Local Government Finance in the
Philippines
Milwida M. GuevaraSynergeia
www.synergeia.org.ph
The Philippines
• 2,100 islands• 76.5 million people in 2000; 2.4 per cent growth
annually (88.7 million by July 2007)
• 38 percent urban estimated to increase to 82 percent in 2020
Our Local Governments
Provinces 81
Municipalities 1,510
Component Cities
85
Barangays41,994
Barangays41,994
Highly Urbanized
Cities33
Barangay
Who does what?
• Provinces: Hospital and tertiary health services; Low cost housing; telecommunications; Infra from local funds; social welfare services
• Municipalities: Primary health care; school building; solid waste disposal; cultural centers, parks, tourism facilities
• Barangay (Village) : health center, day care, solid waste collection, reading center
• Cities: All of the above
Vertical Fiscal Imbalance
Revenues and Expenditure Shares of Central and Local Governments, 2004
0
20
40
60
80
100
120
Revenues Expenditures
Local
Central
Local 8.1 20.48
Central 91.9 79.52
1 2
LGU revenues do not match their expenditures.
Financial Dependence of LGUs on Central Government
Grants and Revenues of Local Governments
0
20
40
60
80
1989 1993 1997 2002
Year
Pe
rce
nt
to t
ota
l R
ev
en
ue
s o
f L
GU
sPercent ofgrants to totalrevenues ofLGUsPercent of localsources to totalrevenues ofLGUsPercent of realproperty tax tototal revenues ofLGUsPercent ofbusiness taxesto total revenuesof LGUs
The Road to a Robust Local Finance
• Definition of Minimum standards for public services, e.g. P10,000 per elementary student
• Grant system that equalizes needs and resources
• Productive, flat and simple to administer local taxes
• Systems and processes that promote tax compliance and transparency
Out of the Box Strategies—Policy framework that supports:• Public-private sector partnerships• Development of a credit market
* Special Purpose Vehicles * Bond financing* Credit rating for LGUs* Local Government Guarantee Corporation* Municipal/City Banks?
• Municipal Development fund for less capable LGUs
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