LGUs post 12% hike in operating income to P825B in 2020

Department of Finance

The total current operating income of the local government units (LGUs) rose from P738.54 billion in 2019 to P825.2 billion in 2020, representing an increase of P86.66 billion or 12%, as a result of their higher internal revenue allotment (IRA) and improved local tax collections.

In a report to Finance Secretary Carlos Dominguez III, the Bureau of Local Government Finance (BLGF) said the increase in the 2020 current operating income of provinces, cities and municipalities is mostly attributed to the 18-percent growth in the external revenue sources of LGUs, including the IRA, which amounted to P509.65 billion, or 11% more than the P457.15 billion they received in 2019.

BLGF Executive Director Niño Raymond Alvina said that although local tax collections increased in 2020 to P189.86 billion from P183.46 billion in 2019, their share in the current operating income of LGUs declined to 23% in 2020 from 25% in 2019.

The share of non-tax revenues, which amounted to P61.79 billion in 2020, also decreased to 7% compared to 10% in 2019 when collections reached P70.36 billion.

Alvina said LGUs’ dependence on external sources, comprised of IRA and other transfers to the LGUs, as a ratio of their operating income last year, has increased to 70%, as compared to 66% in 2019.

“In aggregate terms, LGUs dependence on external sources in Fiscal Year (FY) 2020 reached 70%, which is 18% or P88.83 billion higher than 2019 levels. On IRA dependence, provinces showed the highest dependency ratio at 78%, followed by municipalities (74%) and cities (42%) in FY 2020,” Alvina said.

Besides the IRA, the other external revenue sources of LGUs are other transfers from the national government (NG), which amounted to P63.9 billion in 2020, or 132% higher than the P27.57 billion in 2019, Alvina said.

The share of these other sources in the current operating incomes of LGUs grew to 8% in 2020, or 4% higher than in 2019.