, 
FIFTEENTH CONGRESS OF THE REPUBLIC 
OF THE PHILIPPINES 
First Regular Session 
SENATE 
Senate Bill No. 
604 
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INTRODUCED BY SEN. JINGGOY EJERCITO ESTRADA 
EXPLANATORY NOTE 
The Local Government Code of 1991 was enacted to empower local 
government units by providing them responsibilities in the delivery of basic 
services to respective localities. To equip them with this gargantuan task, their 
share from the taxes remitted to the National Government was increased to 80%. 
However, owing to our country's inexperience in the devolution of services, 
a number of problems, especially in the health sector, were encountered. These 
were compounded by the fact that there is a mismatch between the Internal 
Revenue Allocation per local government unit and the cost of health services 
devolution. 
This bill proposes the deduction of the cost of devolved functions, including 
the cost of city-hospitals, less capital outlays, from the Internal Revenue Allotment 
before it is divided among the local government units. The bill likewise seeks the 
direct release of the amount corresponding to the amount of devolved functions to 
the local government units concerned. 
In view of the foregoing, early approval of this bill is earnestly sought. 
Senator 


FIFTEENTH CONGRESS OF THE REPUBLIC 
OF THE PHILIPPINES 
First Regular Session 
SENATE 
Senate Bill No. 604 
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INTRODUCED BY SEN. JINGGOY EJERCITO ESTRADA 
AN ACT 
AMENDING SECTION 285 OF REPUBLIC ACT NO. 7160 OTHERWISE AS THE 
LOCAL GOVERNMENT CODE, OF 1991, PROVIDING FOR GOVERNMENT 
UNITS RE·ALLOCATION OF THE INTERNAL REVENUE ALLOTMENT OF 
LOCAL GOVERNMENT UNITS 
Be it enacted by the Senate and the House of Representatives of Congress 
assembled: 
SECTION 1. - Section 285 of Republic Act No. 7160, otherwise known as 
the Local Government code of 1991, is hereby amended to read as follows: 
"SECTION 285. ALLOCATION TO LOCAL GOVERNMENT UNITS. THE 
SHARE OF THE LOCAL GOVERNMENT UNITS IN THE INTERNAL REVENUE 
ALLOTMENT SHALL BE ALLOCATED STARTING IN 2004, AFTER DEDUCTING 
THEREFROM TNE COST OF DEVOLVED FUNCTIONS AND CAPITAL 
OUTLAYS, INCREASED AT THE RATE OF TEN PERCENT (10%) PER ANNUM 
FROM THE EFFECTIVITY OF THIS CODE. THE TOTAL COST SO DEDUCTED 
SHALL BE DISTRIBUTED AND DIRECTLY REMITTED TO THE LOCAL 
GOVERNMENT UNITS CONCERNED AND THE NET OR BALANCE OF THE 
INTERNAL 
REVENUE 
ALLOTMENT 
SHALL 
BE 
ALLOCATED 
IN 
THE 
FOLLOWING MANNER: 
a) Provinces -
b) Cities-
d) Barangays -
c) Municipalities -
Twenty-three percent (23%); 
Twenty-three percent (23 YO); 
Twenty percent (20%); 
Thirty-four percent (34%); 
Provided, however, that the shares of each provinces, city and municipality 
shall be determined on the basis of the following formula; 
a) Population -
[Fifty percent (50%)] 
FIFTY FIVE PERCENT (55%) 
b) Land Area -
[Twenty-five percent (25%)] 
TWENTY PERCENT (20%) 
c) Equal Sharing - Twenty- five percent (25 %) 
Provided, further, that the share of each barangay with a population not less 
than hundred (100) inhabitants shall not be less than Eighty Thousand pesos 
(P80,000.000) per annum chargeable against the twenty percent (20%) share 
of the barangay from the internal revenue allotment, and the balance to be 
allocated on the basis of the following formula: 
a) On the year of the effectivity of this Code: 


1) Population - Forty percent (40%); and 
2) Equal sharing - Sixty percent (60%) 
b) On the second year: 
1) Population - Fifty percent (50%); and 
2) Equal sharing - Fifty percent (50%) 
c) On the third year 
1) Population - Sixty percent (60%); and 
2) Equal sharing - Forty percent (40%) 
Provided, finally, that the financial requirements of barangays created by 
local government units after the effectivity of this Code shall be the responsibility of 
the local government units concerned." 
SEC.2. Effectivity - This Act shall take effect upon approval 
Approved,