Local Budgeting Reform Bill (House Bill No. 588)

December 4, 2021

An Act Ensuring the Equitable Distribution of Funds between the National Government and the Local Government Units, Appropriating Funds Therefor and for Other Purposes

Despite the mandate of an increase in the share of Local Government Units (LGUs) from the national government’s annual tax collection through the distribution of the Internal Revenue Allotment (IRA) and an authorization for LGUs to impose local fees and taxes to generate additional resources through the Local Government Code of 1991 (LGC), many LGUs still continue to suffer from limited fiscal resources, resulting to their inability to provide quality services to their constituents, a stark contrast to what was initially envisioned when the LGC was enacted in 1991. To date, many LGUs still rely on direct provision from the national government, especially for programs and projects that contribute to their local development.

This bill, therefore, seeks to provide additional funding for LGUs by giving each barangay, municipality, city, and province a Local Development Fund (LDF). The LDF aims to supplement the funding of LGUs to ensure that their developmental programs and projects are adequately funded. Furthermore, in order to promote equity in terms of income distribution, this bill provides for higher funding to lower-income LGUs compared to their higher-income counterparts.

This bill also outlines various safeguards (such as, but not limited to, compliance with local development plan, local capacity-building, multi-sectoral monitoring and evaluation) to ensure that funds are used as intended.

In addition, this bill also mandates that at least 10% of the LDF be utilized for programs aimed towards the enhancement and promotion of technical skills training and education in the community.

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