PBBM signs RA 11964 institutionalizing automatic LGU income classification – Presidential Communications Office

President Ferdinand R. Marcos Jr. signed into law Republic Act (RA) No. 11964 on Thursday, institutionalizing the automatic income classification of local government units (LGUs) to provide a more responsive approach to the promotion of local autonomy and to enable LGUs to realize their full economic potential.

The law, known as the “Automatic Income Classification of Local Government Units Act, was crafted to provide LGUs with more responsive approach to promoting local autonomy and local development.

“In line with this, the State recognizes the need to determine the financial capability and fiscal position of local government units,” the law stated.

Under RA 11964, municipalities shall be classified into five classes, according to their income ranges and based on the average annual regular income for three fiscal years preceding a general income reclassification.

LGUs will be classified as First Class, or municipalities earning an annual average income of P200,000,000; Second Class, municipalities earning an average annual income of P160,000,000, or more but less than P200,000,000; Third Class, those earning P130,000,000 or more, but less than P160,000,000; Fourth Class, those with an annual average regular income of P90,000,000 or more, but less than P130,000,000; and, Fifth Class, those with an average annual income of less than P90,000,000.

The new law mandates that the Secretary of Finance, in consultation with the National Economic and Development Authority (NEDA) and the concerned LGUs League, shall have the authority to adjust the income ranges based on the actual growth rate of the annual regular income from the last income reclassification and undertake regular income reclassification once every three years so that LGU income reclassification conforms with the prevailing economic conditions.

The first general income reclassification shall be made within six months after the effectivity of the law and every three years thereafter.

The LGU income classification will serve as the basis for the identification of administrative and statutory aids, financial grants and other forms of assistance to LGUs, determination of LGU capability to undertake