March 4, 2024

President Ferdinand R. Marcos, Jr. has signed into law a bill institutionalizing the automatic income classification of local government units.

Marcos signed on Oct. 26 Republic Act 11964, or the “Automatic Income Classification of Local Government Units Act,” a law that aims to provide a more responsive approach to the promotion of local autonomy and to enable LGUs to realize their full economic potential.

“The Department of Finance, in coordination with the Department of Budget and Management and in consultation with LGU Leagues, will craft the law’s implementing rules and regulations (IRR) within three months from its effectivity,” Communication Secretary Cheloy Garafil said in a statement.

Malacañang has yet to release a copy of RA 11964.

The new law classifies provinces, cities, and municipalities according to their income ranges and average annual regular income.

Under RA 11964, the Finance Secretary in consultation with the National Economic and Development Authority and concerned LGUs League, will have the authority to adjust the income ranges based on the actual growth rate of the annual regular income from the last income reclassification.

The Secretary of Finance is also designated to undertake regular income reclassification once every three years to make sure that LGU income reclassification conforms with the prevailing economic conditions.

Garafil said the first general income reclassification would be made within six months after the effectivity of RA 11964, and every three years thereafter.

“According to the newly signed legislation, the first income reclassification of provinces, cities, and municipalities will take effect on Jan. 1st of the immediately succeeding year following the issuance of the table of income classification by the Finance Secretary,” she said.

Garafil said under RA 11964, municipalities would be classified into five classes.

“LGUs will be classified as first class, or municipalities earning an annual average income of P200 million; second class, municipalities earning an average annual income of P160M or more but less than P200M; third class, those earning P130M or more, but less than P160M; fourth class, those with an annual average regular income of P90M or more, but less than P130M; and fifth class, those with an average annual income of less than P90M.”

She added that the LGU income classification would serve as the basis for the identification of administrative and statutory aids, financial grants, and other forms of assistance to LGUs.

She said the institutionalization of the income classification system would also help determine the LGUs’ capability to undertake development programs and projects.

The law will also serve as a guide for the total annual supplemental appropriation for personnel services of an LGU, and for the compensation adjustment for LGU personnel, under RA 11466 or the Salary Standardization Law of 2019.

“It could also serve as the basis for the creation of the new LGU, setting of the number of elective members in the sangguniang panlalawigan and the sangguniang bayan, issuance of a free patent title to residential lands, minimum wage of domestic workers, insuring LGU properties with the Government Service Insurance System, and for setting the limitation on the percentage of agricultural land area that can be reclassified and the manner of their utilization,” Garafil said. – PNA