Marcos signs law formalizing income classification of LGUs

MANILA, Philippines — President Marcos signed into law Republic Act 11964 or the Automatic Income Classification of Local Government Units on Oct. 26, institutionalizing the automatic income classification of LGUs.

Under RA 11964, provinces, cities and municipalities shall be categorized into five classes according to their income ranges and average annual regular income for three fiscal years preceding a general income reclassification.

The classifications of provinces are as follows: First Class, provinces that have obtained an average annual regular income of P1.5 billion or more; Second Class, provinces with an average annual income of P900 million or more, but less than P1.5 billion; Third Class, provinces with an average annual regular income of P700 million or more but less than P900 million; Fourth Class, provinces that have average annual regular income of P500 million or more but less than P700 million; Fifth Class, provinces that have average

 annual regular income of less than P500 million.

Cities will also be classified into five classes: First Class, cities with an average annual regular income of P1.3 billion; Second Class, cities with an average annual regular income of P1 billion or more but less than P1.3 billion; Third Class, cities with an average annual regular income of P800 million or more but less than P1 billion; Fourth Class, cities with an average annual regular income of P500 million or more but less than P800 million; Fifth Class, cities with an average annual regular income of less than P500 million.

Meanwhile, municipalities will be classified as First Class, or municipalities earning an annual average income of P200 million; Second Class, municipalities earning an average annual income of P160 million or more, but less than P200 million; Third Class, those earning P130 million or more, but less than P160 million; Fourth Class, those with an annual average regular income of P90 million or more, but less than P130 million; Fifth Class, those with an average annual income of less than P90 million.

The LGU income classification will serve as the basis for the identification of administrative and statutory aids, financial grants and other forms of assistance to LGUs, determination of LGU capability to undertake development programs and projects, total annual supplemental appropriation for personal services of an LGU and for compensation adjustment for LGUs personnel, pursuant to the Salary Standardization Law of 2019, according to a statement released by the Presidential Communications Office (PCO) yesterday.

It will also serve as the basis for the setting of the number of elective members in the Sangguniang Panlalawigan and the Sangguniang Bayan, issuance of a free patent title to residential lands, minimum wage of domestic workers, insuring LGU properties with the Government Service Insurance System and for setting the limitation on the percentage of agricultural land area that can be reclassified and the manner of their utilization, the PCO said.

The new law gives the Secretary of Finance, in consultation with the National Economic and Development Authority and the concerned LGU’s league, the authority to adjust the income ranges based on the actual growth rate of the annual regular income from the last income reclassification, and undertake regular income reclassification every three years so that it conforms with the prevailing economic conditions.

The first general income reclassification shall be made within six months after effectivity of the law and every three years thereafter.

According to RA 11964, the first income reclassification of provinces, cities and municipalities will take effect on Jan. 1 of the immediately succeeding year following the issuance of the table of income classification by the finance secretary.

The Department of Finance, in coordination with the Department of Budget and Management and in consultation with LGU leagues, will craft the law’s implementing rules and regulations within three months from its effectivity.

“It will finally address the classification of LGUs as many are classified as first class. There will be correct grading on the LGUs. It will benefit all as the law fixes the system. At present, if you are classified as first class, your salary structure is for first class but in reality, the LGU is overburdened,” Union of Local Authorities of the Philippines president and Quirino Gov. Dax Cua said in an interview with The STAR.

According to Cua, the law provides safety nets to ensure that the salaries of employees will not be affected.

Interior Secretary Benhur Abalos lauded Marcos’ approval of RA 11964, adding that under the new law, a general income reclassification of LGUs shall be made within six months and then automatically every three years thereafter.

“Income classification impacts their ability to undertake development projects, access financial grants from various sources and determine the salary of LGU personnel,” Abalos explained.