Having exceeded its Personal Service (PS) limitation for Fiscal Year 2023, the City Government of Baguio is “constrained” to implement the 4th tranche of the salary standardization for its employees. This was the response of Atty. Naoime Humilde of the Department of Budget and Management- Cordillera Administrative Region (DBMCAR) to the members of the Baguio City Council during a forum last December 5 to their question about the possibility of granting the 4th tranche salary increase of the employees.

Pursuant to Section 325(a) of the Local Government Code of 1991 (RA No. 7160), first to third class local government units such as Baguio City shall not allocate an amount exceeding 45% of its total annual income from regular sources of the previous year for personal services (PS) in the next preceding year.
In the foregoing case of the City Government of Baguio, the basis for computing its 45% PS limitation to be applied next year is Fiscal Year 2021.

Personal services (PS) refers to all budgetary items intended for the payment of salaries, wages, step
increments, and other compensation of permanent, temporary, contractual, and casual employees of an LGU. (LBC No. 98) The Salary Standardization Law of 2019 (RA 11466) also provides that the
implementation of the salary adjustment is subject to the said PS limitation. Humilde, however, said there are possible options the city government can explore to be able to provide the fourth tranche salary increase despite the PS excess.

Local Budget Circular 145 issued in March, 2022 states that, in case the PS cap has exceeded, the local government may be granted additional PS expenditures if it collapses vacant plantilla positions. “Pwede po nating ibalik itong collapsed positions once kailangan na at kung wala nang PS excess,” Humilde explained. Another option based on LBC 145 is to reduce PS items of lesser priority. The current salary scheme is excluded from the option of items that may be reduced as any reduction in the current salary scheme is against the general policy on nondomination of salary.

According to City Budget Officer Leticia Clemente, the PS excess is P21,258,528.67 and the amount needed for the fourth tranche of the salary standardization is P28 million. Clemente said the city government had not exceeded its PS limitation for years until recently. Humilde explained that any excess in the PS allocation should be disapproved, but she assured that DBM would look into the factors that had led to the excess in the PS allocation. “As a rule, kahit nagexceed tayo sa PS cap, we cannot reduce the salary rates that [the employees] are receiving now,” Humilde stressed.

She added that, as an effect of the PS excess, there should be no more additional PS cost to be incurred.
Leaning towards the first option presented by Humilde, the city council tasked the Local Finance Committee to study which vacant positions to be collapsed to and come up with the corresponding
computation to be able to determine whether city government could satisfy the funding requirement of the
fourth tranche salary increase through this option. All documents related to this would be submitted to the city council.

Clemente said this would have to be discussed with Mayor Benjamin Magalong and the department heads.
Meanwhile, Councilor Bomogao said a possible longterm solution to avoid any PS excess in the future is to
“increase more economic activities” in the city.

SP/Jordan G. Habbiling

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