fiscal year 2012,” DBM Secretary Florencio Abad said.

The Local Government Code (LGC) mandates that the IRA share of LGUs should be computed as 40% of the national internal revenue taxes collected in the third fiscal year preceding the current fiscal year. The National Internal Revenue Code of the Philippines identifies the national internal revenue
 taxes that are sources of IRA as: income tax; estate and donors’ tax; value-added tax; other percentage taxes; excise taxes; documentary stamp taxes; and such other taxes that may be imposed and collected by the BIR.

Just as we were alarmed by the looming IRA cut, the Supreme Court declared final on April 12, 2011 its resolution handed down on February 15, 2011 upholding the laws converting the sixteen towns into cities in 2007 as constitutional.  The petition filed on March 2007 by the League of Cities of the Philippines (LCP), of which Maasin City is a member, appealing to declare the 16 cityhood laws as unconstitutional, was dismissed by the High Court.    

The beneficiaries of the ruling were Republic Act No. 9389 (Baybay City, Leyte), RA 9390 (Bogo City, Cebu), RA 9391 (Catbalogan City, Samar), RA 9392 (Tandag City, Surigao del Sur), RA 9393 (Lamitan City, Basilan), RA 9394 (Borongan City, Eastern Samar), RA 9398 (Tayabas City, Quezon), RA 9404 (Tabuk City, Kalinga), RA 9405 (Bayugan City, Agusan del Sur), RA 9407 (Batac City, Ilocos Norte), RA 9408 (Mati City, Davao Oriental), RA 9409 (Guihulngan City, Negros Oriental), RA 9434 (Cabadbaran City, Agusan del Norte), RA 9435 (El Salvador City, Misamis Oriental), RA 9436 (Carcar City, Cebu), and RA 9491 (Naga City, Cebu).

The resolution was the fifth decision by the Supreme Court on the case questioning the constitutionality of the laws converting 16 municipalities into cities.  The first decision was decided by a 6-5 vote and issued on November 18, 2008. It declared unconstitutional the 16 cityhood laws for violation of Section 6 and 10, Article X of the Constitution that specifies equalities in the creation of new cities. It said the 16 towns did not meet the criteria of a P100-million income to qualify them into cities.

On December 21, 2009, the first decision was reversed by the SC with a ruling that the laws converting 16 municipalities into cities are constitutional. This time, the decision was a 6-4 vote, declaring that all cityhood laws, enacted after the effectivity of RA 9009 which increased the income requirement for cityhood from P20 million to P100 million exempts the 16 municipalities from the said higher income requirement.

The third ruling was decided by the High Court on August 24, 2010, in a 7-6 vote, granting the motions for reconsideration filed by the LCP.  It reinstated the November 18, 2008 decision declaring
 unconstitutional the 16 cityhood laws.

The 16 municipalities filed their motions for reconsideration.  On February 15, 2011, the Supreme Court issued the fourth ruling and granted the motions for reconsideration filed by several of the 16 municipalities as it declared constitutional the 16 cityhood laws. 

The LCP filed its own motion for reconsideration. 

 “The Court can no longer modify, alter, or amend a judgment that had long become final, executory, and continues to be implemented and executed," the LCP cited.

The LCP also cited that Sta. Rosa and Biñan in Laguna, Trece Martires in Cavite, and Navotas and San Juan in Metro Manila became cities because they met the P100-million requirement in the LGC.  It would be unfair for them if the 16 new cities had to pass only the P20-million annual revenue requirement. 

The LCP said the existing cities were not greedy enough to share their IRA to the 16 would-be cities.  It insisted that the law should be followed in the qualification of municipalities to be converted to cities.  

In a dramatic display of disapproval, more than 40 city mayors led a protest march to the Supreme Court before filing the appeal.  Hundreds of supporters joined them in the said protest showing their sympathy for their respective cities.  But the appeal was denied by the High Court on April 12, 2011. 

It resulted to considerable cuts in the IRA for 2012 among affected existing cities.  The IRA of Maasin City reduced by P47 million due to the 4.8% reduction and the creation of new cities.    

It was by far the biggest reduction in the income of Maasin ever since the application of the LGC and the apportionment of the IRA.  Items in the annual budget had to be cut to cope up the decrease in revenues, except for the personal services like salaries, wages and benefits which we could not reduce.

I enjoined all city employees to join the first phase of protest by member cities of the LCP during the first reversal of the SC decision in favor of the 16 municipalities.  In one flag ceremony, city employees wore black arm bands in protest of the ruling. 

However, I later realized what if we were among the 16 municipalities deprived to become

 cities?  Maasin became a city with the same P20-million income requirement passed by the 16 would-be cities.  It would be too greedy for us then if we hurdled the same requirement and deprive others who had filed their cityhood bills before the income requirement was raised to P100 million.

Three mayors of the affected 16 municipalities were my friends:  Mayor Dale Corvera of Cabadbaran, Mayor Coefredo Uy of Catbalogan, and Mayor Mike Cari succeeded by her mother Mayor Carmen Cari of Baybay.

Mayor Corvera was a colleague in the Boy Scouts of the Philippines National Executive Board.  While Mayor Uy together with elected and appointed officials of Catbalogan came to Maasin to study about our healthy city enforcement.  Mayor Cari accomodated Mama as DPWH District Engineer of the 5th District of Leyte stationed at Baybay.


I also felt what they suffered when their cities were reverted to municipalities then to cities then back to municipalities.  They were even jokingly been called “Municity.”

They even elected ten city councilors during the 2010 elections and when the decision was reversed during the third ruling, they were in a quandary on what to do with their two “extra councilors,” since the municipal council only has eight members prescribed by the LGC.    

So when the LCP decided to stage another protest in filing the appeal to reverse the fourth ruling favoring the 16 new cities, I declared, “It’s enough.  We will give chance to the 16 cities to become cities officially.”

I decided not to join the protest march to the Supreme Court, although we were hurting with the alarming IRA reduction.  We would just brace ourselves up for the coming “financial calamity.”  

The LCP National Executive Board finally accepted the 16 new cities as members of the league during its meeting at Pagadian City on September 2011.  It was a “surrender” on the part of the 122-member city league.  

However, to lessen the impact of the IRA reduction, the Department of Interior and Local Government (DILG) and the Department of Budget and Management (DBM) made available a Local Government Support Fund (LGSF).  The key requirement for the release of such fund is for the

 LGUs to pass the Seal of Good Housekeeping (SGH), a program of the DILG which elevates the practice of good governance into institutionalized status.

The funds would be used to supplement the approved 2012 annual investment plan of the

 city for the implementation of any or combination of the projects prescribed by the DILG.  The identified projects include rural electrification, local roads connecting national roads, arterial farm-to-market roads and bridges, local economic enterprises, flood control and drainage and support to the priority projects of the National Government such as Millennium Development Goals, Philippine Disaster Risk Reduction and Management Act of 2010 and Solid Waste Management Act of 2000.

The Seal of Good Housekeeping for LGUs is the criteria set by the DILG in its commitment “to aggressively scale up interventions to elevate the practice of governance that values transparency, accountability, participation and performance into an institutionalized status.” 

Four (4) areas in good governance were considered:

(1) Good Planning - Updated and Approved Comprehensive Land Use Plan, Updated and Approved Comprehensive Development Plan, Updated and Approved Annual Investment Plan, Presence of Executive- Legislative Agenda,

(2) Sound Fiscal Management - Result of COA Audit (acceptable level), LGU Annual Budget approved and compliant to legal and statutory requirement, Percentage of cost to collect revenues to total local revenues (50% or less), Growth in local revenues over 3 years, Presence of Updated Revenue Code (every 5 years), Presence of updated Schedule of Market Values (every 3 years), Regular submission of Statement of Receipts and Expenditures (quarterly),

(3) Transparency and Accountability

 - Functionality of  Local Special Bodies, Transparency of the procurement process, Compliance to the Anti-Red Tape Law, Full disclosure of local budget and finances, and bids and public offerings through posting in conspicuous places within public buildings in the locality, or in print media of community or general circulation, and in their website, and

(4) Valuing of Performance Monitoring - Performance Monitoring Tool or Scorecard System being utilized, Published State of Local Governance Performance Report, State of Development Report, and Financial Report, Awards Received for Exemplary Performance.