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TH~RTEENTH CONGRESS OF THE REpuBtrc 
OF THE PHILIPPINES 
1 
FIRST REGULAR SESSION 
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S E N A T E  
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S.B.NO. 
86 
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Introduced by Senator JINGGOY EJERCfTO ESTRADA 
EXPLANATORY NOTE 
The Local Government Code of 1991 was enacted ti, 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 40%. 
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. 
In an attempt to respond to these problems, Congress passed House Bill No. 333 1 
and Senate Bill No. 1173 in order to suspend devolution of health services in selected 
municipalities and provinces. This was however vetoed by then President Fidel V. 
Ramos. In the President’s veto message, he endorsed the bills filed by Representative 
Dominador Venegas and Senator Vicente Sotto I11 in the Ninth Congress which called for 
the re-allocation of the Internal Revenue Allotment. 
In the Tenth Congress, 
Representative Romeo Salalima filed House Bill No. 1704 containing the proposals of 
the Venegas-Sotto Bills. This proposed bills is based on Senate Bill No. 1704. 
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 
EJERCITO ESTRADA 
Senator 


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THIRTEENTH CONGRESS OF THE REPUBUC ) 
FIRST REGULAR SESSION 
OF T H E P " E S  
1 
..- 
S E N A T E  
S.B. NO. 
Introduced by Senator JINGGOY EJERCITO ESTRADA 
AN ACT 
AMENDING SECTION 285 OF REPUBLIC ACT NO. 7164 OTHERWISE 
K" AS THE LOCAL GOVERNMENT CODE OF 1991, PROVIDING FOR 
LOCAL GOVERNMENT UNITS 
THE RE-ALLOCATION OF THE INTERNAL REVENUE ALLOTMENT OF 
Be it enucted by the Senate and House of 
~ e ~ r e ~ e n t u t ~ ~ e s  
of the Philippines in 
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 GOVEEWMENT UNITS IN THE INTERNAL 
REVENUE ALL0"NT 
SHALL BE ALLOCATED STARTING IN 2004, 
AFTER DEDUCTING THEREFROM TNE COST 
OF 
DEVOLVED 
FUNCTIONS AND PERSONNEL, AND THE COST OF CITY-FWNDED 
HOSPITALS, EXCLUDING CAPITAL OUTLAYS. THE AMOUNT TO BE 
DEDUCTED S€M& BE THE ACTUAL COST IN 1992 OF THE DEVOLVED 
FUNCTIONS AND THE 
COST 
OF 
CITY-FUNDED HOSPITALS, 
EXCLUDING CAPITAL OUTL,AYS, INCREASED AT THE RATE OF TEN 
PERCENT (10%) PER ANNUM FROM THE EFFECTIVlTY OF THIS CODE. 
THE TOTAL COST SO DEDUCTED SHALL BE DISTRIBUTED AND 
DIRECTLY REMITTED TO THE LOCAL GOVERNMENT UNITS 
C0NCERNE;D AND THE NET OR BALANCE OF THE INTERNAZ, 
REVENUE ALZOlTbENT SHALL BE ALLOCATED 7N TEE FOLLOWING 
MANNER: 


a) 
Provinces 
- 
Twenty three percent (23%); 
b) 
Cities 
Twenty- three percent (23 %); 
c) 
Municipalities - 
Thirty-four percent (34%); 
d) 
Barangays 
- 
Twenty percent (20%); 
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%)] 
FLFTY 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,OOO.OO) 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 - 
FiRy percent (50%) 
c) 
On the third year 
1) 
Population 
- 
Sixty percent (60%); and 
2) 
Equalsharing - 
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 This Act shall take effect upon approval. 
Approved,