NINETEENTH CONGRESS OF THE ) 
REPUBLIC OF THE PHILIPPINES )
First Regular Session 
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*22 JUL 12 P6 33
SENATE
S.B. No. 447
RBCEIVCD eV;
INTRODUCED BY SENATOR ROBINKOOD PADILLA
AN ACT
INSTITUTING BUDGET REFORM THAT WILL ENSURE EQUITABLE 
DISTRIBUTION OF FUNDS AMONG THE TJATIONAL AND LOCAL 
GOVERNMENT UNITS FOR THE PURPOSE OF LOCAL DEVELOPMENT, 
APPROPRIATING FUNDS THEREFOR, AND FOR OTHER PURPOSES
EXPLANATORY NOTE
Devolution has been the agenda of the government for many good reasons: it 
provides public services more efficiently and effectively, supports the development of 
poor regions, veers away from overly centralized planning, and empowers local 
authorities. However, the evident concentration of both political and economic power 
in the nation's capital, as sigiiified by what we knew as "Imperial Manila", has 
constrained our pursuit of meaningful devolution and equitable growth.
While the Legislature sought to address this problem through the enactment of 
the Local Government Code (LGC) of 1991 which mandated decentralization, we have 
seen that the law needs changes in order to respond to the present context which 
was not anticipated when the code was crafted.
In fact, the poor fiscal $tate of our local government units (LGUs) persists for 
decades. Even after 30 years of its implementation, the LGC of 1991 has faced various 
structural deficiencies. Thesfe include (I) Inadequate and inequitable transfer 
mechanisms, (ii) lack of cladty in functional assignments, and (iii) unproductive 
sources of local revenues making LGUs heavily dependent on Internal Revenue 
Allotment. All of these factors contribute to the poor fiscal capacity of LGUs to function 
efficiently and fulfill their mandates for their respective jurisdiction.


LCDs' failure to exercise fiscal autonomy results in inequitable regional growth 
and development; lacking response to societal welfare; and ineffective local 
governance. To illustrate, in 2021, around 57% of the country's real gross domestic 
product (GDP) has been accounted for largely by the N^^tional Capital Region, and its 
neighboring regions. Central Luzon and CALABARZON. In comparison, the 
Bangsamoro Autonomous Region in Muslim Mindanao accounts for a mere 1.5% of 
the GDP. High incidence of poverty has also been evident across other regions. In 
2018, alone, while NCR only registered 1.4% poverty Incidence, ARMM had more than 
half or 54.2% of its population with insufficient per capita income to meet their basic 
food and non-food needs.
The National Economic Development Authority (NEDA) has acknowledged two 
of the significant challenges in the Implementation of the LGC: the inability of LGUs to 
raise local income, the inadequate and inequitable transfers of national to local 
governments, and the overlap in the performance of functions that compromises 
accountability.
The cornerstone of this proposed measure Is the creation of a Local 
Development Equitabillty Fund to support the mandated expenditure assignments 
Imposed upon LGUs. Accordingly, this measure aims to provide an equitable 
distribution of wealth to LGUs to foster development with the end goal of bridging the 
gap between the revenue expenditure mandates of the LGC and the General 
Appropriations Act (GAA).
In view of the foregoing, the passage of this bill is earnestly sought.
OBINHOOD PADILLA


NINETEENTH CONGRESS OF THE ) 
REPUBLIC OF THE PHILIPPINES )
First Regular Session 
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,22 JUL 12 P6 33
SENATE
s.B. No. 447
RHCE'I-TQ 0
INTRODUCED BY SENATOR ROBINHOOD PADILLA
AN ACT
INSTITUTING BUDGET REFORM THAT WILL ENSURE EQUITABLE 
DISTRIBUTION OF FUNDS AMONG THE NATIONAL AND LOCAL 
GOVERNMENT UNITS FOR THE PURPOSE OF LOCAL DEVELOPMENT, 
APPROPRIATING FUNDS THEREFOR, AND FOR OTHER PURPOSES
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Be it enacted by the Senate and House of Representatives of the Philippines in 
Congress assembled:
SECTION 1. Short Title, - This Act shall be known as the Local Development 
Equitabiiity Fund Act"
SEC. 2. Declaration of Policy.
a. It is a declared policy of the State that territorial and political subdivisions 
shall enjoy genuine and meaningful local autonomy to enable them to 
attain their fullest development as self-reliant communities and make 
them more effective partners in the attainment of national goals;
b. It Is also the policy of the State that meaningful local autonomy can only 
be realized through the implementation of locally crafted development 
plans that accurately acknowledge and address perceived local needs;
c. The State acknowledges that there exists a fiscal gap between the 
expenditure responsibilities of the Local Government Units (LGUs) and 
their fiscal capacity;
d. It is likewise the policy of the State to ensure that sufficient financial 
resources for development are available to LGUs with corresponding 
accountability of improving public services;


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e. Therefore, the State recognizes that inclusive and sustainable growth can 
be truly achieved only by providing the LGUs with adequate resources and 
technical capacities that will promote meaningful development.
SEC. 3. Allotment for Oevelopment. - To achieve the policies declared in 
this Act, the National Government shall guarantee an annual fund sufficient to 
implement the three-year Comprehensive Development Plan (CDP) of all provinces, 
cities, municipalities, and barangays herein referred to as the "Local Development 
Equalization Fund" (LDEF), to wit:
a. Provinces - Five Flundred 
Million Pesos 
to One 
Billion Pesos
(P500,000,000.00 to P1,000,000,000.00) Per province per year;
b. Cities - One Hundred Million Pesos to Two Hundred 
Million Pesos
(P100,000,000.00to P200,000,000.00) per city per year;
c: 
Municipalities - Fifty Million 
Pesos to One Hundred 
Million Pesos
(P50,000,000.00 tc P100,000,000.00) per municipality per year; and
d. Barangays -Three Million Pesos to Five Million Pesos (P3,000,000.00 to 
P5,000,000.00) per barangay per year.
Provided, That the amount of LDEF for each province, city, or municipality shall 
be based on the following criteria:
a. 50% of the prescribed amount for each 1st class LGU;
b. 60% of the prescribed amount for each 2nd class LGU;
c. 70% of the prescribed amount for each 3rd class LGU;
d. 80% of the prescribed amount for each 4th class LGU;
e. 90% of the prescribed amount for each 5th class LGU; and
f. 
100% of the prescribed amount for each 6th class LGU;
Provided, further. That each barangay shall, at all times, receive the full amount 
of LDEF prescribed above.
In the allotment of the LDEF, fiscal capacity, expenditure responsibilities and 
poverty Incidence shall be taken into consideration.
These funds shall be automatically and directly released to every LGU at the 
start of the fiscal year or on a quarterly basis within five (5) days at the start of each 
quarter. No lien, holdback, or any other imposition, of whatever nature, may be 
Imposed by the National Government against the said fund.


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SEC. 4. Purpose of Local Development Equalization Fund. - The fund 
shall be used solely by the LGUs to finance their respective development projects, 
activities and programs (PAPs) identified In their approved Comprehensive Local 
Development Plans (CDPs); Provided, That no less than ten percent (10%) of the 
LDEF shall be allotted to PAPs geared towards the enhancement and promotion of 
technical skills training of the citizens in the concerned LGU. Provided further, That 
the fund shall not be used by the LGU as collateral or as security for existing or future 
obligations.
SEC. 5. Expenditures Not Covered. - No amount shall be paid out of the
LDEF to items that are not related to or connected with the development of PAPs such 
as:
a. Administrative expenses such as cash gifts, bonuses, food allowance, 
medical assistance, uniforms, supplies, meetings, communication, water 
and light, petroleum products and the like;
b. 
Salaries, wages, emoluments, per diems, or overtime pay;
c. Traveling expenses, whether domestic or foreign;
d. Registration or participation fees in training, seminars, conferences and 
conventions;
e. Construction, repair, or refinishing of administrative offices;
f. 
Purchase of administrative office furniture, fixtures, equipment or 
appliances;
g. Purchase, maintenance, or repair of motor vehicles or motorcycles.
Likewise, the LDEF shall not be used to finance PAPs that may duplicate or 
overlap with PAPs that are being implemented or funded by the National Government 
Agencies (NGAs). Also, no LDEF shall be utilized as a counterpart fund to support 
NGAs' identified PAPs.
SEC. 6. Comprehensive Local Development Plan. - Consistent with LGC, 
every LGU shall formulate a three-year CDP that is reflective of and respons've to the 
developmental needs of their respective localities with corresponding periodic 
timelines. The approved CDPs shall be funded yearly by the National Government in 
accordance with Section 3 hereof. The projects funded shall be identified in the Annual 
General Appropriations Act.
The Local Development Councils shall conduct an annual review, and if 
necessary, update and improve their respective CDPs. The CDPs shall be formulated 
and approved in accordance with the provisions of Republic Act 7160.
The approved CDPs of each LGU shall be the basis for the allocation of the 
Local Development Fund. In the event that the CDP is updated and funding has been


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re-adjusted, the affected development project should first be approved before it may 
be funded and implemented.
Consultations with all stakeholders shall be done at all stages of the 
formulation, review, updating, or improvement of the CDP.
SEC. 7. Performance-based Evaluation, - A performance-based evaluation 
shall be conducted by the Oversight Evaluation Committee (OEC) chaired by the 
Undersecretary for Local Government of the Department of Interior and Local 
Government (DILG). Before the end of the fourth quarter of the year, the committee 
shall conduct an annual performance review of the LGUs' implementation of their 
development PAPs based on the indicators identified in their CDPs. The results shall 
be published before the end of the first quarter of the following year.
Unsatisfactory performance of an LGU shall result in the reduction of its LDEF 
by fifty percent (50%) in the following year after the evaluation; Provided, That, when 
the LGU obtained satisfactory performance in the next year's evaluation period, its full 
funding shall be restored; Provided further, That, LDEF shall be terminated in case of 
two (2) consecutive unsatisfactory performance; and Provided finaiiy, That, LGUs, 
whose LDEF has been terminated, may reapply for funding of their CDPs a year 
following its termination.
SEC. 8. Web-based Monitoring System. - In the spirit of transparency and 
accountability, the OEC shall adopt a web-based application to facilitate the monitoring 
and evaluation of all PAPs funded by the LDEF. The system shall allow tracking of 
expenditures and the status of implementation of the PAPs. The status of the PAPs 
shall be updated monthly by the LGUs or as frequently as may be necessary. The 
system shall be accessible to the general public and all information, including but not 
limited to funding/cost, location, contractor, progress status, number of beneficiaries, 
date of completion, and responsible government official, of the PAPs shall be disclosed.
SEC. 9. Responsibilities of the Chief Executive. - It is the responsibility 
of the Chief Executive of the LGU to make sure that the reportorlal requirements are 
complied with. In case of non-reporting or failure to comply with the reportorlal 
requirements, the OEC shall advise the Department of Budget and Management (DBM) 
to suspend the release of funding to the delinquent LGU until such time that it complies 
with the requirements.
SEC. 10. Role of the Strategic Action and Response (STAR) and the 
Office of Participatory Governance. - To enhance the monitoring of PAPs, the 
Strategic Action and Response (STAR) and the Office of Participatory Governance, 
both under the Office of the Cabinet Secretary, shall promote active citizenship, 
inclusiveness, transparency, and accountability, and conduct public awareness 
campaigns on reform for the Governments' development PAPs in the localities.
SEC. 11. Oversight Evaluation Committee (OEC). - There is hereby 
created an Oversight Evaluation Committee In charge of the monitoring and evaluation


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of the implementation of development PAPs under the LDEF based on the indicators 
provided under the CDPs which shall be composed of the following:
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The Undersecretary for Local Government of the DILG, as Chairman;
An Undersecretary from the Office of the Cabinet Secretary;
The Undersecretary for Regional of the National Economic and 
Development Authority (NEDA);
The Undersecretary for Local Government and Regional Operations Group 
of the DBM;
The Executive Director of the Bureau of Local Government Finance (BLGF) 
of the Department of Finance (DOF);
A representative from each of the various leagues of the different LGUs 
concerned;
The Chairperson of the National Commission on Indigenous Cultural 
Communities/Indigenous Peoples (NCIP), if applicable; and;
Four representatives from accredited civil society groups and/or non­
government organizations in the locality where the CDP is to be 
implemented.
The representatives from the accredited civil society groups or non-government 
organizations shall be selected based on the criteria and mechanisms to be determined 
for this purpose by the OEC. In no case shall the said representative be accredited 
when any of its members Is related within the sixth degree of consanguinity or affinity 
to any elected officials in the locality.
SEC. 12. Secretariat of the OEC. - The various Regional Project Monitoring 
Committees (RPMC) shall assist the OEC in its task of monitoring and evaluation and 
shall act as the secretariat of the OEC with respect to their region. The OEC may create 
a Technical and Support Unit under its direct control and supervision but within the 
administrative structure of the DILG.
SEC. 13. Capacity-Bi Uding. - The Local Government Academy (LGA), in 
partnership with academic Institutions of higher learning or state university with 
distinguished competencies in public governance programs, shall establish a 
continuing capacity-building program for all LGUs. Training or programs conducted by 
such academic institutions of higher learning or state university may be considered for 
academic credits.
SEC. 14. LGA Certification. - The LGA shall provide options or lists of 
development PAPs to guide the LGUs. No Local Development Fund shall be released 
without a certification from the LGA that the LGU is capacitated to plan and Implement 
its CDP.
SEC. 15. Procurement. - Procurement for the purpose of implementing the 
CDPs must be consistent with the provisions of Republic Act No. 9184, otherwise 
known as the "Government Procurement Reform Act"


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SEC. 16. Penai Provision.
1. It shall be unlawful for any person to withhold the release of the LDEF to 
the LGUs within the period specified in Section 3 hereof. Any person 
violating any of the provisions of this law shall suffer the penalty of 
imprisonment ranging from one (1) year and one (1) day to six (6) years, 
and a fine of five hundred thousand pesos (r^500,000.00X and permanent 
disqualification from holding any public office or employment In the 
government, including any Government-Owned or Controlled 
Corporations (GOCCs), and their subsidiaries.
2. The Local Chief Executive shall be administratively liable, without 
prejudice to any civil or criminal liabilities he or she may have incurred 
under existing laws for failure to report the status of their development 
PAPs as required under Section 9 of this Act.
3. Any government official or employee who shall prevent the reporting or 
disclosure of any Information or data pertaining to a funded development 
PAP as mandated by Section 8 of this Act, shall be held administratively 
liable without prejudice to any civil or criminal liability he may have 
Incurred under existing laws.
4. Any person who uses the fund contrary to the stated purpose under 
Section 4 of this Act shall be liable for technical malversation as defined 
and penalized under Article 220 of Act No. 3815, otherwise known as the 
"Revised Pena! Codd\
SEC. 17. Appropriations. - The amount of One Hundred Million Pesos 
(P100,000,000.00) Is hereby appropriated to fund the establishment of a web-based 
monitoring system.
The LGA is mandated to ensure, within one (1) year after the effectivity of this 
Act, that all territorial and political subdivisions are capacitated to effectively plan and 
implement the development projects In their respective GDPs. For this purpose, the 
amount of One Billion Pesos (P1,000,000,000.00) is hereby appropriated for the 
capacity building of all LGUs.
SEC. 18. Oversight Committee. - There is hereby created a Congressional 
Oversight Committee to monitor and oversee the implementation of the provisions of 
this Act. The Committee shall be composed of five (5) members from the Senate and 
five (5) members from the House of Representatives to be chaired by the Chairpersons 
of the Committee on Local Government from both the Senate and House of 
Representatives.
SEC. 19. Sunset Review. - Five (5) years following tlie effectivity of this Act, 
or as the need arises; Congress shall conduct a sunset review. For purposes of this 
Act, the term "sunset review" shall mean a systematic evaluation by Congress of the


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accomplishments and impact cf this Act, as well as the performance of LGUs, for 
purposes of determining remedial legislation.
SEC. 20. Implementing Rules and Regulations. - For the effective 
Implementation of this Act, the Secretary of the DILG, with the Secretaries of the DOF 
and the DBM and in consultation with the various leagues of the different LGUs, shall 
issue the necessary Implementing Rules and Regulations.
SEC. 21. Suppletory Application of Existing Laws.
laws consistent with this Act shall have a suppletory effect.
The LGC and other
SEC. 22. Repealing Clause. - All laws, presidential decrees, executive 
orders, presidential proclamations, rules, and regulations, or parts thereof contrary to 
or inconsistent with this Act are hereby repealed, superseded, or modified accordingly.
SEC. 23 Separability Clause. - Any portion or provision of this Act that may 
be declared unconstitutional or invalid shall not have the effect of nullifying other 
portions or provisions hereof, as long as such remaining portions or provisions can still 
subsist and be given effect in their entirety.
SEC. 24. Effectivity. - This Act shall take effect fifteen (15) days after its 
complete publication in the Official Gazette or in at least two newspapers of general 
circulation.
Approved,