Pursuant to Section 2(a) of Republic Act (RA) No. 7160 or the Local Government Code of 1991 (LGC), the State shall provide for a more responsive and accountable local government structure instituted through a system of decentralization whereby local government units (LGUs) shall be given more powers, authority, responsibilities, and resources. The process of decentralization shall proceed from the National Government (NG) to the LGUs.
Section 3(d) of RA No. 7160 further provides that the vesting of duty, responsibility, and accountability in LGUs shall be accompanied with provision for reasonably adequate resources to discharge their powers and effectively carry out their functions; hence, they shall have the power to create and broaden their own sources of revenue and the right to a just share in national taxes and an equitable share in the proceeds of the utilization and development of the national wealth within their respective areas.
The Supreme Court (SC) decision in the consolidated cases of Congressman Hermilando I. Mandanas, et. al. vs. Executive Secretary Paquito N. Ochoa, Jr. et. al. and Honorable Enrique T. Garcia, Jr. vs. Executive Secretary Paquito Ochoa, et. al. clarifies the basis for the computation of local government shares and ordered the NG to include all collections of national taxes in the computation of the base amount for the just share of the LGUs. This is pursuant to Section 6, Article X of the 1987 Philippine Constitution which provides that the LGUs shall have a just share in the national taxes which shall be automatically released to them.
In line with the implementation of the SC Ruling, Executive Order (EO) No. 138, s. 2021 orders the full devolution of functions, services, and facilities by the NG to the LGUs not later than the end of FY 2024. Except for those functions that shall be primarily and ultimately responsible and accountable for the provision of all basic services and facilities fully devoted to them, in accordance with the minimum standards for service delivery to be prescribed by the NG.
To support the transition to full devolution, Section 10 of EO No. 138, s. 2021, instructs all LGUs to formulate and prepare their Devolution Transition Plans (DTPs) to guide the transition in their full assumption of the devolved roles and responsibilities.