An Assessment of the Local Government Units' Functional Assignments under a Decentralized Regime

The Philippines embraced a devolution agenda in 1991, leading to the enactment of the Local Government Code (LGC). Despite over three decades of implementation, devolution has remained incomplete, resulting in blurred accountability between the national government and local government units (LGUs) and inefficient delivery of basic devolved services. In March 2023, President Ferdinand Marcos Jr. ordered a review of the functions, services, and facilities that will be fully devolved to local governments. As part of this review, the study assesses LGU functional assignments across three critical sectors: health, infrastructure, and agriculture. The study performs an “unbundling” of the broad functions identified in the LGC and examines them in light of the principles of functional assignment and the binding constraints that have hindered devolution in the country. An expenditure analysis is employed to assess whether the increase in available financing in the first year of implementing the Mandanas ruling has translated into an increase in service delivery of devolved functions, as reflected in LGU spending. The study finds that the emphasis on subsidiarity and local autonomy, coupled with the country’s binding constraints, has resulted in significant gaps between de jure and de facto functional assignments, as well as disparities in assumed devolved functions across LGUs. The data further indicates uneven uptake or utilization of the increased funding across different levels of LGUs. The discussion highlights the need for a reevaluation of functional assignments, as well as the government's strategy to address the binding constraints that continue to hinder devolution: fiscal imbalances, institutional capacity, enforcement, and political economy factors. Specifically, the study recommends a re-assignment of the devolved functions—between national and local, and among different levels of local government—that not only accounts for institutional constraints but also aligns benefits and costs and considers inter-jurisdictional spillovers. Comments on this paper are welcome within 60 days from the date of posting. Email publications@pids.gov.ph.