Senate President Pro Tempore Ralph Recto on Tuesday said the government should settle its P195-billion debt in internal revenue allocations to local government units, saying this was a test of its promise to funnel more funds to the provinces through federalism.
“The administration is being presented with the opportunity to put its money where its mouth is, in a case that will prove federalism’s model of granting the regions more money is feasible,” Recto said.
“If they cannot fund a decision based on an order of the Supreme Court, how can they spend for federalism, which needs a huge budget?” he added.
He said the government could comply with the decision on the IRA case by way of the 2019 national budget, or have a separate supplemental budget passed by Congress.
In other developments:
• Senator Francis Escudero questioned the allocation of P90 million for an information campaign on federalism, where no federal system has been approved.
• Philippine Information Agency Director General Harold Clavite said Communications Assistant Secretary Margaux “Mocha” Uson should apologize to the people and take a leave of absence following the furor over her “pepedederalismo” video.
• Secretary Martin Andanar of the Presidential Communications Operations Office said it was planning to release a jingle that will have “repetitive” lines that might be helpful in embedding federalism into the public consciousness.
The Supreme Court on July 4 ruled that the share of LGUs from taxes paid should be sourced from “all national taxes and not only national internal revenue taxes.”
The IRA is the mechanism by which the taxes are plowed back to local governments. Provinces and cities get 23 percent, municipalities, 34 percent; and barangays, 20 percent.
The Supreme Court ruled that in computing the share of local governments, collections made by the Bureau of Customs and other fees collected by government agencies must be included.
Recto said the Court ruling on IRA case proves that public funds can be sent to the grassroots without tinkering with the Constitution, but by way of ordinary legislation, Recto said.
Recto has filed three “equal IRA share” bills, which contain other reform provisions like basing the IRA on internal revenues collected two years before, instead of the present three, and allowing the direct remittance of national wealth income, like a share from mining, to host LGUs.
Meanwhile, Senator Francis Escudero questioned the allocation of P90 million for an information campaign on federalism, where no federal system has been approved.
“We don’t even know what shape, size, color, or format. What will we disseminate? It is a draft proposed constitution which is still subject to debate in the House?” he said during a budget briefing at the Senate.
“Is it not right that we should disseminate only the approved version to be understood by the public?” he added.
Senator Loren Legarda asked for the economic team’s comprehensive report on the direct and indirect costs and the impact of the implementation of projects of federalism.
Senate Minority Leader Franklin Drilon, for his part, opposed a plan by the country’s economic managers to declare an unmanageable public sector deficit to allow the President to reduce the IRA shares of LGUs to address the potential expense of P195 million caused by the Supreme Court ruling.
The ruling could increase the country’s deficit from 3 percent to 4 percent,
“Where do we source potentially huge amount that we have to add to the NEP [National Expenditure Program]?” Drilon said.
Finance Secretary Carlos Dominguez said the government will not absorb a higher deficit. “We cannot afford that,” he said.
The economic managers later said they are contemplating invoking Section 284 of the Local Government Code.
But Drilon opposed the plan, saying such move would be detrimental to the local governments, who have their own plans where to use the additional budget that is due them by virtue of the SC ruling.
He explained that by invoking Section 284 of the Local Government Code, the government may declare an unmanageable public fiscal deficit to cut the IRA shares of the LGUs by up to a maximum of 10 percent from the present level.
“This is a power available to them under the Local Government Code, but I strongly advise against using that power,” Drilon said.
“Any reduction of the IRA will hit the LGUs and the projects of the LGUs. It may also affect the personnel and their salaries,” Drilon said.
“It will also send a very wrong signal to investors,” he added.
At the same briefing, Dominguez admitted that the economic managers were “very confused by the draft” on federalism, particularly since the government could incur a “very large” budget deficit that would lower the country’s credit rating.
He referred specifically to the proposal that 50 percent of revenue collection be given to the regions.
He said this would require “more work” when applied to the national budget because a very large deficit might be incurred.
When asked by Recto what would happen to the country’s credit ratings as a result, Dominguez replied: “Oh, it will go to hell… Everybody pays higher interest rates.”