Intergovernmental fiscal transfers and local resource generation in Philippine provinces

This chapter presents the dynamics of fiscal management in Philippine local governments. It also explores how a recent policy change in the Mandanas-Garcia ruling of the Supreme Court, which expanded the fiscal resources transferred to local governments, can affect local fiscal behavior and autonomy. To determine the influence of intergovernmental transfers on the capacity to generate local revenues, income and expenditures of the provincial governments over three periods (2015, 2018, and 2021) were analyzed using a fixed-effects model. Results indicate a positive influence of internal revenue allotment (IRA) on local revenue generation. It suggests how increases in transfers put provincial governments in a better position to assume devolved functions toward local economic development and a more locally responsive service delivery. Such outcomes are premised on adequacy of transfers to attendant costs, fidelity of spending decisions with the devolved responsibilities, and active engagement of local citizens (Manasan, 2020).