IRA Share Distribution - the tale of six cities (Part 3)

A particular issue which has become part of the history of our legal jurisprudence in this country actually stemmed from the very particular concept of resource allocation spelled out in the Local Government Code. Last Thursday, we wrote that out of the total internal revenue of the country, 40 percent is set aside for the local governments. The IRA is divided among the four LGU classes as follows: provinces - 23 percent; cities - 23 percent; municipalities - 34 percent; and barangays - 20 percent. The share of each LGU class is then divided among the LGUs in the class.

Among the four classes of LGUs, the cities and municipalities are the closest to each other. Actually, except for the code-provided criteria in defining cities and municipalities, there seems to be no clear distinguishing features between them. Some municipalities are actually more city-like than some cities. Except for the population, land area, and income criteria, cities are the same as municipalities. But look at how the IRA share are distributed to each class and to the LGUs in each class.

Under the LGC, cities get 23 percent of the pie while municipalities get 34 percent.The latter seem to get 50 percent more than the former. But realize that originally, there were only less than a hundred cities and more than a thousand municipalities. So, on a per square meter, or per capita basis, cities get tremendously more than municipalities. No problem with provinces and barangays, they are a league of their own, and very few barangays aim to secede from their original cities municipalities and become separate LGUs.  There's also no strong incentive for a city or municipality or a group of LGUs to create new provinces, except to maximize IRA shares or increase the number of political positions. But municipalities want to become cities!

That you can get much more share of the IRA pie is reason enough for many municipalities to aspire to become cities. When you become one, you get a much bigger share of the pie - at present, the 23 percent is divided among the more than a hundred cities while the 34 percent is divided among the more than a thousand towns. Cities with growing population and income levels fight tooth and nail to become cities. When a municipality becomes a city, its IRA share increases tremendously, all the existing cities' IRA shares will decrease, while all the remaining municipalities' shares will somewhat increase with one less taker.

That's why when there was a rush for municipalities to convert to cities, many of the existing cities at that time protested and objected especially when the criteria was relaxed. Not so much with the remaining municipalities, but six municipalities converting to cities resulted in considerable decreases in original cities' LGU share. What complicated the issue was the series of fluctuating decisions of the Supreme Court for and against the conversion, so many times, that even until now it left everybody confused.  The six are cities now and would probably stay as such. But the issue remains a volatile issue as the law on IRA share distribution remain as it is, enticing municipalities to dream of becoming cities.

The funny thing is, it's a zero-sum game - the entire value of IRA share remain the same, and doesn't really benefit the country as a whole. The new cities might bask in their new wealthy status, but this is at the loss of other LGUs. It's a case of local priorities being pushed with no concern of what their effects are on national development. On the contrary, most of local government conversions result to additional bureaucratic positions, meaning more expenditures for salaries and operating expenses, the non-GDP-forming part of the budget.

This is just a side-issue of the entire resource allocation policy, but it highlights the need for a fuller understanding of the existing policy/policies and how government needs to improve the same in the light of the need to balance national development goals and interests with local concerns and the need for equitable and inclusive growth. The Local Government Code is one of the best pieces of legislation in the country but it's far from perfect, and needs to be understood better because issues arise due to misinterpretations.  Worse, the gems of development-related concepts in it are often drowned by emotional self-interests. (to be continued)