Republic of the Blippines
HOUSE OF REPRESENTATIVES
@uzsen City

FIFTEENTH CONGRESS
First Regular Session

EXPLANATORY NOTE

Due to the recurring budgetary deficits of the National Government,
annual appropriations that are incorporated in the General Appropriations
Law are very limited and do not provide for the financial requirements of
the construction of school buildings, laboratory equipment, computer
hardware and software, books, scholarships and training programs, and
hiring of additional teachers. The imperative need of introducing computer
education in the public school system and the necessity for emphasizing
Science and Mathematics has also required not only specialized
equipment but also specialized classrooms and laboratory facilities that
are suited to computer and science education. There is also a need to
retrain teachers in the teaching of English, Mathematics, Science, and
computer education.

There is a tremendous shortage of classrooms such that in many
cases in public schools, both elementary and high school levels, on the
average, every classroom is occupied by 60-85 students where the norm
should be 35 students per classroom or at worst not more than 45
students per classroom. In many cases classes are even held outdoors
under trees in the school grounds for lack of classroom facilities.

Because of increasing enrollment every year, not only additional
classrooms are required, but also additional teachers and additional
books. Whenever there is an increase in enroliment every school year, the
National Budget does not provide for adequate additional plantilla for new
teachers, as well as for books and learning materials.

The Local Government is pressured to pay for honoraria, salaries
and wages for teachers since the National Government is not able to
Provide for additional teachers with the corresponding budgetary
allocations. The National Government is also unable to Provide books to
allow for a 1:1 ratio of books per student per subject. Again Local
Government Units (LGUs) are compelled, even if they are not devolved
functions to provide for these requirements. More and more LGUs,



particularly provincial governments, are impelled to construct school
buildings, school stages, and covered assembly halls.

If the LGUs will rely only on the present rate imposed on Real
Estimated Property Taxes, the proceeds of which will go to the Special
Education Fund (SEF), then the LGUs would have very limited capacity to
provide or supplement National Government efforts to fill up the backlog,
not to mention projected demand, of schoo! buildings, laboratory
equipment, computer hardware and software, books, scholarships,
training programs, and hiring of additional teachers.

All these provide additional financial burdens that the National
Government is unable to cope with, in view of the looming financial crisis
and the debt service burdens on loans and credit of the National
Government and the GOCCs.

The time has come therefore for the LGUs to supplement National
Government budgetary allocations for the Public Education Sector. Limited
as the sources of financing of LGUs to support education programs are, its
sources can be augmented through amendments to the Local Government
Code provisions on the percentage of Special Levy on Real Property Tax
that accrue to and expand the uses of the proceeds of the SEF.

The present Local Government Code is amended to equalize the one
percent (1%) SEF tax for a province, city, and municipality within the
Metro Manila Area; and to maintain the one-half percent (2%) additional
levy for a component municipality of a province in order for LGUs to
supplement the budgetary allocations of the National Government to the
Public Education Sector that cannot meet the massive backlog and future
demand for the educational needs of basic public education, including but
not limited to sports, arts, and cultural development projects or services;
for the purchase of tables, chairs, or desks; electrical or water supply
connections to public schools; remuneration or honoraria of volunteer
school teachers; scholarship and training of students, teachers, and
school administrators as well as contributions to seminars, workshops,
research studies, conferences, and meetings for the public educational
sector; and/or the purchase of textbooks and library reference materials.

It is envisioned under this Bill that the Local School Board of a
province, city, or a municipality within the Metro Manila Area shall be
allowed to obtain loans or credit from lender institutions or financial
intermediaries to further supplement the budget allocations of the
national government. Under this bill the payment of the principal,
interest, and/or other costs shall be chargeable to the SEF of the
borrowing LGU. Provided, that, the lender institution or financial
intermediary providing or arranging the loan or credit to the school board
of a province, city or municipality within the Metro Manila area shall be


entitled to an assignment of the corresponding portion of the fund
accruing to the local school board concerned which shall constitute a
preferred or priority lien or encumbrance on said fund and said lending
institution or intermediary shall be entitled to debit the account deposit or
placement of the borrowing local school board as and when payment
schedule of the loan, credit, or indebtedness become due and payable
without need of further notice or demand to the local school board to
ensure timely payment of such liabilities or obligations of the local school
board concerned.

Thus, in essence, this scheme is a self-liquidating measure as the
payment schedule for loans or credit obtained by a Local School Board
shall be matched by the future stream of collections that accrue to the
SEF. This borrowing authority is limited to provinces, cities, and
municipalities within the Metropolitan Manila Area; a Local School Board
of component municipality of a province shall not have this borrowing
authority as their SEF shall be earmarked for.

It is understood that the financial institution shall in due course
evaluate the financial feasibility and viability of every loan or credit in
order to ensure the success of their loan or credit extension, to assure
credit worthiness and cash flow to provide timely payment of loans and
credits availed of.

This bill empowers LGUs not only to address the most pressing
needs of their Public Education Sectors, but also allows them to make
timely and much-needed contributions to one of the primary concerns of
the National Government.

In view of the above intentions and purposes, the immediate
passage of this bill is earnestly recommended.

ly ww
LUIS R. VILLAFUERTE



Republic of the Philippines
HOUSE OF REPRESENTATIVES
‘Gueson City

FIFTEENTH CONGRESS
First Regular Session

33

HOUSE BILL NO.

Introduced by HONORABLE LUIS R. VILLAFUERTE

AN ACT AMENDING SECTION 235 AND SECTION 272 OF REPUBLIC
ACT NO. 7160 OTHERWISE KNOWN AS THE LOCAL
GOVERNMENT CODE OF 1991, AS AMENDED, FOR THE
PURPOSE OF AUGMENTING, EXPANDING AND DIVERSIFYING
THE USES OF THE SPECIAL EDUCATION FUND AND FOR
OTHER PURPOSES

Be it enacted by the Senate and House of Representatives in Congress
assembled:

SECTION 1. Section 235 of Republic Act No. 7160, as amended,
otherwise known as the “Local Government Code of 1991” is hereby
amended to read as follows:

Sec. 235 Additional Levy on Real Property for the Special

Education Fund. - A SPECIAL EDUCATION FUND (SEF) IS

HEREBY CREATED FOR EVERY LOCAL GOVERNMENT UNIT

RESPECTIVELY MENTIONED HEREUNDER TO BE FUNDED

FROM THE ADDITIONAL LEVY ON REAL PROPERTY

PRESCRIBED UNDER THIS SECTION.

A province or city, or a municipality within the

Metropolitan Manila Area, may levy and collect an annual tax of

one percent (1%) on the assessed value of real property IN


1 THEIR RESPECTIVE TERRITORIAL JURISDICTION [which

2 shall be] in addition to the basic real property tax PROVIDED
3 UNDER THIS CODE.

4 EVERY MUNICIPALITY OUTSIDE THE
Ss METROPOLITAN MANILA AREA MAY LIKEWISE LEVY AND
6 COLLECT AN ANNUAL TAX OF ONE-HALF PERCENT (12%)
7 ON THE ASSESSED VALUE OF REAL PROPERTY WITHIN
8 SAID MUNICIPALITY.

9 The proceeds OF THE ADDITIONAL LEVY STATED IN

10 THE PRECEDING PARAGRAPHS [thereof] shall exclusively
an accrue to the Special Education Fund (SEF) OF THE LOCAL

12 GOVERNMENT UNIT CONCERNED.

13 Sec. 2. Section 272 of RA No. 7160, as amended, otherwise known

14 as the “Local Government Code of 1991” is hereby amended to read as

15 follows:

16 Sec. 272 Application of Proceeds of the [Additional One
17 Percent] SEF Tax - ONE HALF (2) OF the proceeds OF [from]
18 the additional one percent (1%) SPECIAL EDUCATION FUND
19 tax [on real property] accruing to [the Special Education Fund
20 (SEF)] A PROVINCE, CITY OR MUNICIPALITY WITHIN THE
21 METROPOLITAN MANILA AREA shall be automatically
22 released to the local school boards; [: Provided, That, in the
23 case of provinces, the proceeds shall be divided equally between

24 the provincial and municipal school boards: Provided, however,


20

21

22

23

24

That the proceeds shall be allocated] THIS FUND SHALL BE
USED for the [operation and maintenance of public schools,]
construction [and repair] OR IMPROVEMENT of PUBLIC
school buildings, AND/OR RELATED facilities [and equipment,
educational research, purchase of books and periodicals, and
sports development as determined and approved by the Local
School Board.] INCLUDING BUT NOT LIMITED TO
PARENTS-TEACHERS ASSOCIATIONS AND/OR STUDENT
ASSEMBLY HALLS; SCHOOL STAGES; LABORATORY
EQUIPMENT, AND COMPUTER HARDWARE AND
SOFTWARE.

THE OTHER ONE-HALF PERCENT (12%) SHARE OF A
PROVINCE, CITY, OR MUNICIPALITY WITHIN THE METRO
MANILA AREA INCLUDING THE ONE-HALF PERCENT
(2%) PERCENT ADDITIONAL LEVY ACCRUING TO THE
SCHOOL BOARD FUND OF A COMPONENT MUNICIPALITY
OF A PROVINCE SHALL BE USED FOR EITHER OR A
COMBINATION OF ANY OF THE FOLLOWING: SPORTS,
ARTS AND CULTURAL DEVELOPMENT PROJECTS OR
SERVICES; FOR THE PURCHASE OF TABLES, CHAIRS, OR
DESKS; ELECTRICAL OR WATER SUPPLY CONNECTIONS
TO PUBLIC SCHOOLS; REMUNERATION OR HONORARIA
OF VOLUNTEER SCHOOL TEACHERS; SCHOLARSHIP AND

TRAINING OF STUDENTS, TEACHERS, AND SCHOOL


20

21

22

23

24

ADMINISTRATORS AS WELL AS CONTRIBUTIONS TO
SEMINARS, WORKSHOPS, RESEARCH STUDIES,
CONFERENCES, AND MEETINGS FOR THE PUBLIC
EDUCATIONAL SECTOR; AND/OR THE PURCHASE OF
TEXTBOOKS AND LIBRARY REFERENCE MATERIALS; AND
OTHER PROJECTS, SERVICES OR ACTIVITIES AS THE
LOCAL SCHOOL BOARD SHALL DETERMINE. THE
RESPECTIVE SCHOOL BOARDS OF A PROVINCE, CITY, OR
MUNICIPALITY WITHIN THE METRO MANILA AREA,
INCLUDING THE LOCAL SCHOOL BOARD OF A
COMPONENT MUNICIPALITY OF A PROVINCE SHALL
DETERMINE THE SPECIFIC FUND ALLOCATION AS TO THE
AMOUNT AND SCHEDULE OF DISBURSEMENT OF THE
SPECIFIC USES OF THE SCHOOL BOARD FUND BY VOTE OF
THE MAJORITY OF THE QUORUM OF THE LOCAL SCHOOL
BOARD CONCERNED.

WITH THE APPROVAL OF THE MAJORITY OF ALL THE
MEMBERS OF A LOCAL SCHOOL BOARD OF A PROVINCE,
CITY, OR MUNICIPALITY WITHIN THE METRO MANILA
AREA, THE LOCAL SCHOOL BOARD CONCERNED MAY
OBTAIN A LOAN, CREDIT, OR INDEBTEDNESS FROM ANY
FINANCIAL INSTITUTION, ENTITY OR INTERMEDIARY TO
FINANCE THE CONSTRUCTION OF PUBLIC SCHOOL

BUILDINGS AND THE ANCILLARY FACILITIES,


20

21

22

23

24

EQUIPMENT, FURNITURE AND FIXTURES TO BE DEVOTED
TO GENERAL ACADEMIC COURSES, COMPUTER
EDUCATION, INDUSTRIAL ARTS, HOME ECONOMICS AND
THE LIKE IN ORDER TO PROVIDE, AUGMENT, AND
EXPAND THE SOURCES OF FUNDS FOR SAID CAPITAL
OUTLAYS OF PUBLIC SCHOOLS (i.e. PRE-SCHOOLS,
ELEMENTARY, AND SECONDARY). THE PAYMENT OF THE
PRINCIPAL, INTEREST, AND/OR OTHER COSTS SHALL BE
CHARGEABLE TO THE SPECIAL EDUCATION FUND OF THE
BORROWING LOCAL GOVERNMENT UNIT. PROVIDED,
THAT, THE LENDER INSTITUTION OR FINANCIAL
INTERMEDIARY PROVIDING OR ARRANGING THE LOAN
OR CREDIT TO THE SCHOOL BOARD OF A PROVINCE, CITY
OR MUNICIPALITY WITHIN THE METRO MANILA AREA
SHALL BE ENTITLED TO AN ASSIGNMENT OF THE
CORRESPONDING PORTION OF THE FUND ACCRUING TO
THE LOCAL SCHOOL BOARD CONCERNED WHICH SHALL
CONSTITUTE A PREFERRED OR PRIORITY LIEN OR
ENCUMBRANCE ON SAID FUND AND SAID LENDING
INSTITUTION OR INTERMEDIARY SHALL BE ENTITLED TO
DEBIT THE ACCOUNT DEPOSIT OR PLACEMENT OF THE
BORROWING LOCAL SCHOOL BOARD AS AND WHEN
PAYMENT SCHEDULE OF THE LOAN, CREDIT, OR

INDEBTEDNESS BECOME DUE AND PAYABLE WITHOUT


1 NEED OF FURTHER NOTICE OR DEMAND TO THE LOCAL

2 SCHOOL BOARD TO ENSURE TIMELY PAYMENT OF SUCH

8 LIABILITIES OR OBLIGATIONS OF THE LOCAL SCHOOL

4 BOARD CONCERNED.

) Sec. 3. Any law, decree, executive order, administrative order, rules

6 and regulations contrary to or inconsistent with the provisions of this Act
7 are hereby repealed, modified and amended accordingly.
8 Sec. 4. Effectivity. - This Act shall take effect fifteen (15) days after
9 its publication in two (2) newspapers general circulation.

Approved,