The Philippines’ more-than-three-decade-old devolution program remains incomplete, with local government units (LGUs) and national agencies continuing to share responsibilities for many basic services despite the 1991 Local Government Code (LGC), according to state-run policy think tank Philippine Institute for Development Studies (PIDS).

In the PIDS research paper titled “Reevaluating Devolution: Assessing Functional Assignments, Expenditures, and Constraints in Philippine Local Governance,” authors Marianne N. Juco, Ricxie B. Maddawin, and Rosario G. Manasan said long-standing fiscal, institutional, as well as political constraints have prevented the full transfer of functions to LGUs.

The paper, published last Monday, June 22, found that the principle of local autonomy has led many LGUs to “cross-charge” or “cross-credit” expenditures among different offices, effectively making functional assignments under the LGC discretionary rather than strictly defined.

“The inability to fully devolve functions, even after 30 years of implementation, can be attributed to this practice,” the authors said.

The researchers also found that many functions considered devolved are still effectively delegated, with funding and accountability remaining with the national government (NG). Capacity constraints, fiscal mismatches, as well as political economy realities have resulted in many services being delivered concurrently by both NG agencies and LGUs.

In the health sector, for instance, the Department of Health (DOH) continues supporting retained hospitals and low-capacity localities. The Department of Public Works and Highways (DPWH) still funds devolved infrastructure projects, while the Department of Agriculture (DA) continues to assume many agriculture-related functions that were intended for LGUs.

The study also examined the impact of the Supreme Court’s (SC) 2019 Mandanas-Garcia ruling, which expanded the tax base used to compute LGUs’ share of national revenues and significantly increased their funding since 2022. Aggregate national tax allotments (NTAs) rose by 38 percent in 2022 compared with the previous internal revenue allotment (IRA) level.

As a result, LGUs’ share of national taxes increased from an average equivalent of 3.3 percent of gross domestic product (GDP) from 2018 to 2021 to 4.4 percent of GDP by 2022, the first year of implementing the Mandanas-Garcia ruling.

Following the increase in funding, nominal spending on health, agriculture, and infrastructure rose across provinces, cities, as well as municipalities. The authors said the spending patterns generally reflected the functional responsibilities assigned to different levels of LGUs.

However, gains were uneven. In health care, significant increases in spending on hospitals and tertiary services were evident only among provinces as well as cities. Among municipalities, meaningful increases were concentrated in first-class municipalities, while fifth- and sixth-class municipalities posted only marginal spending increases, signaling absorptive-capacity constraints as well as differing local priorities.

The study also highlighted weaknesses in expenditure tracking, noting that the widespread practice of cross-charging expenses among different LGU offices makes it difficult to determine how much is actually being spent on specific devolved functions.

To address these issues, the authors recommended strengthening LGUs’ technical, institutional, and human-resource capacities, improving accountability and transparency mechanisms, enhancing coordination among governments, as well as standardizing expenditure reporting to better monitor spending on devolved services.