Thursday, November 11, 2004

Skidding back to square one?

Skidding back to square one?

Updated 01:33am (Mla time) Nov 11, 2004
By Juan Mercado
Inquirer News Service



Editor's Note: Published on page A12 of the November 11, 2004 issue of the Philippine Daily Inquirer


"WHOEVER captures the Palace captures the only government there is."

This old axiom started to unravel in 1991, when the Local Government Code kicked in. The Code built on incremental self-rule laws crafted over half a century, notes the United Nations' "Local Government in Asia and the Pacific." These included the 1959 Local Autonomy Act, Sen. Emmanuel Pelaez's Barrio Charter and the 1967 Decentralization Act. All chipped away at once untouchable "Imperial Manila" funds that, under centralized governance, beggared the countryside. That led to stagnation and festering unrest. "Where there is no bread, all is anger."

Internal Revenue Allotments (IRAs), provided by the Code, spurred growth of increasingly self-reliant local government units (LGUs). They're also at the vortex of today's scramble to patch the fiscal crisis.

IRAs are shares of provinces, cities and towns in taxes. Whoever the transient Palace tenant is, he or she must, under the Code, share part of cash in the tills.

Over a five-year period, "IRA per person in the provinces almost tripled," the Philippine Human Development Report noted. P4 out of every P10-or P80 billion-went for patchy health facilities, rundown schools, etc.

"Even a clever daughter-in-law needs rice to cook with," Pelaez argued as he wrote into the Barrio Charter a thin wedge for today's IRAs: a provision empowering “barangay” [villages] to withhold and spend a fraction of land taxes.

Now, 65 centavos of every LGU tax peso -- or P113.3 billion -- come from IRAs, the Commission on Audit reveals in its latest Annual Financial Report.

IRAs keep the poverty-mired Autonomous Region in Muslim Mindanao afloat. So with fourth- and fifth-class towns from the northernmost province of Batanes to the southernmost Tawi-Tawi.

IRA shares can be hefty. In 2003, Pangasinan province bagged P930.8 million and Cebu province, P909.4 million. Negros Occidental followed with P905.6 million and Bulacan, P806.7 million.

Among cities, Quezon received P1.47 billion, Davao, P1.39 billion and Manila, P1.09 billion. Caloocan, Zamboanga, Puerto Princesa and Cebu trailed after them.

But do IRAs shrivel the local tax base?

Nationwide, only 13 percent or P22.8 billion was raised from real estate levies, the COA reports. Significantly, tax on idle land netted only P3 million.

"Local governments treat IRA as a dole and there's need to reverse this trend," the UN study notes. IRAs are not a crutch. Local income should be higher than IRAs.

"An ideal initial percentage ratio between local and national government is 50-50," the UN suggests. In the long run, LGUs should aim for at least a 70 to 30 percent ratio, with local taxes the mainstay.

Malacañang communication director Silvestre Afable, meanwhile, claimed that the Union of Local Authorities of the Philippines (ULAP) agreed to a "drastic deferment" of the 10-percent increase in IRA due in 2005. They'd voluntarily help patch the government's deficit.

Indeed, there's an "escape hatch" in the Code's mandatory transfer provision. In "emergencies," cuts can be self-imposed by LGUs.

But self-sacrifice is not the strong suit of many LGUs. The provinces of Cebu, Pangasinan, Cavite, Negros Occidental and Laguna, among others, splurged on "personal services," the Commission on Audit (CoA) notes. Those with bloated employee rolls included Pangasinan, P513 million, trailed by Batangas with P456.5 million and Cavite, P444.3 million, followed closely by Laguna, Cebu and Negros Occidental.

LGUs jacked up bloated "maintenance and operating expenses" for business-as-usual work. The province of Cebu spent P690.8 million; Bulacan, P660 million; Laguna P583.8 million, followed by Batangas, Negros Occidental and Cavite.

IRAs lack performance indicators, the UN notes. This undermines efficiency and accountability. Local officials who think beyond patronage and waiting sheds are the exception. Far too many twist IRAs and similar resources into mini-pork barrels that leave the poor on the short end.

The "20 Percent Development Fund," for example, was intended for unmet basic human needs: potable water, sanitation, preventive health care, nutrition, etc.

But earlier CoA audits show Davao Oriental “sanggunian” [provincial board] officials ladled P669,892 as "financial assistance" for themselves. Dapitan City spent over P1 million for an "executive band." San Carlos City allocated P110,000 for its delegation to a Boy Scouts jamboree in Angeles. Northern Samar province bought seven brand-new vehicles.

In Cebu City, Mayor Osmeña's “barangay” leaders bought themselves high-powered motorcycles and handguns. In Cebu province, then Gov. Pablo Garcia parked P42 million of the Special Education Fund in time deposits while students did without textbooks or classrooms.

Doles do not spur growth. And development, which means enlarging human choices, results from policies that tap local resources and people's participation.

"Unconditional grants" like today's IRAs, "do not stimulate long-term capital investments" or tapping of local revenues. Incentives should be written into IRAs to prod LGUs to exert greater tax effort or jack up administrative and operational efficiency and innovate for production.

Ask LGUs to show the color of their money, the UN adds. They must "put up equity to the grant." This will scrub the dole-out syndrome. And how about clipping IRAs equal to the amount of unliquidated advances officials rack up? This may be "the opportune time to revisit the present IRA formula."

"Those who pay the piper call the tune." If the IRA piper cannot play new tunes, there's danger of skidding back to square one: "Whoever captures the Palace captures the only government there is."

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