LGUs post 12 percent hike in operating income to P825-B in 2020

The total current operating income of the local government units (LGUs) rose from P738.54 billion in 2019 to P825.2 billion in 2020, representing an increase of P86.66 billion or 12 percent, as a result of their higher internal revenue allotment (IRA) and improved local tax collections. 

In a report to Finance Secretary Carlos Dominguez III, the Bureau of Local Government Finance (BLGF) said the increase in the 2020 current operating income of provinces, cities and municipalities is mostly attributed to the 18-percent growth in the external revenue sources of LGUs, including the IRA, which amounted to P509.65 billion, or 11 percent more than the P457.15 billion they received in 2019.

BLGF Executive Director Niño Raymond Alvina said that although local tax collections increased in 2020 to P189.86 billion from P183.46 billion in 2019, their share in the current operating income of LGUs declined to 23 percent in 2020 from 25 percent in 2019.   

The share of non-tax revenues, which amounted to P61.79 billion in 2020, also decreased to 7 percent compared to 10 percent in 2019 when collections reached P70.36 billion. 

Alvina said LGUs' dependence on external sources, comprised of IRA and other transfers to the LGUs, as a ratio of their operating income last year, has increased to 70 percent, as compared to 66 percent in 2019.

"In aggregate terms, LGUs dependence on external sources in Fiscal Year (FY) 2020 reached 70 percent, which is 18 percent or P88.83 billion higher than 2019 levels.  On IRA dependence, provinces showed the highest dependency ratio at 78 percent, followed by municipalities (74 percent) and cities (42 percent) in FY 2020," Alvina said. 

Besides the IRA, the other external revenue sources of LGUs are other transfers from the national government (NG), which amounted to P63.9 billion in 2020, or 132 percent higher than the P27.57 billion in 2019, Alvina said.  

The share of these other sources in the current operating incomes of LGUs grew to 8 percent in 2020, or 4 percent higher than in 2019. 

Revenues from local sources totaled P251.65 billion in 2020, representing a slight decline of 1 percent or P2.23 billion from the P253.88 billion in 2019. 

Alvina said that based on the collection performance targets for locally sourced revenues (LSRs) issued by the BLGF to LGU treasurers, the provinces, cities, and municipalities surpassed the 2020 adjusted final target, collecting P244.19 billion out of the P192.24 billion goal in 2020.

"This represents a 127 percent collection efficiency," he said. 

LSRs cover collections from the real property tax (RPT), local business tax (LBT), fees and charges (FC), and receipts from economic enterprise (REE). 

Revenues from the LBT of P119.31 billion, which account for 49 percent of the LSR, reached 137 percent of the full-year target.

The efficiency of RPT collections, which totaled P70.55 billion, reached 127 percent, Alvina said.

The collection efficiency for fees and charges (P33.33 billion) and REE (P21 billion), respectively attained 111 percent and 110 percent, based on the adjusted targets for 2020. 

Alvina said the cities collected the most LSR at P171.90 billion, which is 70 percent of the total LSR of all LGUs, followed by the municipalities and provinces, with P44.72 billion (18 percent) and P27.57 billion (11 percent), respectively. 

As in the previous years, the National Capital Region (NCR) posted the highest LSR collections, which reached P101.94 billion or 42 percent of the total LSR of all LGUs, Alvina said. 

This was followed by Region IV-A (Cavite-Laguna-Batangas-Rizal-Quezon or Calabarzon) and Region III (Central Luzon), with a respective P37.52 billion (15 percent) and P22.35 billion (9 percent) in LSR collections.

Aside from NCR, only Regions VIII, IX, X, XI, XII, and XIII posted positive growth rates in LSR collections, while mostly all other regions in Luzon and the Visayas registered declines, Alvina said.

For 2021, the BLGF is actively monitoring the LGUs' quarterly fiscal performance as it expects lower revenues this year, since the local taxes will be based on the gross receipts of business establishments in 2020 when the Covid-19 pandemic started.

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