Financial liberty to aid LGUs’ limpidity

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FORMER Justice Secretary Alberto C. Agra believes that local government units (LGUs) will enjoy greater fiscal independence and bigger development fund and can undertake more hard and or soft projects.

With such fiscal autonomy and bigger funds at their disposal, Agra said LGUs will have bigger responsibility and accountability, as well.

With the signing last June 21 of Executive Order 138 by President Duterte, the full devolution of certain functions of the Executive Branch to the LGUs is set to take place.

Last week, Finance Secretary Carlos G. Dominguez III called on LGUs to prepare for the “seamless” transfer to their offices’ additional devolved functions, services, and facilities with the implementation of the Mandanas Ruling.

The Mandanas Ruling by the Supreme Court in 2018 will take effect in 2022.  This will raise Internal Revenue Allotments (IRA) by 55 percent in the 2022 national budget to P1.08 trillion or 4.8 percent of gross domestic product compared to the 3.5 percent in 2021.

The decision basically raised the share of National Government tax revenue to local governments.

As the transfer of resources strengthens decentralization and potentially improves social services delivery in the countryside, questions have been raised about LGU capacities, as well as the transparency and accountability of LGUs that will manage the funds.

Room for innovation

For LGUs who are innovative, Agra said the LGU will have bigger rooms for innovation and have substantial contributions for Public-Private Partnerships or PPPs.

Agra said during a webinar last October 20 on LGU finance and the Mandanas Ruling that “more [funds] means more resources and, at the same time, accountability.”

He explained that LGUs have been deprived of fiscal autonomy for 34 years since the 1987 Constitution was put in place.

“All LGUs, even barangays and the autonomous regions and provinces; they all enjoy local autonomy,” Agra, who currently teaches law at the Ateneo de Manila University, said. “Local autonomy consists of administrative and political autonomy.”

Fiscal autonomy, like local autonomy, is a policy enjoyed by LGUs under the Constitution, he added.

“There is no local autonomy without fiscal autonomy and vice versa,” Agra said.  “You need funds in order for local government units to perform their mandate.”

He added that “at the same time, local governments must be given broad latitude in terms of local autonomy in terms of how to use own funds.”

“All LGUs are subdivisions of one state, hence, there’s no national development without local development and vice versa.”

In fiscal autonomy, Agra said there are two important aspects: source and utilization. The lawyer said National Government Agencies can only supervise, but not impose limitations on, LGUs.

“Only Congress can impose limitations on the power of the LGUs,” Agra said. “If the Executive Branch will impose restrictions when there is none imposed by law, [which] will amount to control, not just supervision.”

PPP prospects

ELEAZAR E. Ricote, deputy executive director of the Philippine Public-Private-Partnership (PPP) Center, agreed with Agra that fiscal autonomy will empower LGUs.

In his talk, Ricote also highlighted the prospects of more LGUs implementing PPPs with the private sector, given that LGUs will have the financial capacity to shoulder counterpart funds.

He explained that EO 138 states there is a need to strengthen planning, program and budgeting, which includes LGUs having to put together an annual investment program where proposed projects are identified whether they will be financed through borrowings or PPPs.

Even before the Mandanas Ruling, he said the directive to bring PPPs to LGUs has already started.

As early as 2017, a local PPP strategy has been mounted by the Duterte administration. Before that, the Department of Interior and Local Government (DILG) issued circulars providing guidelines and encouraging LGUs to do PPPs.

According to Ricote, increased infrastructure spending is also part of the 10-point socioeconomic agenda of the government, targeting around 5 percent of the GDP.

“One of the infrastructure spending options is PPPs; not only government financing through budgets or borrowings through ODA, but even private sector finance to bring resources, financing efficiencies and technologies.”

Ricote said that around 30 of the 100 “Build, Build, Build” infrastructure rojects of the Duterte administration are PPPs.

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