'Heavily' relying on national gov't for funds, LGU revenues down in Q3

MANILA, Philippines — Local government units saw their revenue collections inch down in the third quarter, as they still “rely heavily” on the funding transferred to them by the national government to bankroll their initiatives and programs.

In a statement on Tuesday, the Department of Finance, citing data from the Bureau of Local Government Finance, reported collections of LGUs from locally-sourced revenues declined 0.33% year-on-year to P208.98 billion.

Local government units derive their revenues from local and external sources. Local sources include tax revenues from the real property tax and the business tax, and non-tax revenues from fees and charges, receipts from government business operations and proceeds from sale of assets. On the other hand, external sources include the Internal Revenue Allotment (IRA) from the national government and other shares from special laws, grants, aids and borrowings.

Broken down, locally-sourced revenues accounted for 32% of LGUs’ total operating income in the third quarter. This means LGUs continued to depend on IRA from the national government, which cornered 64% of total income to P414.5 billion during the period, up 7.2% year-on-year. Non-tax revenues, meanwhile, accounted for 7% of the LGUs’ operating income while “other transfers from the national government” had a 4% share.

“On IRA dependence, provinces showed the highest dependency at 81%, followed by the municipalities (78%) and cities (43%) in the third quarter of 2021,” BLGF Executive Director Niño Raymond Alvina was quoted as saying by the DOF.

Among locations, cities had the highest locally-sourced revenues in the third quarter at P147.89 billion, accounting for 71% of the total collections. The revenues generated by municipalities clocked in second at P39.57 billion while provinces fell last at P21.53 billion.

“In aggregate terms, LGUs’ dependence on external sources (e.g. IRA, other transfers from national government) in the third quarter of 2021 reached 68%, which is 0.72 percent or P3.14 billion higher than the third quarter 2020 levels,” Alvina added.

Unsurprisingly the country's economic capital, Metro Manila, raked in P89.28 billion during the period, representing 43% of total locally-sourced revenues of all LGUs. Revenue collections from Calabarzon (Region 4-A) hit P32.54 billion while Central Luzon (Region 3) generated P19.32 billion in the third quarter.

Alvina noted that almost half of the cities decreased in revenue intake compared to 2020. Despite that, the DOF reported that tax collection from local businesses, which accounts for 47% of LGUs' revenues from local sources, was already completed this year.

For Zyza Nadine Suzara, executive director of think tank iLEAD, the government's goal of reaching P223.9 billion in collections is feasible but revenue collections next year would likely face hurdles.

"Locally-sourced revenues of the LGUs may perhaps reach its 2021 full-year target given that 92% of target collections has already been achieved in Q3 2021. However, locally-sourced revenues might slow down next year outside of the top regions which significantly contribute to locally-sourced revenues," she said in a Telegram message. 

The government attained 92% of its target as of the third quarter collections, based on performance set by LGUs earlier this year.

"Provinces, cities and municipalities which suffered catastrophic damages due to typhoon 'Odette' might not be able to achieve the targets next year," Suzara said.

"Thus, even with the continued reopening of the economy and assuming the national government successfully contains the spread of the Omicron variant, achieving locally sourced revenue targets will still depend on how swift those LGUs can recover from the devastation wrought by typhoon Odette," she added.