Economic managers seek Duterte's help in lowering LGU share

MANILA, Philippines – Government economic managers, fearing a gaping budget deficit, are running to President Rodrigo Duterte for help to lower the Internal Revenue Allotment (IRA) of local goverment units.

The recent decision handed down by the Supreme Court  that the “just share” of LGUs shall be sourced from “all national taxes and not only national internal revenue taxes” is causing the anxiety of the Duterte administration financial team.

 

Budget Secretary Benjamin Diokno said this on Wednesday, August 8, during the second day of the budget briefing at the Senate.

Responding to a question by Minority Leader Senator Franklin Drilon, Diokno said they would appeal the SC decision.

Diokno said this development would "constrain" the national budget and may lead to an "unmanageable public sector deficit" of 6%.

Under the proposed 2019 national budget, which did not consider the High Court ruling,  the IRA amounted to P575.52 billion.

The IRA could increase to as much as P732 billion should the SC decide that the ruling must be implemented next year.

Challenges: Both Diokno and Finance Secretary Carlos Dominguez told senators they do not know where they would source the additional funds for LGUs.

“I really don't know where we will source the funds and we will put our heads together and try to find out,” Dominguez said.

Drilon then asked about their timetable, saying the Senate has to deliberate on the 2019 budget by November for it to be implemented starting January 1, 2019. The economic managers, however, could not give a definitive answer.

“First we will file a motion for reconsideration, and we’ll wait for that to be decided upon,” Diokno said.

But Drilon said the prudent way is to expect the High Court to stick with its decision.

“Is it not more reasonable to assume that the decision will not substantially change? Do not entertain the thought that the SC will reverse its decision,” Drilon said.

“I don't think Secretary Diokno that it would be difficult for you to assume there will be no substantial changes. The more prudent step to take, minimum exposure, work on this figure, so when the appropriate time comes, we can do so [the adjustment]. It’s very difficult to me. It’s not prudent to say the SC may reverse the decision. For all my experiences, that will not happen, Mr Secretary,” he added.

Only fallback: It seems that the economic team has only Duterte as its main backup.

Citing the Local Government Code of 1991, Diokno said the President can reduce IRA for LGUs in the event of an “unmanageable public deficit,” such as the scenario the economic team foresees after the SC ruling.

Senators Drilon and Francis Escudero, however, were not convinced with Diokno's idea. Should the government announce public deficit, Escudero said it would “wreak havoc” on the country’s other finances.

Dominguez denied it would reach such grim scenario. But Escudero did not buy it: That's how they will react, really?

“Yes, we’re not allowing unmanageable deficit,” Dominguez said.

Drilon, in disbelief, said: "I think what they’re trying to say is by declaring unmanageable public defict, and declare IRA will be adjusted [to lower it], the unmanageable is now manageable.”

In a July 4 ruling, the SC decided on a 6-year-old petition filed by then representative now Batangas Governor Hermilando Mandanas. The petition said the national government did not release P500 billion worth of LGUs' "just share" from national taxes from 1992 to 2012.

Mandanas had asked the government to adjust  its proposed 2019 budget based on the ruling. – Rappler.com

Camille Elemia

Camille Elemia is Rappler's lead reporter for media, disinformation, and democracy. She won an ILO award in 2017. She received the prestigious Fulbright-Hubert Humphrey fellowship in 2019, allowing her to further study media and politics in the US. Email camille.elemia@rappler.com

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