ONE of the vital issues confronting the nation that apparently passed the public eye is the public fiscal policy repercussion to the National Government of the implementation of the Mandanas Ruling, which is set to take effect next year, 2022. There are very few discussions in the public sphere that raise the issue of how the National Government will mitigate the effects of the said ruling. Last week, during the sponsorship speech of the neophyte Senator Bong Go to his hospital bills that sparked a heated debate with Senator Franklin Drilon, the issue had been once again brought into the forefront. This was tackled in line with the discussions about the source of funding of Go’s proposed hospital bills.
The Mandanas Ruling pertains to the Supreme Court decision in Mandanas et.al. vs. Ochoa that assailed and clarified to the High Tribunal the manner in which the “just share” in the national taxes of Local Government Units (LGUs) has been computed. Some of the petitioners cited Article 10, Section 6 of the 1987 Constitution that should provide as the basis of such computation. It has been contended that computation of Local Government Units’ share in national collections should not just be limited to internal revenue, particularly cited in Local Government Code, but should be based on all collections of national taxes including, among others, those that are collected by the Bureau of Customs. In the 2018 Ruling that had been affirmed with finality in 2019, the Supreme Court declared that indeed, as surmised by the petitioners, the basis of computation of LGUs’ just share must be from “all collections of the National Taxes except those that are accruing to special purpose funds and special allotments for the utilization and development of the national wealth.”
Clearly, this decision will greatly affect the national budget for the next fiscal year. Initially, the Department of Finance computed an increase of 27.61% to the budget that has to be given as share to LGUs. This is equivalent to a P234.39 billion increase to the funds that will be redistributed to all LGUs in the country. Instead of only having P848.44 billion based on the current computation, the share of LGUs in 2022 has been computed with a sum of P1.083 trillion as a result of the Supreme Court decision. The amount that will be devolved will heavily affect the budget of the National Government next year. Adding to the current challenge to the national fiscal planners are the effects of the pandemic in revenue computation and collection as a result of the weakening of the country’s economy due to the lockdown restrictions.
With all these challenges brought about by the aforementioned ruling in crafting the proposed 2022 budget, and in the absence of certificate of availability of funds, the House of Representatives passed last Tuesday, May 25, on second reading the Bayanihan to Arise as One Bill or Bayanihan III Stimulus package, with a budget requirement of P401 billion. The bill aims to mitigate both the health and economic implications of the pandemic by providing cash assistance to every Filipino (more than 25% of the budget requirement will be for this purpose), injecting an additional budget for the Department of Social Welfare and Development’s Aid for Individuals in Crisis Situation (AICS), assistance to micro, small, and medium enterprises through a wage subsidy program, making available standby funds (amounting to P30 billion) for the agriculture and agri-fishery sectors for food security, and livelihood assistance projects under the TUPAD (Tulong Panghanapbuhay sa Ating Disadvantaged/Displaced Workers) program, among other things. Indeed, these kinds of measures are among the strategies being implemented by most countries in the world to mitigate the effects of the pandemic. In principle, it will not just help individuals and families affected by the pandemic through the ayuda (assistance) program (coined as AYUDA FOR ALL) but it definitely will aid the economy by increasing government spending and injecting huge amount of its budget into it.
As alluded, the main problem with Bayanihan III is the source of funds. The House of Representatives leadership identified at least three sources of funds for the measure. These are: 1. additional advances from Bangko Sentral ng Pilipinas, 2. increased mandatory dividend remittances from Government-Owned and -Controlled Corporations (GOCCs), and, 3. funding coming from savings of the government (which is highly unlikely given the current fiscal demands).
With the amount of funding needed for the measure and the seeming ambivalence of the Finance Department in looking for possible sources, one approach that can be considered by Congress to make the funding of this bill more sustainable and more efficient, considering the fiscal repercussions of the Mandanas Ruling, is to devolve certain provisions or aspects of the measure to local government units. As a result of the said Ruling, LGUs’ share from the national taxes is expected to increase significantly.
It is comprehensible in the basic principles of decentralization in the Philippines as embedded in the Local Government Code of 1991 that certain functions of the National Government have been devolved to LGUs. Particularly noticeable in the proposed Bayanihan III are certain programs that can be shared by the National Government and the local governments in terms of funding. Since there are considerable portions of the measure specifically addressing social welfare, agriculture, and health aspects, which are among the devolved functions in Philippine decentralization, Congress might want to consider shared funding for these aspects. The National Government can instead focus on the ayuda package in full and certain aspects of the bill that cannot be devolved, instead of solely taking charge of the source of funds for the entire measure. In so doing, the proposed bill attains the aim it pushes for while simultaneously mitigating the fiscal effects of the Supreme Court Ruling to the National Government.
The challenges set forth by the current situation including the different, albeit complex, conditions it fashioned magnified the need for efficient and responsive, if not innovative, fiscal administration. It is imperative for government institutions to include fiscal sustainability and efficiency in their crisis response framework due to the extent and severity of the effects of the current pandemic to National Government financial standing, coupled with the fiscal challenges brought about by the 2018 SC Decision. The uncertainties brought about by contemporary circumstances that apparently do not offer any universal response template necessitate an innovative public administration approach; policies are tentative, responses need to be constantly revisited, and approaches provisional.
Luisito V. Dela Cruz is a faculty member of the Departments of Social Sciences and Political Science of San Beda University teaching Local Governance and Ethics and Accountability of Public Officials.