LGUs to get record P1.32-T tax allotment amid devolution push

By Erika Mae P. Sinaking, Reporter

LOCAL GOVERNMENT UNITS (LGUs) are set to receive a record P1.32 trillion in national tax allotment (NTA) in 2027, up 11% from this year, as the Marcos administration shifts more resources and responsibilities to the local level.

“We only ask that you use it properly,” Executive Secretary Ralph G. Recto said in Filipino at the League of Municipalities of the Philippines Luzon National Congress on Tuesday. “Use it wisely. Above all, use public funds for the people.”

The projected allocation would mark the highest LGU share in national taxes on record.

LGUs in Luzon are expected to receive P676.9 billion of the total, Mr. Recto said.

The Local Government Support Fund (LGSF), which finances infrastructure and development projects, reached a record P57 billion this year. The government is proposing to raise the fund to P58.53 billion in 2027.

Mr. Recto announced the figures as he led the distribution of special allotment release orders under the support fund to municipalities in Luzon.

The fund supports projects such as water systems, farm-to-market roads, health facilities, multipurpose buildings, and other local infrastructure.

“It is not enough for the government to listen; it must act quickly to bring national resources directly to communities without political bias,” Mr. Recto said.

Analysts said that some local governments may struggle to balance and absorb these larger allocations.

Adolfo Jose “AJ” A. Montessa, co-convenor of the People’s Budget Coalition, pointed out that the “absorptive capacity of LGUs is quite uneven.”

“Unfortunately, the feedback we’re usually getting is that either LGUs are prone to maintain surpluses, i.e. not utilize this increased funding; or do not have the necessary capacity to implement the mandates and fill the role the National Government has typically taken,” he told BusinessWorld in a Viber message. 

Mr. Montessa said that while the Mandanas-Garcia ruling grants LGUs a larger share of national revenues alongside increased responsibilities, many localities struggle to execute.

The Supreme Court’s 2019 Mandanas-Garcia ruling, which took effect in 2022, increased the NTA share of LGUs to 40% of all national taxes beyond those collected by the Bureau of Internal Revenue (BIR). This adjustment was intended to enhance the fiscal autonomy of LGUs by granting them a more substantial share of the national tax base.

“A bulk of recent research from multiple institutions have pointed out to the still wide inequality across LGUs,” Hansley A. Juliano, a political science instructor at the Ateneo de Manila University, said in a Facebook Messenger chat.

“Highly urbanized cities and some component cities may be able to, but other component cities, municipalities and even provincial governments struggle to balance resources,” he added.

He warned that without strong local mechanisms, the devolution push could backfire.

“The monitoring should always continue. It is the responsibility of the National Government to do so even in most decentralized or federal countries,” he said.

Palace Press Officer Clarissa A. Castro said that the National Government will continue monitoring programs and projects even after functions and funding are transferred to LGUs.

“The National Government’s obligation does not end simply with the release of funds, everything is subject to monitoring,” she told a news briefing in Filipino. 

“Of course, regarding infrastructure, the Department of Public Works and Highways is involved in the monitoring process. As for the provision of scholarships, the Department of Education, Commission on Higher Education, and Technical Education and Skills Development Authority are also involved,” she said. 

Mr. Montessa also expressed concern over the potential politicization of LGSF, noting that “this fund might be used for early election purposes, another form of pork similar to what we tagged in the soft, hard, and shadow pork, but this time through Malacañang or the executive secretary releasing funds directly to local government units.”

He said that the massive tax allotment reduces national fiscal space, shrinking the government’s ability to fund new programs to respond to global and domestic crises. 

He said that the government must evaluate devolution by measuring actual ground-level health, nutrition, and literacy outcomes rather than simple project delivery.