About the Mandanas-Garcia Ruling

Lifted from the Frequently Asked Questions published by the Department of

Budget and Management)

In 2018, the Supreme Court (SC) ruled the petitions filed by Congressman Hermilando I. Mandanas,
and Congressman Enrique T. Garcia, et al., about the National Government’s manner of computer
the Internal Revenue Allotment (IRA) shares of the local government units (LGUs). The SC decided
that the just share of LGUs from the national taxes is not only based on the national internal revenue
taxes collected by the Bureau of Internal Revenue (BIR), but also on all national taxes, which
became final and executory last April 10, 2019. To carry out the decision of the SC, President
Rodrigo Duterte released on June 1, 2021 Executive order (EO) No. 138 mandating the full
devolution of basic services from the national government agencies (NGAs) to local government
units (LGUs).

The Impact of the Mandanas-Garcia Ruling

The impact of the SC decision significantly increased the tax base on which the share of the LGUs is
computed from, and thus, strengthened fiscal decentralization. It clarifies the distinction between
“national internal revenue taxes” and “national taxes” as base in the computation of the IRA of
LGUs.
National internal revenue taxes include only taxes collected by the Bureau of Internal Revenue (BIR)
while “National taxes,” consists of all taxes and duties collected by the NG through the BIR, the
Bureau of Customs (BOC), and other collecting agencies.

The Implications of the Mandanas-Garcia Ruling on the National Governments

and the Local Government Units

Based on the certifications issued by the BIR, BOC, and Bureau of the Treasury (BTr), the fiscal
implication of the SC ruling implementation is about PhP959.04 Billion, which is equivalent to a
37.89 percent increase or around PhP263 billion from the FY 2021 IRA shares of LGUs.

The implications of this bigger allocation for LGUs are as follows:

 This presents a unique opportunity for the LGUs to assume the functions that have been
devolved to them under the 1991 LGC and other subsequent and pertinent laws.
 On the other hand, this will significantly diminish the fiscal resources available to the NG for
its key priorities and commitments in reducing poverty, promoting infrastructure and human
capital development, and pursuing peace and order in the country, starting 2022.

For fiscal sustainability, however, the devolved functions under the LGC should be fully and
permanently, albeit gradually, be turned over by the NGAs to the LGUs. The NGAs should then
pursue a long-term institutional development program for the LGUs to strengthen their capacities and
capabilities to assume the devolved functions.

Salient Features of Executive Order (EO) No. 138 and its Implementing Rules and Regulations (IRR)

Delineation of National and Local Government Roles

 The functions, services and facilities are based on Section 17 of the Local Government Code
(LGC) of 1991 and other pertinent laws.
 Functions, services and facilities are to be fully devolved from the National Government to
Local Government Units (LGUs) not later than the end of Fiscal Year 2024.
 This covers all LGUs, and departments, agencies, and instrumentalities of the
Executive Branch whose functions are in line with those devolved under the 1991
LGC.

Creation of Committee on Devolution (ComDev)

 The ComDev is tasked to oversee and monitor the implementation of the EO.
 It is composed of
o the Secretary of the Department of Budget and Management (DBM), as Chairperson;
o the Secretary of the Department of Interior and Local Government (DILG), as Co-
Chairperson; and
o the Secretaries from the National Economic Development Authority (NEDA), and the
Department of Finance (DOF); Executive Secretary and Presidents of the Leagues of
Provinces / Cities / Municipalities of the Philippines, Liga ng mga Barangay sa
Pilipinas, and Union of Local Authorities of the Philippines, as Members.
  Regional ComDevs are created to serve as counterparts of the ComDev at the regional level.
These are to be constituted as a special committee under the Regional Development Councils.
The Regional ComDev shall be composed of
o the Regional Director of the Department of Budget and Management (DBM), as
Chairperson;
o the Regional Director of the Department of Interior and Local Government (DILG),
as Co-Chairperson; and
o the Regional Director of the National Economic Development Authority
(NEDA), and the Department of Finance (DOF) – Bureau of Local
Government Finance (BLGF); and representatives from the regional offices of
NGAs concerned and LGU Leagues, as Members.

Preparation of Devolution Transition Plans (DTPs)

National Government Agencies (NGAs)

 NGA DTPs should include the following:

o Identification and clarification of functions and services devolved and strategy for
and phasing of devolution.
o Standards for delivery of devolved services.
o Strategy for capacity development of LGUs.
o Monitoring and performance assessment framework for LGUs.
o Organizational effectiveness proposal
 A Department / Agency Devolution Transition Committee should be organized to coordinate
and oversee the entire preparation process.

Local Government Units (LGUs)

 All provinces, cities, municipalities, and barangays have to prepare their DTPs in close
coordination with NGAs concerned.

 DTPs shall guide LGUs towards full assumption of devolved functions and services, and
serve as guide by NGAs concerned, DBM and DILG on monitoring and performance
assessment of LGUs.

 Local chief executives have to spearhead preparation of LGU DTPs and organize the LGU
DTC; Local Sanggunian to review and approve LGU DTP through a Sanggunian Resolution.

 DBM and DILG will jointly issue the guidelines on the preparation of the NGA and LGU
DTPs

DBM is tasked to review and approve NGA DTPs; DILG to guide and monitor the submission of
LGU DTPs.

Establishment of Growth Equity Fund

A Growth Equity Fund shall be established starting FY 2022 to address problems of marginalization,
unequal development, high poverty incidence, and disparities in net fiscal capacities of LGUs.

Capacity Building for National Government Agencies (NGAs) and Local

Government Units (LGUs)

 Capacity Development Agenda for LGUs has to be formulated based on DILG – Local
Government Academy’s (LGA) assessment framework, and guided by capacity development
strategy contained in NGA DTPs, local development thrusts, and performance goals and
objectives.
 The DILG, through LGA, has to oversee and harmonize provision of capacity development
interventions for LGUs.
 Capacity development interventions are to be offered preferably to career or permanent
local government personnel as a means of institutional strengthening.

Strengthening of Planning, Investment Programming, and Budgeting Linkage and

Monitoring and Evaluation Systems

 Vertical and horizontal linkages across different levels of government in development

planning, investment programming and budgeting should be strengthened, and areas of
convergence should be identified.
 Results-based monitoring and evaluation systems shall likewise be in place and
strengthened to ensure purposive conduct of evaluations in the performance and
delivery of devolved functions and services.

Options for Affected NGA Personnel

 Transfer to other units within the agency.

 Transfer to other agencies within the Executive Branch.
 Retire or separate from the service, and apply to vacant positions in LGUs.

Roles of Non-Government Organizations (NGOs), Civil Society Organizations

(CSOs), and People’s Organizations (POs)

 NGAs and LGUs shall recognize the role of NGOs / CSOs / POs in enhancing transparency,
accountability, and good governance, and as active partners in pursuit of local autonomy.
 NGOs/CSOs/POs are encouraged to participate in the preparation, implementation and
monitoring of the DTPs of NGAs and LGUs through consultations and public dialogues.

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 Mandanas-Garcia Ruling: Its impact and Role of LGUs
Published on: June 24, 2022
By Aila Villanueva

Earlier this year, the government initiated the implementation of the Mandanas-Garcia Ruling of the
Supreme Court with the Department of Budget and Management (DBM) as the head of the Committee on
Devolution (ComDev).

The committee monitors the full devolution or decentralization of certain functions of the national
government to the local government units (LGUs).

On the Ammuentayo radio program of PIA Ilocos Sur, DBM in Ilocos regional director Ria Bansigan
shared how the Mandanas-Garcia Ruling or the Executive Order No. 138 came about.
The ruling is a result of two separate petitions filed by Batangas Governor Hermilando Mandanas and
former Bataan Governor Enrique Garcia Jr. before the Supreme Court requesting the basis of computation
of the Internal Revenue Allotment (IRA) of LGUs be adjusted to include national taxes.
They cited the Local Government Code of 1991 where it states under section 284 that LGUs shall have
40% share from the IRA, however, both the governors appealed that the Section 6 of the Article X of the
1987 Philippine Constitution states otherwise that “LGUs shall have a just share, as determined by law, in
the national taxes which shall be automatically released to them.”

Bansigan discussed the implications of the implementation of the Mandanas-Garcia ruling to the national
government agencies (NGAs), LGUs, and more importantly, to the citizenry.

Fiscal impact of the devolution

The LGUs are given higher shares on the collections of the country but that was deducted from the
available fund of the NGAs.
“Nagkaroon ng fiscal imbalance, nakita na hindi na kakayaning isagawa ng NGAs ang mga programa na
dati ay pinopondohan nila,” the DBM Ilocos chief explained.

She said they discovered there are a lot of programs including the basic services currently being
administered by the NGAs that are supposed to be under the management of LGUs based on the Local
Government Code of 1991.
Changes after the full devolution
The IRA previously included the collection of the Bureau of Internal Revenue within the country,
however with the inclusion of the national taxes which includes the collections of the Bureau of Customs
i.e. custom duties, the funds of the LGUs drastically increased.

The full devolution does not mean that all programs of the NGAs will be transferred to the LGUs, the
mandate of the agencies remain, and they will assume the steering function or assist and provide technical
assistance to the LGUs.
Impact to local citizens
The people are the recipients so they must be informed of these changes.

NGAs reach out to LGUs to discuss the identified programs that will be transferred to the former.
What are these programs?
Director Bansigan stated that the programs of NGAs are included in Section 17 of the Local Government
Code.

She mentioned that one is the Department of Agriculture with its programs such as the farm-to-market
roads, operation plan for rabies elimination, production support services, agricultural machinery
equipment and facilities, among others.

She also pointed out the programs of the Department of Health such as the Health Facilities Enhancement
Program, which funds the construction of health centers, as well as the provision of medical equipment.
Pros of the implementation of the ruling
She states one positive impact of the ruling is that the LGUs have administrative autonomy to identify the
priority programs – they are empowered to determine their own economic development.

The director noted that from 2021 to 2022, the budget increased to 37.89 percent.

“Sila ang nakakaalam sa kanilang lokalidad kung ano ang pangangailangan nila, 'yan ang napakagandang
aspeto ng full devolution,” she said.
Role of Civil Society Organizations (CSOs), Non-Government Organizations (NGOs), People’s
Organizations (POs)

Bansigan stated, “Napakaimportante na ang ating mga CSOs, NGOs at POs sana ay capacitated and
empowered para magkaroon ng active participation in the preparation of devolution transition plan at
local devolution plan.”

Their role is important in the monitoring of the implemented programs.

She emphasized that giving feedback – whether it may be positive or a constructive criticism – to the
local government helps in planning appropriate projects.

“Nakikita na nga natin na hindi maganda dapat sabihin natin, mangialam tayo sa mga programa sa ating
lokalidad. Also, they know what their sectors need so they have to push for their advocacies,” she
quipped. (JCR/AMB/ATV PIA Ilocos Sur)