Abstract

This paper examines the relationship between fiscal autonomy (the assignment and responsibility of revenues and expenditure functions across government levels) and public finance (or the sources and uses of public funds) in the Cordillera region in northern Philippines. The study reviews briefly the Cordillera autonomy literature and organic laws to contextualize fiscal autonomy. Financial analysis and regression are employed to explore the determinants and drivers of local public finance using the local government units’ (LGUs) income statement accounts for the period 2001 to 2006. Results show that poverty incidence as a proxy of average income and tax base in the LGUs is negatively related to per capita real property tax revenues, pointing to the inadequacy and unpreparedness of the LGUs to raise their own funds. The size of LGU expenditures, however, exerts pressure to improve tax revenue collections, leading to increased government accountability at the lower levels. National government transfers or internal revenue allotments (IRA) provide a disincentive for LGUs to increase their local tax and non-tax efforts, perpetuating the LGUs’ so-called IRA dependency. The study concludes that there is the need to revisit revenue and expenditure assignment, responsibility and functions across government levels for efficient public goods production and provision.