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JV Ejercito: Automatic income classification of LGUs Act to boost economic growth, local autonomy

October 27, 2023

Senator Joseph Victor "JV" Ejercito said the new law, which institutionalizes the automatic income classification of local government units (LGUs), will boost their economic growth and enhance their local autonomy.

President Ferdinand Marcos Jr. just signed into law the Republic Act No. 11964 or the “Automatic Income Classification of Local Government Units Act,” which seeks to set the income thresholds for provinces, cities, and municipalities and empower the Secretary of Finance to regularly reclassify LGUs and revise income ranges.

The Automatic Income Classification of LGUs Act is the first law Ejercito has passed in the 19th Congress, adding to his list of landmark legislation like the Universal Health Care Act and the Department of Human Settlements and Urban Development Act.

“Ipinapaabot ko po ang aming pasasalamat kay Pangulong Bongbong Marcos sa pagpirma upang gawing batas ang Republic Act No. 11964 o Automatic Income Classification of Local Government Units Act na aking pong isinulong at iniakda,” Ejercito said.

Ejercito, who previously served as local chief executive of his hometown in San Juan, said the new law will guide the national government in efficiently allocating its resources for the compensation of local government personnel and the distribution of financial grants to LGUs.

“Sa pagkakapasa nito, inaasahan po natin na makatutulong ang batas sa national government sa pagsusuri ng financial capacity ng mga LGU at sa pagtukoy po ng angkop na uri ng tulong sa kanila,” the senator emphasized.

“Ang amin pong layunin sa batas na ito ay malinaw: i-synchronize ang reklasipikasyon ng mga LGU sa termino ng mga lokal na opisyal na inihalal.”

The first general income reclassification will be made within six months of the law taking effect, and then every three years after that. The changes shall take effect on January 1 next year.

Under the law, an LGU won't be reclassified to a lower category unless its income falls below the new range during the next reclassification.

This law will also be used to determine the minimum wage for domestic workers as per Republic Act No. 10361, commonly known as the Domestic Workers Act or Batas Kasambahay.

Ejercito thanked Senate President Juan Miguel Zubiri and his fellow senators for backing the measure, and the Department of Finance for their technical assistance.

The latest income reclassification was implemented in 2008, shortly before the issuance of an adverse Opinion from the Department of Justice on the power of the Secretary of Finance to adjust the income ranges under Executive Order No. 249, dated July 26, 1987.

This means that the current income classification of LGUs is based on outdated revenue figures from their 2004-2007 Financial Statements. 

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