Business World, 8 September 2015


The Department of Interior and Local Government (DILG) under the Aquino administration is the combined Philippine Constabulary, the Ministry of the Interior, and the Ministry of Human Settlements (MHS) during the Marcos years. In its present form, the DILG is a ‘super’ Department.

From 2010 to 2016, the budget of the entire DILG has increased by 30.2%, or an averaged increase of 5% annually.

But, surprisingly, the budget of the Office of the Secretary (OSEC), during the same period, has soared by a whopping 385.7% or by a mind-boggling annual rate of 64.3%.

This meteoric rise in the budget of the DILG-OSEC is even understated since the 2016 budget is a bit smaller that this year’s budget. Its 2015 adjusted budget for is P16.0 billion compared to 2016’s proposed budget of P13.6 billion. From P2.8 billion in 2010, DILG-OSEC’s budget surged to P16.0 billion in 2015 or an increase, over five years, of 471%. (See Table 1)

DILG2The rise in the budget of DILG proper is largely due to the increase in capital outlays owing to the Aquino administration’s policy of modernizing the police and the fire protection by massive acquisition of new firearms, jeeps, and fire trucks.

However, the increased budget of the DILG-OSEC is due to the highly interventionist policy of the Aquino administration. Some analysts may call it paternalistic, others may call it blatantly political, as the arrangement favors the President’s anointed one.

DILG’s mandates are clear: first, supervision (not control) of some 45,000 local government units (LGUs); and second, peace and order and fire protection. Sadly, it has gone into areas where its bases for intervention are unclear.

It has no business distributing public funds to LGUs. That’s already taken care of by the formula-based, automatically-released internal revenue allotment (IRA) as provided for in the Local Government Code of 1991. The IRA may be supplemented by the use of taxing powers delegated to LGUs under the same law.

In 2016, the IRA will amount to a staggering P482.6 billion. This is roughly one-sixth of the P3 trillion proposed budget.

In the 2016 budget document, DILG lists the following organizational outcomes that it seeks to accomplish:

• Transparency and accountability of all LGUs sustained;

• LGU capacity to prepare and build resiliency to disasters and adapt to climate change enhanced;

• LGU capacity to be business-friendly and competitive enhanced; and

• LGU capacity to develop and implement social protection and security mechanisms for local communities, especially the marginalized and vulnerable groups enhanced.

Transparency and accountability are the responsibility of elected local authorities, not by some DILG bureaucrats.

Elected local officials are directly responsible to their local constituency. If they perform well, they have a good chance of getting reelected or voted to higher office. If they misbehave or misuse public funds, they may be sued before the Ombudsman, and they risk rejection in the polls.

It is totally unnecessary for the unelected DILG bureaucrats to intervene in the affairs of local governments in order to create a more business friendly and competitive environment. With or without DILG intervention, there will be competition among LGUs.

Investors vote with their feet — they locate in communities that they find attractive and business friendly and avoid those where local authorities are notorious for rent seeking. Hence, it is in the interest of local authorities to adopt business friendly and competitive policies. There is no need for DILG officials to persuade local officials to behave in a certain way.

Social protection programs and security mechanisms for local communities are not within the mandate of DILG. These are the responsibility of social security institutions (Government Security Insurance System, Social Security System, and Philippine Health Insurance Corp.). In addition, redistributive goals that should be a national concern is best done by the Departments of Education, Health and Social Welfare, and not by a political agency like DILG.


Yet, the Office of the Secretary, with the aid of the Department of Budget and Management has deliberately enlarged its areas of engagement. Aside from having the mandate to ensure public safety, the DILG has been recreated as the MHS. Remember MHS, the creation of yet another regime when power was concentrated in Imperial Manila.

DILG, in its present form, is now into housing, road construction, water supply, management of conflict-affected areas, and a hodgepodge of projects under the Bottom-Up Budgeting (BUB) program.

In Section 3: Special Provisions (2016 NEP, Volume II, pp. 246-247) there are programs and projects included in the DILG-OSEC operations and locally funded projects which total to P8.7 billion, or 64%, of the proposed 2016 budget. (See Table 2)


It is hazy whether these programs, specifically PAMANA (peace and development program in conflict areas), SALINTUBIG (Provision of Potable Water Program), and ISF (Housing Program for Informal Settler Families) fall within the mandate of the DILG. The same observation goes for Flood Control, Delivery of Potable Water, Local Roads and Reconstruction of Health Clinics under BUB Program.

Worse, it is unclear whether the DILG has the technical expertise to plan, evaluate, and implement projects that involve construction.

One of the legacies of the late President Corazon C. Aquino was to develop local autonomy by giving LGUs a steady, predictable source of revenues independent of political affiliation. The IRA was increased significantly and it was made formula-based and automatically released, monthly at designated time, regardless of party color. Moreover, LGUs’ powers to impose taxes were expanded.

With the substantial IRA grant and broader local taxing powers, local authorities can then be expected to live within their means. This is to ensure that local authorities will learn to observe the hard budget constraint.

It is sound fiscal policy to discourage discretionary grants to LGUs from Central Government officials in exchange for their political loyalty and allegiance. It requires fiscal discipline not to use the national budget to buy the loyalty of LGU officials.

The lesson here is that the Aquino III administration has actively sought the loyalty of local officials by creating a variety of discretionary funds within the national budget and offering them to local officials. The BUB is one such fund.

Here’s a good guide for the upcoming 2016 presidential and local elections. Elect local officials who are totally committed to a hard budget constraint, those who are willing to live within the IRA and other existing local taxes.

Choose local officials who are committed to increase real property taxes and local business taxes if there is higher demand for local public services. Reject those who would choose to kowtow to the President and his men for additional funds, rather than raise local taxes, in exchange for their loyalty.

For better use of public funds, for greater openness in public finance management, to reduce political opportunism, and to change the culture of mendicancy, we need a few good men in the forthcoming elections.