TWENTIETH CONGRESS OF THE ) 
REPUBLIC OF THE PHILIPPINES ) 
First Regular Session 
)
25 JUL -3 P5 53
SENATE
S.B. No. 119
Introduced by SENATOR IMEE R. MARCOS
AN ACT
PROMOTING LOCAL GOVERNMENT FISCAL AUTONOMY
EXPLANATORY NOTE
Article X Section 2 of the 1987 Constitution states that "The territorial and 
political subdivisions shall enjoy local autonomy".
The fiscal autonomy of local government units has been hampered by 
restrictions on which it can use internally generated funds. The current guidelines on 
the use of the Special Education Fund, the Local Development Fund, and the Calamity 
Fund is too rigid and takes away from the ability of local government units to respond 
to unique challenges and situation in their respective areas.
Through the years. Congress has mandated the creation of various positions to 
the local government units. The on-going devolution of services such as health and 
agriculture has also created a pressure to absorb personnel. However, local government 
units are still bound by the 45% Personnel Services cap under Section 325(a) of R.A. 
No. 7160 or the Local Government Code. In addition, the budget of local government 
units is also under the supervision of the Department of Budget and Management.
Given the current thrust of bringing government closer to the people, it is 
imperative that we remove the restrictions in the ability of local government units to 
act in response to their local conditions. As such, the proposed bill expands the possible 
usage of the Special Education Fund to include payment of teaching and non-teaching 
staff and other expenditures related to the promotion of accessible public education. 
The proposed bill also seeks to remove the restrictions on the usage of the Local 
Development Fund and the Calamity Fund to allow local government units to adopt a 
more nuanced strategy in allocating their resources. Lastly, the proposed bill removes 
the Personnel Services Cap in the Local Government Code to allow local government
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units to fill all the necessary and mandated positions and to better implement their 
development projects in their respective localities
For the abovementioned reasons, the passage of this bill is earnestly sought.
R. MARCOS


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TWENTIETH CONGRESS OF THE ) 
REPUBLIC OF THE PHILIPPINES ) 
First Regular Session 
)
25 JiJL-3 P5:53
SENATE
S.B. No. 119
Introduced by SENATOR IMEE R. MARCOS
AN ACT
PROMOTING LOCAL GOVERNMENT FISCAL AUTONOMY
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 "LGU Fiscal Autonomy
Act"
SEC. 2. Section 272 of R.A. No. 7160 otherwise known as theLocal Government 
Code of 1991" as amended, is hereby amended to read as follows:
Section 272. Application of Proceeds of the Additional One 
Percent SEF Tax. - The proceeds from the additional one 
percent (1%) tax on real property accruing to the Special 
Education Fund (SEF) shall be automatically released to the 
local school boards: Provided, That, in case of provinces, the 
proceeds shall be divided equally between the provincial and 
municipal school boards: Provided, however. That the proceeds 
shall be allocated for the operation and maintenance of public 
schools, construction and repair of school buildings AND 
LIBRARIES, facilities and equipment, PAYMENT OF 
SALARIES, ALLOWANCES AND OTHER BENEFITS OF 
TEACHING AND NON-TEACHING PERSONNEL, 
COMPETENCY TRAININGS FOR TEACHING PERSONNEL. 
OPERATION OF ALTERNATIVE LEARNING SYSTEM 
(ALS) INCLUDING PAYMENT OF SALARIES, 
ALLOWANCES AND OTHER BENEFITS OF ALS 
FACILITATORS, educational research, purchase of books and 
periodicals, TEACHING AIDS, OTHER INSTRUCTIONAL


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MATERIALS, sports development, AND ALL OTHER 
EXPENDITURES RELATIVE TO THE PROMOTION OF 
ACCESSIBLE PUBLIC EDUCATION TO BE SOLELY
determined and approved by the Local School Board."
SEC. 3. Section 287 of R.A. No. 7160 otherwise known as the nLocal Government 
Code of 1991" as amended, is hereby amended to read as follows:
"Section 287. Local Development Projects. - Each local 
government unit shall appropriate in its annual budget no less 
than twenty percent (20%) of its annual [internal revenue] 
NATIONAL TAX allotment for development projects AS 
DETERMINED AND APPROVED BY THE LOCAL 
SANGUNIAN. Copies of the development plans of local 
government units shall be furnished the Department of THE 
Interior and Local Government."
SEC. 4. Section 324 (d) of R.A. No. 7160 otherwise known as the "Local 
Government Code of 1991" as amended, is hereby amended to read as follows:
"Section 324.
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D. NOT LESS THAN FIVE PERCENT (5%) OF THE 
ESTIMATED REVENUE FROM REGULAR SOURCES SHALL 
BE SET ASIDE FOR THE LOCAL DISASTER RISK 
REDUCTION AND MANAGEMENT FUND (LDRRMF) TO 
SUPPORT DISASTER RISK MANAGEMENT ACTIVITIES 
AS DETERMINED AND APPROVED BY THE LOCAL 
SANGGUNIAN. UNEXPENDED LDRRMF SHALL ACCRUE 
TO A SPECIAL TRUST FUND SOLELY FOR THE PURPOSE 
OF SUPPORTING DISASTER RISK REDUCTION AND 
MANAGEMENT ACTIVITIES OF THE LDRRMCS WITHIN 
THE NEXT FIVE (5) YEARS. ANY SUCH AMOUNT STILL 
NOT FULLY UTILIZED AFTER FIVE (5) YEARS SHALL 
REVERT BACK TO THE GENERAL FUND OF THE 
CONCERNED LGU AND SHALL BE MADE AVAILABLE FOR 
OTHER SOCIAL SERVICES AS APPROVED BY THE 
CONCERNED SANGGUNIAN."


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SEC. 5. Section 325 (a) of R.A. No. 7160 otherwise known as the "Local 
Government Code of 1991" as amended, is hereby deleted:
(a) [The total appropriations/ whether annual or
supplemental,—fer—personal—services of—a—local 
government unit for one (1^ fiscal-year shall not exceed
forty-five percent (45%) in the case of first to third
class provinces,- cities and municipalities, and fifty-five
percent ^55tV^ in the case of fourth class or lower, of
the total annual income from regular sources realized in
the next-preceding fiscal year. The appropriations for
salaries/ wages/ representation and transportation
allowances of officials and employees of the public
utilities and economic enterprises owned, operated,
and maintained by the local government unit concerned
shall not be included in the annual budget or in the
computation of the maximum amount for personal
services. The appropriations for the personal services of
such economic enterprises shall be charged to their 
respective budgets;}
SEC. 6. Section 326 of R.A. No. 7160 otherwise known as the 
Government Code of 1991" as amended, is hereby deleted:
[Section 326. Review of Appropriation Ordinances of
Provinces,—Highly-Urbanized—Cities,—Independent
Component—Cities/—and—Municipalities—within—the 
Metropolitan Manila Area^—The Department of Budget
and Management shall review ordinances authorizing
the—annual—or—supplemental—appropriations—ef
provinces,—highly-urbanized—cities?—independent 
component—cities,—and—municipalities—within—the
Metropolitan—Manila Area—in accordance with the
immediately succeeding section.]
SEC. 7. All sections of R.A. No. 7160 are renumbered accordingly.
'Local


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SEC. 8. Separability Clause. - If for any reason any part or provision of this Act 
shall be deemed unconstitutional or invalid, the other sections or provisions hereof shall 
not be affected and shall remain in force and effect.
SEC. 9. Repealing Clause. - All laws, decrees, executive issuances, rules and 
regulations inconsistent with this Act are hereby repealed or modified accordingly.
SEC. 10. Effectivity. - This Act shall take effect fifteen (15) days after its 
publication in the Official Gazette or in a newspaper of general circulation.
Approved,