Declaration of purpose and policy
- The Act establishes rules for classifying municipalities by income.
- The Act fixes maximum limits of annual salaries of municipal officers.
- The Act sets budgetary constraints through special municipal funds and general salary-and-wages expenditure limits.
Municipal classification by income
- Municipalities are divided into seven classes based on average total revenue for the last four fiscal years.
- A municipality’s class determines the number of councilors:
- First class municipalities have eight councilors.
- Second class municipalities have eight councilors.
- Third class municipalities have eight councilors.
- Fourth class municipalities have eight councilors.
- Fifth class municipalities have eight councilors.
- Sixth class municipalities have six councilors.
- Seventh class municipalities have six councilors.
- The classification income brackets are:
- First class: PHP 300,000 or more per annum.
- Second class: PHP 200,000 or more but less than PHP 300,000 per annum.
- Third class: PHP 100,000 or more but less than PHP 200,000 per annum.
- Fourth class: PHP 50,000 or more but less than PHP 100,000 per annum.
- Fifth class: PHP 30,000 or more but less than PHP 50,000 per annum.
- Sixth class: PHP 15,000 or more but less than PHP 30,000 per annum.
- Seventh class: less than PHP 15,000 per annum.
- Municipalities with an average total revenue of less than PHP 5,000 per annum have only four councilors.
- The councilor continuity and timing rule provides that:
- Councilors elected at the last general election continue to hold office through their elected term.
- Any reduction or increase in councilors due to classification takes effect beginning with the general election of 1959.
Classification by the Secretary of Finance
- Starting July 1, 1958, and for each period of four consecutive fiscal years after that date, the Secretary of Finance classifies all municipalities.
- Classification is based on average annual income during the four consecutive fiscal years immediately preceding the classification.
- The Secretary of Finance classifies municipalities in accordance with the income-and-councilor framework provided for municipality classes.
- The classification is based on certification by the Auditor General.
Maximum municipal officers’ salaries
- The annual salaries of municipal officers may not exceed the maximum amounts fixed by the Act, except as otherwise specially provided.
- Salary ceilings are fixed by municipality class and, for first class municipalities, by additional income tiers using the next preceding two fiscal years average total annual revenue:
- First class (First-1): average total annual revenue of PHP 1,400,000 or more
- Mayor: PHP 7,800
- Municipal Treasurer: PHP 6,480
- Municipal Secretary: PHP 4,200
- Chief of Police: PHP 3,720
- Chief of Municipal Fire Department: PHP 3,120
- First class (First-2): average total annual revenue of PHP 1,000,000 or more but less than PHP 1,400,000
- Mayor: PHP 7,500
- Municipal Treasurer: PHP 6,120
- Municipal Secretary: PHP 3,960
- Chief of Police: PHP 3,600
- Chief of Municipal Fire Department: PHP 3,000
- First class (First-3): average total annual revenue of PHP 700,000 or more but less than PHP 1,000,000
- Mayor: PHP 7,200
- Municipal Treasurer: PHP 5,760
- Municipal Secretary: PHP 3,780
- Chief of Police: PHP 3,480
- Chief of Municipal Fire Department: PHP 2,880
- First class (First-4): average total annual revenue of PHP 500,000 or more but less than PHP 700,000
- Mayor: PHP 6,600
- Municipal Treasurer: PHP 5,400
- Municipal Secretary: PHP 3,600
- Chief of Police: PHP 3,300
- Chief of Municipal Fire Department: PHP 2,760
- First class (First-5): average total annual revenue of PHP 300,000 or more but less than PHP 500,000
- Mayor: PHP 6,000
- Municipal Treasurer: PHP 5,040
- Municipal Secretary: PHP 3,300
- Chief of Police: PHP 3,000
- Chief of Municipal Fire Department: PHP 2,580
- First class (First-1): average total annual revenue of PHP 1,400,000 or more
- Salary ceilings for other classes (by class) are:
- Second class: Mayor PHP 5,400; Municipal Treasurer PHP 4,680; Municipal Secretary PHP 3,000; Chief of Police PHP 2,700; Chief of Municipal Fire Department PHP 2,400.
- Third class: Mayor PHP 4,800; Municipal Treasurer PHP 4,320; Municipal Secretary PHP 2,700; Chief of Police PHP 2,400; Chief of Municipal Fire Department PHP 2,160.
- Fourth class: Mayor PHP 4,200; Municipal Treasurer PHP 3,780; Municipal Secretary PHP 2,400; Chief of Police PHP 2,280; Chief of Municipal Fire Department PHP 2,040.
- Fifth class: Mayor PHP 3,600; Municipal Treasurer PHP 3,240; Municipal Secretary PHP 2,160; Chief of Police PHP 2,040; Chief of Municipal Fire Department PHP 1,800.
- Sixth class: Mayor PHP 2,760; Municipal Treasurer PHP 2,400; Municipal Secretary PHP 1,560; Chief of Police PHP 1,680.
- Seventh class: Mayor PHP 2,160; Municipal Treasurer PHP 1,920; Municipal Secretary PHP 1,440; Chief of Police PHP 1,440.
- The Act provides a funding split for the municipal treasurer’s salary:
- Two-thirds of the municipal treasurer’s salary is paid out of municipal funds in the treasurer’s capacity as treasurer.
- One-third is paid out of provincial funds in the treasurer’s capacity as deputy provincial treasurer.
- The provincial board may authorize a higher provincial-funds portion for the treasurer:
- The provincial board concerned may, in its discretion, authorize as salary of the municipal treasurer an amount more than the maximum rate payable from provincial funds.
- This authorization is allowed provided the corresponding maximum salary rate authorized for the treasurer is not exceeded.
- Capital-city adjustment rule:
- With the approval of the Secretary of Finance, annual salaries of municipal officers of a municipality that is the capital of a province or a subprovince may be fixed at rates higher than those authorized for the class the municipality belongs to.
- Adjusted salaries must not exceed the maximum rates authorized for the corresponding officers in the next higher scale.
- If no higher scale is provided, officers of provincial and subprovincial capitals may, with the approval of the Secretary of Finance, be increased by not more than PHP 360 per annum.
Compensation of vice-mayor and councilors
- The municipal council may grant per diem to the vice-mayor and each councilor for each day of regular or special sessions actually attended.
- Per diem ceilings depend on municipality class:
- First class: PHP 20 per day.
- Second class: PHP 18 per day.
- Third class: PHP 15 per day.
- Fourth class: PHP 12 per day.
- Fifth class: PHP 10 per day.
- Sixth class: PHP 8 per day.
- Seventh class: PHP 6 per day.
- No per diem may be granted for more than four special sessions a month.
- If the mayor ceases to discharge the duties of office due to absence, suspension, or other disability, the vice-mayor or councilor acting as mayor must receive compensation equivalent to the salary of the mayor during the period of service.
Municipal fire department salaries
- The salaries of the chief and other members of the municipal fire department are fixed by the municipal council.
Municipal funds and salary-and-wage limits
- Each municipality must maintain a special fund in its treasury called the permanent public improvement fund.
- Appropriations to the fund include:
- Appropriations made by the municipal council from time to time; and
- A statutory share of the municipal general fund:
- 12% in first, second, and third class municipalities
- 10% in fourth and fifth class municipalities
- 8% in sixth and seventh class municipalities
- The permanent public improvement fund is available exclusively for the construction and maintenance of all public improvements.
- If the municipal council requires the fund for other peremptory needs, it may use it for those needs subject to approval of the provincial board.
- General limitation on salaries and wages:
- Except as provided, no fiscal-year expenditures for salaries and wages of municipal officials and employees of every description (excluding those employed on public works) may exceed a percentage of the municipal general fund revenues for the fiscal year.
- The percentage caps by municipality class are:
- First class: more than 55%
- Second class: more than 60%
- Third class: more than 65%
- Fourth class: more than 70%
- Fifth class: more than 75%
- Sixth class: more than 80%
- The cap is computed using annual revenues accruing to the municipal general funds during the fiscal year, exclusive of balances carried forward from preceding years and exclusive of appropriations, loans, or gifts made from national, provincial, or private funds.
- Exceeding the cap:
- With the approval of the Secretary of Finance, a municipality may exceed the foregoing percentages for justifiable cause, under limitations prescribed by the Secretary of Finance.
Transitory coverage and budget payment rules
- Upon the first classification of municipalities under the Act, existing laws, orders, rules, and regulations referring to first-class groupings map to the new classes as follows:
- References to first class-A municipalities apply to first class or second class municipalities, as the case may be.
- References to first class-B, first class, second class, third class, and the fourth and fifth class municipalities apply to third class, fourth class, fifth class, sixth class, and seventh class municipalities, respectively, as defined in the Act.
- When existing provisions use terms like “first class municipalities,” “municipalities of the first class,” “municipalities belonging to the first class group,” or similar terms not expressly amended or modified, the Act directs that these terms apply (upon initial classification) to fourth, third, second, and first class municipalities as defined in the Act.
- Municipalities with an average total annual revenue of less than PHP 5,000 are not subject to the financial contribution in Section 2 of Republic Act Numbered Nineteen hundred and thirty-nine.
- Municipal officers’ entitlement to salary appropriations:
- The municipal officers mentioned in the Act are entitled to