Local Government Code Explained (A Legal Article)

Introduction

Decentralization in the Philippines is a constitutional and statutory design that reallocates powers, responsibilities, and resources from the national government to local government units (LGUs). It is intended to bring governance closer to the people, improve public service delivery, deepen democracy, and promote local development that is responsive to diverse community needs. The cornerstone law implementing this constitutional policy is the Local Government Code of 1991 (Republic Act No. 7160).

This article explains decentralization in Philippine law and practice: its constitutional roots, the types of decentralization adopted, the structure of LGUs, the scope of devolved powers and services, fiscal arrangements including the national-local revenue sharing system, intergovernmental relations, accountability mechanisms, persistent tensions, and the major legal doctrines and controversies that shape local autonomy today.

1. Constitutional Foundations of Decentralization

1.1. Local Autonomy as State Policy

The 1987 Constitution explicitly mandates decentralization. It declares that:

The State shall ensure local autonomy (Article II, Section 25).
LGUs shall enjoy self-governance with powers to create their own sources of revenue, levy taxes, and receive a just share in national taxes (Article X).

Local autonomy in constitutional terms does not mean absolute independence from the national government. Rather, it means meaningful self-rule within a unitary state, subject to national supervision to ensure legality.

1.2. Purpose

Constitutional decentralization pursues:

Democratic input: local officials elected directly by constituents.
Efficiency and responsiveness: local variation in needs demands local solutions.
Developmental equity: enabling less-dominant regions to plan and implement growth programs.

2. Types of Decentralization in the Philippines

Philippine decentralization is not a single act but a blend of three interrelated forms.

2.1. Political Decentralization (Devolution of Power)

Political decentralization transfers decision-making authority to LGUs. This includes:

lawmaking by local councils (sanggunians),
executive authority by governors, mayors, and barangay captains,
local electoral accountability.

2.2. Administrative Decentralization (Devolution of Functions)

Administrative decentralization gives LGUs responsibility to deliver specific public services previously handled by national agencies. Under the Local Government Code, functions such as health services, agricultural extension, social welfare, and environmental management are devolved to localities.

2.3. Fiscal Decentralization (Devolution of Resources)

Fiscal decentralization provides LGUs:

large shares from national revenues,
authority to create local revenue sources,
borrowing and investment powers,
budgeting discretion.

These three dimensions must work together. Transfer of functions without funding is ineffective; transfer of funds without authority can waste resources; transfer of authority without accountability risks abuse.

3. Local Government Units (LGUs): Structure and Legal Nature

3.1. Levels of LGUs

The Philippines has a multi-tiered system:

Provinces
Cities
Municipalities
Barangays
Autonomous Regions (special political setup under the Constitution)

Each level is a political subdivision of the State, created by law, possessing corporate personality, and exercising powers granted by the Constitution and statute.

3.2. Dual Character: Political Subdivision and Corporate Entity

LGUs are:

agents of the State, implementing national policies; and
corporate bodies, capable of owning property, entering contracts, suing and being sued.

This duality explains why LGUs have autonomy but remain under supervision.

4. The Local Government Code of 1991 (RA 7160): Core Framework

The Local Government Code operationalizes constitutional decentralization by:

defining the powers, functions, and revenues of LGUs;
outlining devolution of basic services;
establishing mechanisms of participation, accountability, and inter-LGU coordination.

It is widely regarded as one of the most ambitious decentralization laws in Asia.

5. Powers of LGUs Under the Code

5.1. General Welfare Clause

LGUs are granted broad authority to enact ordinances and implement measures to promote:

health and safety,
economic development,
environmental protection,
public morals,
peace and order,
general welfare of their inhabitants.

This clause is interpreted expansively and is the legal basis for many local initiatives, especially when no explicit power is stated elsewhere.

5.2. Police Power

LGUs can regulate the use of property, business operations, land use, and public conduct within their territories, subject to:

the Constitution,
national laws,
reasonableness and due process.

5.3. Eminent Domain

LGUs may expropriate private property for public use, but only:

through an ordinance,
with payment of just compensation,
and for a legitimate public purpose.

5.4. Taxing Power

LGUs can levy local taxes, fees, and charges, including:

business taxes,
real property tax,
community tax,
franchise taxes (with limits),
regulatory fees.

Local taxing powers are not inherent; they exist only because the Code grants them. They are also constrained by national policies (e.g., exemptions for certain entities and national economic considerations).

5.5. Closing and Opening of Roads; Local Infrastructure

LGUs can plan and implement local infrastructure, manage local roads, and regulate transportation consistent with national standards.

6. Devolution of Basic Services and Facilities

6.1. Concept of Devolution

Devolution is the legal transfer of responsibility for delivering services from national agencies to LGUs. It is different from:

deconcentration (national agencies establishing field offices),
delegation (temporary assignment of tasks),
privatization (transfer to private entities).

6.2. Key Devolved Services

Under the Code, LGUs assume responsibility for services such as:

Barangays

barangay health centers and day-care,
maintenance of barangay roads and facilities,
peace and order through barangay tanods,
solid waste and sanitation at the community level.

Municipalities

primary health care and rural health units,
agricultural extension and on-site training,
communal irrigation and water systems,
municipal roads and public works,
social welfare programs.

Cities and Provinces

hospitals and higher-level health services (especially provinces),
provincial/city agriculture and fisheries support,
environmental management of large-scale ecosystems,
tertiary social welfare services,
large-scale infrastructure and investment promotion.

6.3. Personnel and Asset Transfer

Devolution includes transfer of:

staff,
equipment,
facilities,
budgets, from national agencies to LGUs, though implementation has often been uneven.

7. Fiscal Decentralization in Detail

7.1. Local Revenue Sources

LGUs finance themselves through:

local taxes, fees, and charges,
income from local economic enterprises,
proceeds from property and investments.

7.2. National Internal Revenue Allotment / National Tax Share

LGUs receive an automatic share from national taxes. This is meant to:

give LGUs predictable funding,
reduce dependence on political favoritism,
enable meaningful autonomy.

The share is allocated by formula, considering:

population,
land area,
equal sharing.

7.3. Budgeting and Expenditure Powers

LGUs have authority to:

enact annual budgets through their sanggunians,
prioritize local spending,
reallocate within legal limitations.

Budgets must follow statutory rules on:

mandatory allocations (e.g., development funds),
personnel services caps,
transparency and audit.

7.4. Borrowing and Credit Financing

LGUs may borrow and issue bonds, but only if:

they operate within debt ceilings,
projects are income-generating or development-oriented,
they meet fiscal sustainability requirements.

8. Intergovernmental Relations: Autonomy with Supervision

8.1. Supervision vs. Control

A key legal doctrine is the difference between:

Supervision: ensuring LGUs act within the law.
Control: substituting the national government's judgment for LGU judgment.

The Constitution and Code allow supervision, not control.

8.2. Role of the President and DILG

The President exercises general supervision, chiefly through the Department of the Interior and Local Government (DILG). Tools include:

review of ordinances for legality,
administrative discipline procedures,
performance monitoring.

8.3. National Agencies After Devolution

Many agencies retain:

policy-making,
standard-setting,
oversight, while LGUs handle delivery.

This creates continual negotiation over “who does what,” especially in health, environment, and social welfare.

9. Local Legislation and Ordinance-Making

9.1. Sanggunians

Local councils enact ordinances and resolutions:

Sangguniang Panlalawigan (province),
Sangguniang Panlungsod (city),
Sangguniang Bayan (municipality),
Sangguniang Barangay (barangay).

9.2. Limits on Ordinances

An ordinance must:

not violate the Constitution or statutes,
align with public welfare,
follow due process (hearings, publication),
stay within territorial jurisdiction.

It can be invalidated by courts if ultra vires (beyond powers) or unreasonable.

10. Local Development Planning and Participation

10.1. Local Development Councils

LGUs must create Local Development Councils (LDCs) at each level to:

set development priorities,
draft local development plans,
coordinate sectoral programs.

Civil society and NGOs are required members, embedding participatory governance into local planning.

10.2. Local Special Bodies

Other bodies institutionalize participation:

Local School Boards,
Local Health Boards,
Local Peace and Order Councils,
Local Disaster Risk Reduction and Management Councils.

11. Accountability and Oversight Mechanisms

11.1. Administrative Discipline

Local officials can be disciplined through:

Ombudsman proceedings,
DILG administrative actions,
recall elections or impeachment-type processes (for some officials).

11.2. Audit and COA

The Commission on Audit (COA) audits LGU funds. This is a constitutional safeguard ensuring fiscal autonomy does not become fiscal impunity.

11.3. Citizen Remedies

Citizens can:

challenge ordinances in court,
file administrative, civil, or criminal complaints,
use participatory bodies to influence budgets,
exercise electoral accountability.

12. Persistent Issues and Tensions in Philippine Decentralization

12.1. Unequal Local Capacity

Not all LGUs have comparable:

tax base,
technical staff,
administrative systems.

This creates uneven service delivery and entrenches inequalities.

12.2. Dependence on National Transfers

Many municipalities and provinces rely heavily on their national tax share, weakening incentives for local revenue generation.

12.3. Political Dynasties and Elite Capture

Local autonomy can be captured by entrenched families, affecting:

accountability,
competition,
fair distribution of resources.

12.4. Overlap and Confusion of Functions

Ambiguities remain in sectors like:

environmental regulation,
infrastructure,
public health during epidemics,
social protection.

This overlap often leads to intergovernmental conflict and policy fragmentation.

12.5. Recentralization Pressures

In crisis moments (natural disasters, pandemics, security threats), national government may reassert stronger direction. The legal line between supervision and control becomes a practical battleground.

13. Decentralization and Special Regions

13.1. Autonomous Regions

The Constitution allows autonomous regions in Muslim Mindanao and the Cordilleras. Their legal status differs:

greater legislative powers,
block grant-type fiscal setup,
region-wide governance structures.

Autonomy here is a higher form of decentralization, meant to address historical and cultural distinctiveness.

13.2. Highly Urbanized Cities and Independent Component Cities

Some cities are independent from provincial supervision, reflecting decentralization tailored to urban governance needs.

14. Key Legal Doctrines and Judicial Themes

Courts commonly emphasize:

Local autonomy is real but not absolute.
LGUs have only delegated powers, but these are interpreted in favor of autonomy when ambiguous.
Ordinances deserve respect as expressions of local democratic will, unless clearly unlawful.
Fiscal transfers are mandatory, not discretionary, buttressing local independence.
The general welfare clause is a broad grant, especially for police power ordinances grounded in public interest.

These doctrines collectively shape how decentralization works beyond the text of the Code.

15. Practical Implications: Why Decentralization Matters

Decentralization affects everyday governance:

local health systems, hospitals, clinics,
land use and zoning,
business permitting and investment climates,
disaster response,
social welfare and education support,
environmental protection,
peace and order at community level.

For citizens, decentralization means that local leaders are not mere implementers; they are primary policymakers for many crucial services.

Conclusion

Decentralization in the Philippines is a constitutional commitment to local autonomy implemented chiefly through the Local Government Code of 1991. It blends political, administrative, and fiscal devolution to empower LGUs as engines of service delivery and local development. Yet this autonomy exists within a unitary state, bounded by law and supervised for legality.

The system’s successes—greater local initiative, participatory planning, and proximity-based governance—coexist with persistent challenges of unequal capacity, dependency on transfers, elite capture, and sectoral overlaps. Understanding decentralization therefore requires seeing both its legal architecture and its lived realities: it is not merely a rulebook, but an evolving balance of power between national unity and local self-rule.