DOF: LGUs post 12% increase in operating income to P825B in 2020

The total current operating income of the local government units (LGUs) rose by a double-digit last year, resulting from higher internal revenue allotment (IRA) and improved local tax collections, the Department of Finance (DOF) said Tuesday.

Citing a report from the Bureau of Local Government Finance (BLGF) to Finance Secretary Carlos Dominguez III, the DOF said LGUs reported a total operating income of P825.2 billion in 2020, up 12% from P738.54 billion in 2019.

In its report, the BLGF said the increase in the 2020 operating income of provinces, cities, and municipalities is mostly attributed to the 18% growth in the external revenue sources of LGUs, including the IRA, which amounted to P509.65 billion, 11% 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% in 2020 from 25% in 2019.  

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

Alvina said this was due to LGUs’ dependence on external sources, including IRA and other transfers to the LGUs.

External sources’ ratio to LGUs’ operating income last year has increased to 70% as compared to 66% in 2019.

“In aggregate terms, LGUs dependence on external sources in Fiscal Year (FY) 2020 reached 70%, which is 18% or P88.83 billion higher than 2019 levels. On IRA dependence, provinces showed the highest dependency ratio at 78%, followed by municipalities (74%) and cities (42%) in FY 2020,” he 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% 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% in 2020, or 4% higher than in 2019, he said.

Meanwhile, revenues from local sources totaled P251.65 billion in 2020, representing a slight decline of 1% 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% 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).

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

As in the previous years, the National Capital Region (NCR) posted the highest LSR collections, which reached P101.94 billion or 42$ of the total LSR of all LGUs, according to the  BLGF chief.

This was followed by Region IV-A or Cavite-Laguna-Batangas-Rizal-Quezon (Calabarzon) and Region III or Central Luzon, with a respective P37.52 billion or 15% and P22.35 billion or 9% 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, he said. -MDM, GMA News