Devolution without federalization

Notably, President Duterte no longer mentioned federalism — his 2016 campaign battle cry — in his final State of the Nation Address. Why? I think because federalism’s avowed goal of devolution had been quietly accomplished without a tedious, disruptive, expensive, and much-ballyhooed Charter change.

In fact, starting next year, 2022, the local government units or LGUs (provinces, cities, municipalities, and barangays) will “automatically” receive 27.61 percent more funds or about P234.39 billion more (from P848.5 billion in 2021 to P1.083 trillion in 2022) from the national government (NG), and will have more powers, functions, and services through a cadenced process of devolution without need of federalization.

Three legal gems enabled this historic devolution. The first is Mandanas v. Ochoa (July 3, 2018) which ruled that the LGUs’ “just share” of the taxes collected by the revenue-gathering agencies of the NG (Bureau of Internal Revenue, Bureau of Customs, etc.) should include not only collections from national internal revenue taxes (practiced in all prior years since our Republic was born) but also from tariff and customs duties, value added taxes (in certain areas), excise taxes, taxes from the exploitation and development of natural resources, and others.

The provincial governors, city and town mayors, and barangay captains will be delighted to know that the total of P1.083 trillion to be released to the LGUs is about 20 percent of the P5 trillion budget proposed by the Executive Branch to Congress for the operation of the NG in 2022. This P1.083 trillion is in addition to the revenues that another gem, the Local Government Code (and similar laws), authorized the LGUs to impose and collect in their respective territories.

One more legal gem is Executive Order (EO) No. 138 signed by the President last June 1 that devolved functions and services heretofore performed by the NG to the LGUs pursuant to the principle that with more power and funds go more responsibilities and tasks.

Under the EO, the NG “is fully committed to the policy of decentralization enshrined in the Constitution and relevant laws which are aimed at (i) developing the capabilities of local governments to deliver basic social services… increase productivity and employment, and promote local economic growth; and (ii) ensuring accountability, competence, professionalism and transparency of local leaders…”

“In pursuit of full devolution of functions to the LGUs,” the department secretaries and agency heads were directed to “conduct a functional and organizational review of their respective mandates… [in such a way that] [p]ublic services with little or no benefit spillover are best administered and financed by lower level governments, while public services with significant inter-jurisdictional externalities or benefit and cost spillovers are best assigned to higher levels of government.”

With detailed legalese, the EO carefully delineated the roles of the NG and the LGUs; the preparation of “devolution transition plans;” the establishment of the Growth Equalization Fund (GEF); the creation of the Committee on Devolution (ComDev); the reinforcement of the LGUs’ capacity-building; the strengthening of planning, investment programming, budgeting linkage, and monitoring and evaluation systems; the development of communication plans and strategies; and the giving of reemployment options to adversely affected NG personnel.

The GEF will “address issues on marginalization, unequal development, high poverty incidence and disparities” to enable “poor, disadvantaged and lagging LGUs” to undertake the functions and services devolved to them. The ComDev shall “oversee and monitor the implementation of administrative and fiscal decentralization goals.”

The adversely affected NG personnel were given the option to apply for transfers to other units in the Executive branch without reduction in pay, or to avail of retirement benefits and thereafter apply to the LGUs concerned as new employees.

In sum, pursuant to the constitutional mandate of decentralization, the three great branches of government cooperated quietly but seamlessly to devolve funds and functions to the LGUs via (1) the Supreme Court’s Mandanas v. Ochoa, (2) the President’s EO 138, and (3) the Congress’ Local Government Code. Significantly, the devolution was accomplished without a contentious Charter change and without adding a new, costly, and burdensome layer of governance.

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