Coverage and classification of provinces/cities
- Section 1 classifies provinces and cities (except Manila, Quezon City, and the City of Trece Martires) into seven classes based on average total revenue during the last four fiscal years.
- First Class applies to provinces and cities with average total revenue of PHP 1,500,000 or more per annum (Section 1).
- Second Class applies to provinces and cities with average total revenue of PHP 1,000,000 or more but less than PHP 1,500,000 per annum (Section 1).
- Third Class applies to provinces and cities with average total revenue of PHP 700,000 or more but less than PHP 1,000,000 per annum (Section 1).
- Fourth Class applies to provinces and cities with average total revenue of PHP 500,000 or more but less than PHP 700,000 per annum (Section 1).
- Fifth Class applies to provinces and cities with average total revenue of PHP 300,000 or more but less than PHP 500,000 per annum (Section 1).
- Sixth Class applies to provinces and cities with average total revenue of PHP 150,000 or more but less than PHP 300,000 per annum (Section 1).
- Seventh Class applies to provinces and cities with average total revenue of less than PHP 150,000 per annum (Section 1).
How “revenue” is computed
- Section 1 defines “revenue” for classification purposes as all revenues and receipts accruing to the province or city.
- Section 1 excludes from “revenue” the following receipts: (1) proceeds from bond issues; (2) proceeds from or repayment of loans; (3) aids from the National Government; (4) private contributions or donations; (5) return of advances to economic enterprises; (6) sales of fixed assets; (7) income from sale of real property; (8) prior year’s adjustment; (9) inventory adjustment; and (10) other receipts not regularly recurring each fiscal year.
Secretary of Finance classifications and timing
- Section 2 requires the Secretary of Finance to classify all provinces and cities (except Manila, Quezon City, and the City of Trece Martires) based on the average total revenue of each province or city during the last four consecutive fiscal years immediately preceding the classification.
- Section 2 requires the classification to be made as certified by the Auditor General.
- Section 2 directs classifications to occur upon approval of the Act and for each period of four consecutive fiscal years thereafter.
- Section 2 provides that the first classification takes effect on July 1, 1965.
- Section 2 provides that a province or city existing for less than four full fiscal years before the initial classification shall be classified using its average income during the lesser number of full fiscal years or during the year immediately following its organization as such province or city.
- Section 2 provides that no readjustment of classification may be made oftener than once in four consecutive fiscal years after the first classification.
- Section 2 authorizes readjustment at any time when there are diminishing revenues, allowing the Secretary of Finance, in his discretion, to order readjustment in accordance with the same schedule.
Salary schedule for provincial officials
- Section 3 amends Section 2067-B of the Administrative Code (as amended by Republic Act No. 3719) to establish provincial salary rates by class.
- Section 3 fixes annual salaries for provincial officials and their assistants for each class, including salaries for provincial governors, vice-governors, members of the provincial board, provincial treasurers, district engineers, provincial auditors, provincial health officers, chiefs of hospitals, superintendents of schools, provincial assessors, and specified assistants and school principals (with amounts varying by class).
- Section 3 requires a financial capacity adjustment when salary increases cause an overdraft in the general fund or when operating expenses exceed revenue collections.
- If reduction becomes necessary, Section 3 provides that the provincial board shall make a corresponding proportional reduction, or the President of the Philippines—upon recommendation of the Secretary of Finance—shall reduce salaries to the maximum rates fixed for the next lower class (or further lower rates within the province’s capacity to pay).
- Section 3 provides that if salaries are reduced due to one or both stated causes, a uniform percentage of reduction shall apply to all salaries affected.
- Section 3 directs that lieutenant governors, subprovincial district engineers, subprovincial assessors, and other officials in the subprovince with counterparts in provincial government receive salaries corresponding to the classification that the province would belong to if its subprovinces were classified as independent and separate.
- Section 3 sets national vs. local funding rules: the salary of the district engineer and the superintendent of schools is paid out of national funds, while the salary of the chief of hospitals is paid out of funds created under Republic Act No. 1939; it also requires that one-half of the salary of the provincial auditor and provincial health officer (and similarly for their assistants) is paid from national funds and one-half from the province’s funds, with a proviso that the increase is borne by the province until the National Government share is provided in the General Appropriations Act.
- Section 3 establishes tiered chief-of-hospitals salary mapping based on bed capacity and provides special treatment for a training and teaching hospital with a school of nursing.
Salary schedule for city officials
- Section 4 amends Section 2 of Republic Act No. 840 (as amended by Republic Act No. 3719) to set annual city salary rates by city class.
- Section 4 provides that city officials’ annual salaries apply unless the corresponding charter or special law provides for higher salaries.
- Section 4 provides a distinct rule for First Class-A cities: for first-class cities with total annual revenue of PHP 3,000,000 or more during the next preceding fiscal year, it applies the specified salary rates for city positions (such as city mayor, city vice-mayors, members of the municipal board, city treasurers, city auditors, city judges, city health officers, chiefs of hospitals, city superintendents of schools, city engineers, city assessors, chiefs of police, chiefs of fire departments, and listed secretaries/assistants and secondary school principals).
- Section 4 sets specific salary rates for first-class cities (other than First Class-A), second-class, third-class, fourth-class, fifth-class, sixth-class, and seventh-class cities.
- Section 4 provides an overdraft/excess-operating-expenses mechanism similar to provinces: if salary increases cause an overdraft or operating expenses exceed revenue collections, the municipal board or city board shall make a proportional reduction, or the President of the Philippines—upon recommendation of the Secretary of Finance—shall reduce salaries to the maximum rates fixed for the next lower class (or further lower rates within the city’s capacity to pay).
- Section 4 requires that any reduction applies using a uniform percentage of reduction to all affected salaries.
- Section 4 prescribes funding rules: the chief of city hospitals salary is paid out of funds created under Republic Act No. 1939; the difference between the salary authorized under Republic Act No. 3345 for the city judge and the salary fixed here is paid out of the National Treasury; and one-half of the city auditor’s salary is paid from national funds and one-half from the city, with a proviso that the increase in the city auditor’s salary is borne by the city until the National Government share is provided in the General Appropriations Act.
- Section 6 makes city salary rates for First Class-A applicable to Quezon City when those rates are higher than existing legal rates for Quezon City officials.
- Section 6 excludes the application of the Act to Manila and Trece Martires.
Salary/wage expenditure limits
- Section 5 sets a general cap on the amount expendable for salaries and wages of provincial and city officials and employees.
- Section 5 limits expendable salaries and wages to a percentage of the ordinary and regular income that accrued to the general fund during the preceding fiscal year.
- Section 5 specifies that the base excludes: all balances carried forward from preceding fiscal years, transfers from other funds, and all receipts from loans, aids or gifts from government or private funds.
- Section 5 caps salaries and wages as follows (ordinary income percentages of the general fund): Provinces/ Cities
- First Class: 50% / 55%
- Second Class: 55% / 60%
- Third and Fourth: 60% / 65%
- Fifth: 65% / 70%
- Sixth: 70% / 75%
- Seventh: 80% / 85%
- Section 5 requires that if current income of the general fund is less than the preceding fiscal year’s income, the percentages shall be based on the reduced income for the current fiscal year.
- Section 5 authorizes the Secretary of Finance to allow a province or city to exceed the percentages under conditions imposed by the Secretary of Finance.
Incumbent entitlements and transitional rules
- Section 7 grants automatic entitlement to the benefits of the Act to incumbent provincial and city officials mentioned in the Act whose appointments were already confirmed by the Commission on Appointments prior to approval of the Act.
- Section 7 extends automatic entitlement to incumbent provincial and city officials temporarily designated by the President under Commonwealth Act No. 588, unless their subsisting appointments or designations state otherwise.
Amendments, repeals, and savings effect
- Section 3 further amends Section 2067-B of the Administrative Code (as amended by Republic Act No. 3719) by replacing its salary provisions for provincial officials.
- Section 4 further amends Section 2 of Republic Act No. 840 (as amended by Republic Act No. 3719) by replacing its city salary provisions.
- Section 8 repeals or modifies acts, executive orders, administrative orders, rules and regulations, or parts thereof inconsistent with Republic Act No. 4477.
- Section 9 sets the effectivity date on July 1, 1965.