I was browsing a major broadsheet today when I came across a whole-page advertisement of the Department of Finance (DOF) and the Bureau of Local Government Finance (BLGF). The advertisement was about the Special Education Fund (SEF), and raised several issues, quite alarming in my opinion, on the state of local education financing in the country.
Special Education Fund
The Special Education Fund (SEF) is a special fund created under the Local Government Code of 1991 (RA 7160). The SEF can be used for operation and maintenance of public schools; construction and repair of school buildings, facilities, and equipment; educational research; purchase of books and periodicals; and, sports development (Section 272).
The SEF is an additional levy on real property tax. Municipalities, cities, and provinces have powers to ‘collect an annual tax of one percent (1%) on the assessed value of real property which shall be in additional to the basic real property tax’ (Section 235). The collected funds are under the control of the Local School Board (LSB), which has the sole power to determine the appropriations of the said fund.
In the case of municipalities within provinces, the collection is equally divided between the source municipality and its province. Such division rests under the idea that the collections at the provincial level will be used to fund the needs of municipalities with smaller SEF collections. For cities, they get the entire collection.
Schedule of Market Values
The basis for computing the real property tax (RPT), which is the base of one percent additional levy, is the schedule of market values (SMVs). Included in the computation of the RPT are the land, buildings, machineries, and improvements affixed and attached to the real property.
The law requires all local government units (LGUs) to review and update their SMVs every three years. This will enable the LGUs to correctly assess the value of real property and levy the right amount of RPT. A quick look at the data from DOF-BLGF reveals that some LGUs are complying with this requirement, while some may have completely ignored the law. In Region IV-A (CALABARZON) for example, only the Province of Quezon has not updated its SMV. As of 2012 , the SMV used by the province is ten years outdated.
In ARMM, the Province of Maguindanao may have the worst record. Their SMV is 27 years outdated as of 2012. Other provinces in region, namely Lanao del Sur (10 years), Basilan (20 years), and Sulu (7 years), also share the record of outdated SMVs . This would translate to low amount collected for SEF and eventually the kind of education service the local government units can offer.
SEF to Public School Student Ratio
Of the 80 provinces in the Philippines, excluding the newly created Province of Davao Occidental, 52 have below the average SEF to public school student (PSS) ratio. This means that the per capita allotment per student is below the average Php 330.00 per student. And to think Php 330.00 per student per annum is already low, i.e., what kind and quality of services can be procured and provided with that meagre amount, it is expected that in the 52 provinces there are even less.
Most of the 52 provinces are in the Visayas and Mindanao regions, while the nine of top 10 provinces are in Luzon. The highest estimated available SEF revenue per PSS is Php 3,153, which is in the Province of Bataan; the lowest, Php 3.00, in the Province of Basilan. As mentioned above, the provinces in the ARMM have outdated SMVs, which could partly be the reason for this situation.
Student Population and SEF Collection
Another concern is the number of students per province. Student population may be fluctuating, but a general trend suggests that it is always going up. Looking at the statistics from the Department of Education (DepEd) reveals that there are areas with large student population like Cebu with 482,699 students from public elementary and high schools, while others have smaller like Batanes with 4,111. This means that larger student population requires larger SEF allotment, but smaller ones need not necessarily have smaller counterparts.
Though the Province of Batangas registered the highest SEF collection at Php 640.55 million, it is only second in terms of SEF-PSS ration. The Province of Bataan may have lower collections, Php 420 million, but they also have relatively fewer students. On the other extreme, the Province of Basilan took the lowest spot with Php 0.13 million collection.
If the LGU fails to collect RPTs, which is sometimes if not oftentimes the case, then SEF collections could also be affected. There are mechanisms, however, in order for the LGUs to follow through uncollected RPTs. Also, LGUs may impose fines for late payment, which can also accrue to SEF. Thus, there is a challenge for LGUs to be aggressive in the collection of SEF, especially if they have a large student population.
The Challenge and Some Concluding Remarks
The advertisement posed two challenges: (1) ‘[a]n updated SMV contributes to higher revenue generation capacity to fund education services; and (2) ‘[i]mproving collection efficiency increases local revenues even more’. These are real challenges. These responds to the issues raised above about SMVs and SEF collection.
Taking the challenge to a higher level, there must also be a reevaluation of the SEF system. The LGC of 1991 and its framers intended to have a special fund for provision of education services at the local level. The basis of the fund however may raise other issues. Since the SEF is largely based on the RPT, smaller LGUs in terms of land area are expected to have lower SEF collections. While they may also have smaller student population, it is not enough a justification for them to settle with their low collections.
Likewise, the idea that the province as equaliser may work in better situated provinces. Elsewhere, the challenges are still present. A poor municipality in a poor province may have problems in providing education services. There is already instance where a first income class municipality in a first income class province is having its share of difficulties. Worse could be expected for lesser-situated LGUs.
In the short-term, LGUs can start solving their SEF problem by regularly updating their SMVs. For politicians, this could be a hard task. Increasing taxes is like killing the dreams of reelection. However, if the citizens can see that proper services are provided, there should be no reason not to update the SMVs.
In the long-term, a review of the SEF system can be made by looking at other possible sources of SEF aside from RPT, or improve/modify the computation scheme. There are many pending proposed legislations in both chambers of Congress about the SEF, its collection and utilisation. After more than 20 years, it is about time to update it as well.
 Data from DOF-BLGF covered 2010 to 2012.
 Data for the Province of Tawi-Tawi is not available.
About the author
Jan Robert R. Go is Assistant Professor at the Department of Political Science, University of the Philippines Diliman. His research interests include decentralisation and devolution studies, local government and politics, politics of educational reform and governance, and new institutionalism in political science.