LGUs dependence on NG risen in 2020

Published July 20, 2021, 4:00 PM

by Chino S. Leyco

Most local executives remained heavily dependent on income they received from the national government to fund their operations, data from the Department of Finance’s (DOF) Bureau of Local Government Finance (BLGF) revealed.

Based on the latest operating income reports submitted by local government units (LGUs) to BLGF, the share of local tax collections in their total operating expenses declined to 23 percent last year from 25 percent in the previous year.

Moreover, the share of non-tax revenues in the operating income of provinces, cities and municipalities dropped from 10 percent in 2019 to seven percent last year.

On the other hand, the share of LGUs’ income from external sources, like internal revenue allotment (IRA) from the national government, increased to 70 percent last year from 66 percent in 2019.

Likewise, the share of other revenue transfers from the national government to LGUs jumped last year to eight percent from four percent a year earlier.

In aggregate terms, Niño Raymond Alvina, BLGF executive director noted that LGUs dependence on income from the national government reached 70 percent.

On IRA dependence, provinces showed the highest dependency ratio at 78 percent, followed by municipalities at 74 percent and cities at 42 percent 2020, Alvina said.

In 2020, total current operating income of the LGUs rose by 12 percent to P825.2 billion from P738.54 billion a year ago, bulk of which were IRA.

Total IRAs received by LGUs reached P509.65 billion last year, an increase of 11 percent compared with P457.15 billion in 2019.

Meanwhile, LGUs locally sourced revenues (LSRs) exceeded their 192.24 billion target last year by 27 percent to P244.19 billion.

LSRs cover collections from the real property tax, local business tax, fees and charges, and receipts from economic enterprise.

Like in the previous years, the national capital region posted the highest LSR collections, which reached P101.94 billion or 42 percent of the total in 2020.

Metro Manila was followed by Cavite-Laguna-Batangas-Rizal-Quezon or Calabarzon and Region III or Central Luzon, with P37.52 billion (15 percent) and P22.35 billion (nine percent), respectively.

Aside from NCR, only Regions VIII, IX, X, XI, XII, and XIII posted positive growth rates in LSR collections, while mostly all other regions in Luzon and the Visayas registered declines.

“For 2021, the BLGF is actively monitoring the LGUs’ quarterly fiscal performance as it expects lower revenues this year, since the local taxes will be based on the gross receipts of business establishments in 2020 when the Covid-19 pandemic started,” Alvina said.