Stampede’s End

by Juan L. Mercado

The Supreme Court has junked pleas to reconsider it’s decision that whacked  16 cities back into status as towns. This  final  verdict staunches  the  hemorrhage from  Internal Revenue Allotments (IRAs) of nearly 100  members, a relieved “League of  Cities”  claimed in a full-page ad.

“After conversion of 16 municipalities, existing cities were deniedtheir rightful share in IRA,” the League said. These “cities can now claim those much needed resources.” .…”
“It is high time we revisit IRA redistribution,” the  League added. Congress should come “ up  with a bill  providing for equitable sharing.” Draft  stringent  standards to stop the stampede for cityhood.

In a  7 to 5 vote (2 abstentions) the Court ruled earlier that the 16 – which included Lamitan in Basilan, Batac in Ilocos Norte and  Borongan in Eastern Samar  —  flunked Republic Act 9009 standards. e.g. generating P100-million in local income.

The 16 opted, instead, for  palusot or a cushy shortcut, via exemptions. “The Constitution is clear,” Justice  Antonio  Carpio wrote.  “Creation of  local government units (LGUs)  must follow  criteria  set.”  Applicants   may  not  wiggle thru exemptions  not anchored in  law.

Until the Court sealed the exemption tap, the 16 “cities” siphoned from  the common  IRA pool. In Cebu, Bogo’s P60  million IRA, for example, ballooned into P180 million. This “sweat-free” cash spurred the stampede to clone cities.

In 1991, there were already 60 cities. Many were of dubious viability. By 2003, the number bolted to 117.  Negros Occidental alone had  13. Himamalayan, for  example, is a “city of only three barangays.  The total soared to 131 in June  2007.

“Few  perform as ‘engines of growth.’” When the court order came down, politicians had lined up 27 more towns to become cities,  via Exemption  Expressway. A city shingle can provide safety nets for fading political family dynasties.

But windfalls for the 16 came by dipping unasked into pockets of other cities. Puerto Princesa’s IRA inched up by only P1.7 million instead of P146.7 million. “Since 1998, Cotabato City suffered a loss of P63 million because of the unabated creation of even undeserving cities,” the mayor griped in a Mindanao Cross ad.

Shell cities “strained national government’s ability to finance these units, ”World and Asian Development Banks  warned as early as 2000. “The small size of LGUs prevent them from generating their own revenues”

Few bothered to listen. Congress watered down criteria it set. Local officials itched for status and key to the IRA  larder.President Gloria Macapagal Arroyo obliged by allowing bills to lapse into law—without her signature.  An avoidable mess spiraled into an inevitable muddle.

“Painting over citysignboards is the least of their worries,” Sun Star daily said. “It’s the “R” word that terrifies them: “R”for refund.   Must the 16 pay back what they  drained  from  the  IRA pool?.”  Carcar in  Cebu  will lose P120 million.

“What do we do now?”, wailed no-longer Bogo City mayor Celestino Martinez Jr. The once-again town mayors of Baybay  in Leyte,  Bayugan in Agusan del Sur and Naga in Cebu also mumble this jeremiad.

“Revisit IRA redistribution” That’s the League of Cities’ call.  Indeed, the IRA system is “horrendously  complicated”, “writes former Finance  Undersecretary  Milwilda Guevera. “(It is also) grossly inequitable.”

IRAs are national government grants. They’re not “begging bowls” for LGUs. They’re supposed to budge local officials into crafting sturdy tax structures.

It hasn’t worked out that way. IRAs are blank checks without performance criteria. Officials are not held to account. Slabs from this de-facto pork barrel go for junkets, honoraria,  extra hires, fiestas, etc.

A pittance is allocated for “unmet basic human needs”. Nine mothers die daily from pregnancy-related causes. Nutrition is given  short shrift although 28 out of every 100 kids suffer from chronic hunger. Health care, safe water, sanitation  rank low in  disbursement whims.

The Philippines and 182 other countries pledged to achieve, by 2015, Millennium Development Goals for health, education, poverty, among others.  But “MDGs” elicit blank stares from most local officials, oblivious of the irony, they could do most for the neediest.  

“Local governments have become more dependent on grants,” Ms Guevara notes. “IRA accounts for about 64% of their total revenues compared to 39% before devolution.

“There are no clear rules and no transparency in how (IRAs) are disbursed,” she adds. “Lack of an “efficient transfer system” insulates LGU officials from bearing costs of under-utilizing their taxing powers.”

National Tax Research Center found that IRAs “tend to flow heavily to more developed regions like Regions 3 and  4, plus Metro Manila.  World Bank’s “Development Report” makes the same point.

The system locks resources into theoretical “equal lots”, regardless of actual need. The result is a paradox: IRA  withers  as an  equalizer,  Ms Guevarra observed. The system instead spawns “perverse incentives for LGUs to convert into cities to receive additional IRA”.

“Cities are changing the social fabric and culture of nations,” Asian Development Bank notes “It has the elements of unpredictability and chaos” – and opportunity, given statesmanship.

(E-mail: juanlmercado@gmail.comThis e-mail address is being protected from spambots. You need JavaScript enabled to view it )

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