Press Release
October 2, 2020

Drilon proposes to devolve social services including jails, fire protection functions to LGUs
The Senate chief fiscalizer warns of looming financial issues due to the higher IRA of LGUs under Mandanas ruling and foregone revenues under CREATE bill

Senate Minority Leader Franklin M. Drilon said the government should seriously look at agencies and services that should be devolved to local government units (LGUs) in view of the expected huge deficit that will be incurred due to the increase in the internal revenue allotment (IRA) of LGUs by 2022.

Drilon said this higher requirement for IRA will take a toll on the national coffers on top of other losses that will arise from the proposed Corporate Recovery and Tax Incentives for Enterprises Act (CREATE).

"We should take the bull by its horn and we should be serious about which agencies or services should be devolved because we are facing a serious financial problem next year," Drilon said during the Senate hearing on the proposed budget of the Department of the Interior and Local Government and its attached agencies on Thursday.

"I hope our national leadership listens because we will be scrambling next year for a very difficult financial crisis given the contraction of the economy and the expected low revenues due to the foregone revenues from the CREATE bill," Drilon said.

"If we don't do anything about it, the national government may face an unmanageable deficit," he warned.

Due to the Mandanas ruling, the IRA of LGUs will dramatically increase to P1.083 trillion by 2022. For 2021, the proposed IRA of LGUs stands at P695 billion, he noted.

The Supreme Court had ruled that the IRA of the LGUs must come from 40 percent of collections of "all" national taxes - including collections from import duties and other levies by the Bureau of Customs (BOC) - and not just from national internal revenue taxes collected by the Bureau of Internal Revenue (BIR).

"Next year, at this time, we'll be confronted by a P1.083 trillion allocation for the IRA for 2022 and I do not know what will happen with that kind of a burden on the national budget," Drilon said.

"In 2022, we will be downloading a huge sum of money to LGUs. Saan nila gagastusin iyong P1.1 trillion? This higher IRA should be met with more responsibilities through devolution of some basic services to LGUs," Drilon said in a statement.

He said the agencies have no choice but to devolve their functions to local government units.

To start with, Drilon proposed that social services as well as the management of jail and fire stations be turned over to local governments since their IRA will increase come 2022.

"We must do this quickly, 2022 is just around the corner. We have to work on this to change the necessary organization structure and to capacitate the LGUs. To dilly-dally will mean chaos", Drilon warned in a statement.

At Present, city and municipal jails are managed by the Bureau of Jail Management and Penology (BJMP) while the provincial jails are left with the provincial government. The fire protection function is performed by the Bureau of Fire Protection (BFP). Both are attached agencies of the DILG.

Interior Secretary Eduardo Ano said LGUs may not be ready to take on the responsibility of fire prevention, citing concerns of procurement of fire trucks and other equipment.

But Drilon disagreed, saying that the LGUs are in the best position to manage the jails and fire protection services, particularly with the increase in their IRA by 2022.

"If you look at the situation on the ground, it is difficult to accept that the local government has no capacity to run fire departments," said Drilon.

"There is no additional source of income to cover the increase in the IRA of LGUs. In fact, our revenue streams will be affected by CREATE and other legislation that we are doing today. There is no choice but to identify which agencies can be devolved in order that we can address this P1.083 trillion additional burden to the national government," he added.

Drilon said that 2021 could be difficult for the country insofar as revenue streams are concerned given the contraction of the economy and the expected revenue losses due to CREATE bill and other legislation.

He noted the DOF estimates of P42 billion in foregone revenues in the second half alone and the amount is expected to reach P625 billion over the next five years.

Drilon earlier thumbed down any plan by the country's economic managers to impose new tax or raise taxes by 2021, adding it is difficult to pass any tax raise next year.

Instead of burdening the Filipino people with new or higher taxes next year, Drilon said the government should proceed with the privatization of the gaming industry to repay the debts incurred on Covid-19 response.

Finance Secretary Carlos Dominguez, in response to Drilon's proposal, said his department will push through with the plan to privatize Philippine Amusement and Gaming Corp. (Pagcor) and the Philippine Charity Sweepstakes Office (PCSO) to raise additional revenue.

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