FOURTEENTH CONGRESS OF THE REPUBLIC 
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First Regular Session 
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r * , -  .-.\, 
OF THE PHILIPPINES 
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7 JJ!- -2 i 
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S E N A T E  
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CJY : .- 
Senate Bill NO. ,~~~ 
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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 
1 
Senator 


S E N A T E  
Senate Bill No. 
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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 
Be it enacted by the Senate and fhe 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: 
PERSONNEL, AND THE COST OF CITY-FUNDED HOSPITALS, EXCLUDING 
a) Provinces 
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Twenty-three percent (23%); 
b) Cities 
- 
Twenty-three percent (23 YO); 
d) Barangays 
- 
Twenty percent (20%); 
c) Municipalities 
- 
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 
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[Fifty percent (SO%)] 
FIFTY FIVE PERCENT (55%) 
b) Land Area 
- 
[Twenty-five percent (25k)l ' 
TWENTY PERCENT (20%) 
c) Equal Sharing 
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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,OOO.OOO) 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: 
I) 
Population 
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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,