By Keisha B. Ta-asan, December 2, 2022; Business World

LOCAL GOVERNMENT units (LGUs) should be given more time for the smooth transition of devolved functions from the National Government (NG) agencies, according to a report.

A Mandanas-Garcia Ruling Transition Report by the Department of the Interior and Local Government (DILG) and the United Nations Development Programme (UNDP) in the Philippines called the implementation of the transition program from 2022-2024 “highly ambitious.”

“The implementation of this transition in the midst of the COVID-19 (coronavirus disease 2019) pandemic greatly amplifies the risks of failure and unintended consequences of the move,” the report said. 

“In the given context, a more incremental approach towards full decentralization, such as by expanding the three-year transition to a six-year span to coincide with a full presidential term,” it said, noting that the current period is aligned with the term of local officials elected in 2022.   

Extending the timeline for the transition would also mean a more gradual transfer of programs from NG agencies to LGUs within that period.

“A longer and more phased transition will also allow the both national and local government agencies to build/transfer the necessary capacity to ensure the continuity of performance in service-delivery responsibilities, as well as to course-correct for unintended consequences,” the report said.

The Supreme Court’s Mandanas-Garcia ruling granted LGUs a larger share of the national taxes by expanding their 40% cut to also include revenues from Customs duties, and not just those collected by the Bureau of Internal Revenue.

Last year, President Rodrigo R. Duterte signed Executive Order (EO) 138 which transfers a number of basic services to LGUs by 2024.   

With this, the government has shifted programs and projects, worth an estimated P234.4 billion, to LGUs.

During the report’s event launch on Wednesday, Jerik Cruz, co-author of a study called “From Dependency to Autonomy,” said there is a need to further boost LGUs’ capacity amid the transition to full devolution.

“They’re not able to adapt as well as we would like them to new and challenging circumstances. And partly related to this is what we found to be the surprising level of the lack of digitization of local governments,” Mr. Cruz said.

“Their ability to harness new digital technologies has not yet been maximized. We find that there tends to be a very big inequality among local governments where already capable local governments are able to tap into them whereas those which are poorer and left behind, generally are unable to make the most of them,” he added.   

Mr. Cruz said in their surveys of LGU budget officers, the biggest constraint in relation to spending is the lack of investment funds and resources, followed by a lack of staff.    

“So, we may see as a result of Mandanas ruling based on certain parts of the survey, that we may find greater inequality among local governments, where high performing local governments especially the highly urbanized cities, tend to pull away from the rest. Whereas those who are poorer and lower performing to begin with, especially municipalities, tend to fall behind further,” Mr. Cruz said.   

He emphasized that strengthening the LGUs’ local fiscal autonomy is possibly “one of the most neglected pillars of strong good local governance.”

“It’s not a silver bullet. But for most of the concerns that have been raised about the Mandanas ruling such as possibly challenges with budget execution, challenges with capacity, accountability, strengthening their own fiscal autonomy will help address every single one of those objectives,” he said.   

“We do recommend that we consider a lengthening of the transition from three years to six years so as to coincide with the full presidential term. A gradual transition in this way will give local governments more time to augment their capacity,” he added.   

Meanwhile, Cielo D. Magno, author of the study titled “Breaking Down the LGU Fiscal Performance,” said underspending among local governments is a main concern that needs to be addressed.   

“The Mandanas-Garcia ruling is expected to increase the budget of local government units and if we’re not able to address the constraints, we will expect LGUs to continue with the lower budget execution rates and lower budget execution rates mean underperformance or delay in service delivery,” Ms. Magno said.   

According to their study, LGUs have not been able to fully utilize their resources to combat the threat of COVID-19, climate related disasters, and other conflicts.

Between 2015 to 2018, LGUs utilized about 80% of their budgets on average, with cities having the lowest utilization rate at 72.7% and municipalities at the highest at 79.2%.   

“If we are not able to address this, LGUs will not be able to keep up with the increase in their current budget and they will tend to keep pushing balances to the following year. And this will also affect the quality-of-service delivery at the local level,” she added.   

The study recommends the government to review fiscal transfers and assignment of functions to LGUs. It should also review procurement policies particularly around capital outlay and boost oversight as enabler of good governance and delivery.