June 2, 2023

Having exceeded its personal service (PS) limitation for fiscal year 2023, the city government of Baguio is constrained to implement the fourth tranche of the salary standardization for its employees.
This was the response of lawyer Naoime Humilde of the Department of Budget and Management- Cordillera to the city council during a forum last Dec. 5 to their question about the possibility of granting the fourth tranche salary increase of the employees.
Pursuant to Section 325(a) of the Local Government Code, first to third class local government units such as Baguio City shall not allocate an amount exceeding 45 percent of its total annual income from regular sources of the previous year for PS in the preceding year. 
In the case of the city government, the basis for computing its 45 percent PS limitation to be applied next year is FY 2020. 
PS refers to all budgetary items intended for the payment of salaries, wages, step increments, and other compensation of permanent, temporary, contractual, and casual employees of an LGU.
The Salary Standardization Law of 2019 also provides that the implementation of the salary adjustment is subject to PS limitation.
Humilde, however, said there are options the city government can explore to be able to provide the fourth tranche salary increase despite the PS excess.
Local Budget Circular (LBC) 145 issued in March, 2022 states that in case the PS cap has exceeded, the local government may be granted additional PS expenditures if it collapses vacant plantilla positions.  
“Pwede po nating ibalik itong collapsed positions once kailangan na at kung wala nang PS excess,” Humilde said.
Another option based on LBC 145 is to reduce PS items of lesser priority. The current salary scheme is excluded from the option of items that may be reduced as any reduction in the current salary scheme is against the policy on non-diminution of salary.
Budget Officer Leticia Clemente said the PS excess is P21,258,528.67 and the amount needed for the fourth tranche of the salary standardization is P28M.
Clemente said the city government had not exceeded its PS limitation for years until recently.
Humilde explained that any excess in the PS allocation should be disapproved, but she assured that DBM would look into the factors that had led to the excess in the PS allocation.
“As a rule, kahit nag-exceed tayo sa PS cap, we cannot reduce the salary rates that [the employees] are receiving now,” Humilde said.
She added that as an effect of the PS excess, there should be no more additional PS cost to be incurred. 
Leaning towards the first option presented by Humilde, the city council tasked the Local Finance Committee to study which vacant positions to be collapsed and come up with the corresponding computation to be able to determine whether city government could satisfy the funding requirement of the fourth tranche salary increase through this option. All documents related to this would be submitted to the city council. 
Clemente said this would have to be discussed with Mayor Benjamin Magalong and the department heads.
Meanwhile, Councilor Bomogao said a possible long-term solution to avoid any PS excess in the future is to “increase more economic activities” in the city. – Jordan G. Habbiling