January 2007
Good (Local) Governance

Parables and paradox in devolution

MOST OUSTANDING MUNICIPAL MAYOR. Mayor Jupiter Dominguez of Sabangan receives his plaque of recognition from Senator Aquilino Pimentel during the recent 2006 Local Government Leadership Awards. [photo courtesy of LGLA]

THEY MAY not seem to have anything in common, but there is something that the first-class province of Negros Oriental, the second-class city of Surigao in Surigao del Norte, and the fifth-class municipality of Sabangan in Mt. Province share: all three are held up as exemplars of excellence in local governance, thanks to the stewardship of their respective local chief executives.

For 2006, the Local Government Leadership Awards (LGLA) has named George Arnaiz, three-term governor of Negros Oriental; Alfonso Casurra, two-term Surigao City mayor; and Jupiter Dominguez, two-term mayor of Sabangan as most outstanding governor, city mayor, and municipal mayor, respectively. The three lead 12 other governors, city and municipal mayors who have been cited for their achievements as local chief executives the past year.

Indeed, for all the bad news one hears most of the time about local politicos, Governor Arnaiz and Mayors Casurra and Dominguez are only recent additions to the growing number of local leaders bred in the decentralized era ushered by the enactment of the Local Government Code. Today no longer is excellent local leadership wanting in paragons, unlike in the past, when one was sure not to run out of fingers counting the likes of a Jesse Robredo, who transformed backward Naga City into one of the most vibrant and dynamic cities in the country today. Or a Bayani Fernando, whose strong, if not authoritarian, leadership style made Marikina a symbol of cutting-edge local governance and entrepreneurial dynamism.

Hence the LGLA, the brainchild of Senator Aquilino Pimentel Jr., principal author of the Local Government Code of 1991 and the acknowledged “Father of Philippine Local Autonomy.” The awards have been given since 2002 in recognition of the important role of local chief executives in accomplishing the goals of good local governance as put forth in the Code. In 2003, the LGLA became an official initiative of the Senate, with partners from academic institutions in the forefront of local governance — the University of the Philippines’s National College of Public Administration and Governance (UP-NCPAG), La Salle Institute of Governance, Local Government Academy, and Development Academy of the Philippines — tapped to assist in the rigorous annual selection process.

UP-NCPAG Dean Alex Brillantes Jr. says the abundance of empowered leaders transforming the face of local governance can only be credited to the Code, which he considers as the “most radical and far-reaching policy that addressed the decades-old problem of an overcentralized politico-administrative system” whose most significant political and administrative decisions emanated from “imperial Manila.”

For sure, though, even “successful” local governments have yet to reach the point where they are already able to contribute to national development. That can be traced in part to flaws in the Code, as well as in its implementation, among them the lack of fund sources to meet all the budgetary requirements of the functions, programs, and projects devolved to local governments. But Naga City Mayor Robredo also points out, “(Like) the Parable of the Talents, (the principles of decentralization) will only be meaningful if used fully, and not consigned to the dustbin like the wicked slave did, merely (burying) the Lord’s gold under the ground.”

LGLA AWARDEES TOO. Governor George Arnaiz of Negros Oriental (left) and Mayor Alfonso Casurra of Surigao City. [photos courtesy of lpp.gov.ph, surigaocity.gov.ph]

THERE IS, of course, no argument that the Local Government Code gave many “talents” to local governments for them to either nurture or squander. To breathe life to specific Constitutional provisions, including a declared State policy, that guarantee autonomy to local governments, the Code primarily mandated the transfer of the responsibility for the delivery of basic services, including appropriate personnel, assets, equipment, programs, and projects, to local governments. Devolved basic services include health, social services, environment (partially), agriculture, public works, education, tourism, telecommunications services, and housing projects.

Table 1: Comparative Analysis of Income Classification of LGUs, 1991 and 2001
Source: Bureau of Local Government Supervision
National Barangay Operations Office, DILG

Provinces 18 13 11 5 8 2 57
Cities 41 26 17 8 5 1 98
Municipalities 17 20 51 221 832 257 1,398
Provinces 36 23 12 7 0 0 78
Cities 41 19 19 11 19 0 109
Municipalities 130 140 204 543 401 17 1,435

The Code also devolved to local governments the responsibility for the enforcement of certain regulatory powers — reclassification of agricultural lands, enforcement of environmental laws, inspection of food products and quarantine, enforcement of national building code, operation of tricycles, processing and approval of subdivision plans, and establishment of cockpits and holding of cockfights.

The Code increased the financial resources available to local governments by broadening their taxing powers, providing them with a specific share from the national wealth exploited in their area, increasing their share from the national taxes — mainly internal revenue allotments or IRA — from a previous low of 11 percent to as much as 40 percent. The Code also laid the foundation for the development and evolution of more entrepreneurial local governments by allowing them to enter into build-operate-transfer (BOT) schemes with the private sector, float bonds, and obtain loans from local private institutions.

Lastly, the Code provided the legal and institutional infrastructure for the expanded participation of civil society in local governance. It allocated specific seats to nongovernmental organizations (NGOs) and people’s organizations (POs) in local special bodies like the local development council, the local health board, and the local school board.

Brillantes says that the Code was not the first of its kind in the country. He adds, however, that the previous attempts to decentralize power and authority did not go beyond rhetoric and lip service.

LOCAL GOVERNANCE IDOL. A congratulatory message to Naga City Mayor Jesse Robredo for yet another award. [photo courtesy of naga.gov.ph]

“Did you know that Marcos had his own Local Government Code in Batas Pambansa Bilang 337?” he asks. “We’ve had several laws and policies that recognized the importance of the subnational frontline local governments. Even (former Senator Raul) Manglapus had the Barrio Charter Act (Republic Act No. 2370). But in terms of implementation, in terms of actually transferring powers and resources to local government units (LGUs), it was only in 1991 that these actually materialized.”

Among the Code’s features, Brillantes points to the institutionalization of people empowerment and the impetus for local governments to be more entrepreneurial as important innovations in local governance.

“It’s almost an oxymoron, paradoxical even,” he says of the revolutionary way that the Code was able to bring people empowerment to the local level. “It’s only in the Philippines where you have local government structures like the local development council that have allocated one-fourth of their membership to NGOs.” This, he adds, has opened doors, more than windows, to the active participation of civil society in governance.

On entrepreneurship, Brillantes says local governments can now go into previously untapped modes of raising revenues at the local level, pointing to BOT projects that have built markets like in the case of Mandaluyong and Dingras in Ilocos Norte, or bond flotation that was able to finance housing programs in Victorias, Negros Occidental.

“These were previously unheard of,” he says. “Before, you only have mendicant — for lack of a better term — LGUs always going to Manila waiting for the release of their resources from the national government.”

FROM HIS own city’s experience with decentralization, Naga City Mayor Robredo also believes the Code provisions promoting participation and partnerships stand out as its best features. “It is where Naga City carved its niche — participative governance, which has become part and parcel of our 2015 vision,” he says.

The same provisions, in fact, served as legal basis for the city’s internationally recognized Empowerment Ordinance of 1997, which led to the establishment of the Naga City People’s Council, the local federation of NGOs and POs that Robredo says are “effectively co-governing with us in the city.”

Co-governance seems to be the strategy as well of Negros Oriental Governor Arnaiz, who emphasizes people empowerment and effective partnerships between local governments and civil society. Working closely with the province’s 25 mayors and three congressmen, he has implemented and supported programs like the Barangay Agricultural Development Center, which tries to address the needs of his constituents in the remotest parts of Negros Oriental, minimize the insurgency problem, and provide agriculture-led government service.

Under Arnaiz’s leadership, more than a third of Negros Oriental’s development budget is now allocated to healthcare delivery, resulting in modernized health facilities and a scholarship program for medical and nursing students so that provincial hospitals will have enough doctors and nurses. A gardening and fishpond project in schools and communities called Gulayan at Palaisdaan Alay sa Kabataan (GPAK) meanwhile provides children and their families their daily vitamin and protein requirements.

The 51-year-old governor is also credited for making possible the construction of the Oriental Negros Drug Treatment and Rehabilitation Center, and the three-story Provincial Hospital Administration Building, among others.

Thousands of kilometers up north, Sabangan Mayor Dominguez also places much importance on participatory democracy, encouraging the people to help their public officials in drafting policies and implementing programs toward local development. In addition, he has shown strict adherence to the rule of law and practices leadership by example. And while Sabangan is still a fifth-class agricultural municipality, it is now aiming to generate income from local sources instead of solely relying on its IRA.

Sabangan may want to take notes from Surigao City Mayor Casurra, in that case. A prudent fiscal manager, Casurra was able to set aside funds for the city’s development programs. Top on his list of priorities is quality education, for which the former three-term councilor and vice mayor has sought — and realized — the establishment of an agri-fishery extension college. Then to enhance the city’s agricultural productivity, he provided funds for the building of farm-to-market roads and an irrigation system to service more than 400 hectares of rice lands.

Mayor Casurra is known for his hands-on and performance-oriented management style. This has translated into a customer-friendly organization out of city hall, the rationalization of the local government bureaucracy, and simplified processes. As a result, Surigao City has earned the distinction as the country’s Most Competitive City under the Small Cities Category in terms of cost of doing business. But it is just as proud (if not prouder) of its having maintained its status as one of Rotary International’s 50 Peace Cities in the world since 2003, for the peaceful co-existence among Muslims, indigenous peoples, and Christians.

IF ONLY for what local governments are now able to achieve because of a law he “fathered,” Sen. Pimentel should be a contented man. To a certain extent, he is, although his perennially glum countenance may lead one to think otherwise. According to Pimentel, the level of success attained so far by local governments can be attributed not only to devolution of powers, but also to the fact that they now share 40 percent of the taxes of the nation.

Before the Code’s adoption, provinces, cities, municipalities, and barangays did not have a specific share in the country’s revenues. “Their share depended on, you might say, the closeness of the political leaders of the provinces, cities, municipalities and barangays to the powers that be,” says Pimentel, who was Cagayan de Oro mayor in the 1980s, when the country was still under authoritarian rule. He recalls, “For example, the salary increases of our employees were dependent on the release of Malacañang of the funds. But (President Ferdinand) Marcos didn’t like me because I was in the opposition. And so for a time, the people thought that I was the cause of the problem of the employees at city hall. I had to work with some of my friends in the KBL (Kilusang Bagong Lipunan, the ruling party) at that time to be able to solve that problem.”

Today the IRA is automatically released to local governments (although have also been several instances when its release was delayed or withheld. Pimentel’s office says that there are unreleased allotments amounting to roughly P7 billion dating back to 2001). From a mere P20.3 billion in 1992, the Code’s first year of implementation, the local governments’ IRA share reached P166 billion in 2006, for a total amount of P1.42 trillion.

Table 1: Historical IRA Share of LGUs, 1992-2006
Source: Office of Senator Aquilino Pimentel Jr.

Provinces 23 P326.03 billion
Cities 23 P326.03 billion
Municipalities 34 P481.97 billion
Barangays 20 P283.51 billion

The IRA booty has resulted in bigger local government budgets; some barangays now have as much as P180,000 annually compared to the previous P5,000. Municipalities get as much as P9 million each, up from P1.5 million, while cities have posted a budget increase from IRA shares of over 200 percent. But it is the provinces that have enjoyed the greatest windfall. Capiz, for instance, saw its budget rise by 1,215 percent, from just over P25 million in 1991 to P329 million in 1995.

Here’s the downside, though: Studies done for the Local Development Assistance Program concluded that despite the increased shares from national taxes, the amounts transferred to local governments through the IRA have not been sufficient to cover the cost of devolution.

“The powers have been devolved to them, but at the same time the LGUs are given another impediment in unfunded mandates,” explains Brillantes. These mostly correspond to the salaries of about 70,000 employees of the devolved national agencies of the Department of Health, Department of Agriculture, Department of Social Welfare and Development, and Department of Environment and Natural Resources. Programs like the Magna Carta for Health Workers have prescribed salary scales of devolved personnel that local governments could not afford. Such expenditures have largely been responsible for the local governments’ inability to achieve surplus income.

The other issue is what Brillantes calls a resource-allocation imbalance. “It’s almost misleading,” he says. “Because when you look at the national budget, the IRA share of local governments amounts to a mere 17 percent of the national budget.”

Table 2: IRA Shares of LGUs vs the National Budget (in million pesos)
*Actual obligation
Notes: a – allotment release; b – proposed budget
Source: Department of Budget and Management (DBM)

1991 293,161 9,841 3.4
1992 286,603 20,305 7.1
1993 313,749 36,724 11.7
1994 327,768 46,815 14.3
1995 372,081 52,042 14.0
1996 416,139 56,594 13.6
1997 491,783 71,049 14.4
1998 537,433 76,941 14.3
1999 580,385 95,291 16.4
2000 682,460 114,278 16.7
2001 707,093 115,828 16.4
2002a 770,767 134,422 17.4
2002b 804,200 141,576 17.6

The imbalance is also manifested in the Priority Development Assistance Funds (PDAF), or pork barrel allocations, of congressmen and senators, as well as other budgetary insertions, whose amounts are typically greater than local-government budgets — not to mention that pork barrel somehow tends to distort local planning since the legislator would often insist on his or her own projects.

Pimentel is therefore proposing to increase the IRA share from the present 40 percent to 50 percent in keeping with Article X, Section 6 of the 1987 Constitution, which provides that local governments shall have a just share in the national taxes. He is also recommending that local governments be given slices from other taxes levied by the national government like customs duties, wharfage fees, and others.

“First of all, I am not comfortable with the term internal revenue allocation because it means that it is something that is dependent on the wishes of the central government,” he says. “These are internal revenue shares, so I would rather call them that.”

Pimentel adds that as far as he can recall, the intention of the Local Government Code was to make all government revenues as basis of the sharing, and not what the central government has been doing, which is to restrict access only to internal revenue taxes. Article 290 of the Code even provides that, in addition to the IRA, local governments have a 40-percent share of the national government’s gross collections from mining taxes, royalties, forestry and fishery charges, and other taxes, fees and charges collected from the development and utilization of the national wealth within their territories.

TO MAKE the IRA more equitable, Brillantes is proposing that the formula currently used as basis for its distribution be amended to include a fourth criterion: poverty index. Right now, population, land area, and equal sharing are being considered as the IRA’s yardsticks.

The problem with that formula, argues Brillantes, is that it doesn’t do anything. “It doesn’t lessen poverty because rich LGUs like Makati get equal share, equal access to the IRA as poor LGUs like Dinglas in Ilocos Norte,” he says. “The IRA should have a bias for the poorer local governments.”

Naga City Mayor Robredo, for his part, is asking for a more responsive and relevant IRA sharing scheme based on demographics, in view of the continuing effort to convert more towns into cities. Because Philippine cities today are supporting between 34 and 43 percent of the population, he says a 23-percent share is no longer tenable. Specifically, he eyes the share of provinces as the most logical source, since these have benefited the most under the current scheme.

Yet because it comes like the proverbial manna from heaven, the IRA has also made many local governnments dependent on the national government — a development quite contrary to the very spirit of local autonomy envisioned in the Code. Asks Pimentel, whose office estimates the number of IRA-dependent local governments at over 80 percent: “What happens now to the objective of devolution, which is to create more autonomous units of government, more self-reliant, more innovative in their approach to development?”

As he sees it, this dependence is the result of the failure of local governments to use their taxing power as provided for in the Code so they could raise funds on their own. The obvious reason for this, the senator says, is that local officials don’t want to be blamed by their constituents for tax increases.

But imposing local taxes has not been the only underused — though in some cases abused — power in the hands of local governments. Another has to do with actively seeking alternative activities that will add to their resources. Still another is on the matter of the environmental impact of projects in their localities wherein the local government units have not been as assertive.

All this Brillantes attributes to mindsets that have been steeped in decades and decades of centralized governance. He says government structures and procedures — auditing rules, purchasing rules — are still oriented toward centralization, mired in bureaucratic inertia that is not supportive of local autonomy.

A case in point, as brought up by Robredo, is the Code’s provision regarding the local school board. He says the school board has been “woefully” underused because it continues to follow the framework of a centralized public school system. “That, for the last three decades, has simply failed to work,” he says. “To my mind, the local school board provision reinforces this institutional ineffectiveness and worse, shackles progressive communities like Naga, Bulacan, Cebu, and Marikina.”

At the very least, however, the Code has led to a shift of perspectives and paradigms among the country’s 79 provinces, 118 cities, 1,501 municipalities, and 42,000 barangays. And though the commonplace observation is that devolution democratized not only polity but also corruption, it actually devolved accountabilities as well. As Brillantes puts it: “Nasa inyo ang kapangyarihan, ngunit nasa inyo rin ang pananagutan (The power is in your hands, but so is the responsibility). It might sound like a slogan. But it’s true, and I’ve seen it firsthand.”

Brillantes also notes that 15 years is too short to turn things around. “But” he says, “the mere fact that we have been able to accomplish what we did is already miraculous.”

Robredo, however, would rather use the Parable of the Talents than talk of miracles when it comes to gauging how far local governments have gone.

“In that parable,” he says, “the wicked slave — who buried the gold entrusted to him — was punished by our Lord by casting him into the darkness. This resonates clearly with the need to exact accountability among local officials, and the Code can explicitly mandate a performance evaluation system among elected officials — particularly chief executives — that will rate them comprehensively, and whose results should be publicized nationwide to allow for comparison. This will empower voters with a solid basis for their decisions come election day: whether to reward their leaders with another term, or cast them off into political oblivion.”