Chapter I

A. Background of the Study

In the Philippines, the Government puts priority in promoting the basic education to all

school-aged children. As stated in Section 5, Paragraph 5, Article XIV of the 1987

Constitution, the state shall assign the highest budgetary priority to education and

ensure that the teaching will attract and retain its rightful share of the best available

talents through adequate remmuneration and other means of job satisfaction and

fullfillment.

This is true taking into consideration the annual national budget allocated to the

Department of Education (DepEd). Actually, the 2017 budget of Php 543.2 billion of the

DepEd is 32% higher than that of 2016, which amounted to Php 410.4 billion. This trend

is constant for the last two decades. However, the substantial share of the DepEd from

the National Budget, as provided by the General Appropriations Act, is not sufficient to

support the wide-ranging needs of the basic education sector. Therefore, the Local

Government Units (LGUs) have to assist the national government in funding public

basic education.

The enactment of Republic Act No 5447, which created the Special Education Fund and

the Local School Boards, constituted all minicipalities, cities and provinces to have a

share from the collections taken from the additional 1% real property tax. Also, the LSB

are mandated to determine the allocation of the SEF for the maintenance and

operations of publc schools in the cities, municipalities or provinces, taking into

consideration the criteria set by the Secretary of Education. A city, municipality, or

province may impose and collect a 1% tax on the assessed value of the real property.

This 1% tax will be collected in addition to the basic real property tax on an annual

basis. The proceeds of ehich shall be accumulated to the SEF, and shall be released to

the LSB to finance the expenditures of the schools. However, in the case of provinces

and municipalities, the proceeds are divided equally between the municipal and

provincial boards. The LSB shall determine the allocation of such budget giving priority

to construction of school facilities and school buildings, then repairs and maintenance of

those facilities, then establishment and maintenance of extension classes and other

DepEd activities.

The standing of the SEF collection may vary from one LGU to another, taking into

consideration the availability of the real properties on those areas, the accountability of

the owners of those properties, and the responsibility of the tax collectors. The

effectivity and efficiency of the SEF may also be evaluated using the actual

expenditures relating to such fund. The manner of utilizing such fund will have a

considerable influence on the school performance in the locality. Thus, this study

assessed the actual expenditures of the cities, municipalities and provinces under the

Regionial Division of the Department of Education in Region III, and their compliance

with the existing laws, statutes and policies relating to the utilization of the SEF.

B. Statement of the Problem

This study is conceptualized in order to establish concrete basis for a proposition,

regarding the amendment of Section 7 of RA 5447, relating to the Expenditures of the

SEF.
Specifically, this study sought to answer the following questions.

1. To what extent are the actual expenditures of Special Education Fund (SEF) with

respect to these priorities: (1) construction and repairs of school building and facilities

(2) purchase of teaching materials and school equipments; (3) establishment and

maintenance of extension classes, and (4) Other DepEd Activities?

2. What are the issues and problems regarding utilization of SEF?

3. What are the suggested propositions to be adopted in relation to the setting up

collection appropriation thresholds with regard to the expenditures charged against the

SEF?

4. What are the implications of those propositions in the existing laws and policies of the

government concerning the management of the SEF?

C. Objective of the Study

This study aims to examine the management of Special Education Fund (SEF) in terms

of collection, allocation and utilization in order to maximize LGUs support in providing

free quality basic education, and promote a more equitable allocation of resources for

basic education. In more specific terms, the objectives of the present study are as

follows:

a. to analyze the development in SEF collection, utilization and balances;

 b. to assess the criteria used by different LSBs in allocation and utilization of their

SEF and to verify their compliance with legal and regulatory requirements;

c. to assess the budget processes and correlate them with the actual

expenditures relaing to SEF

d. to provide inputs and evaluate implications towards the development of a

proposal for the amendment of existing laws, particularly RA 5447, with regard to

the imposition of collection appropriation thresholds taking into consideration the

listing of expenditures of SEF, to ensure effective and efficient use of the fund

D. Significance of the Study

The results of this study are beneficial to the following:

Legislators. This will help our legislators in enacting effective statutes and laws, which

will promote paramount consideration to the benefit and welfare of the general public.

The results of this study will help the legislators in proposing amendments in the

enacted and prevailing laws and statutes concerning education-related issues.

Local Government. This study will be beneficial to the local government for it will help

them assess what particular educational-related activities needs preferential attention,

as to budget allocation. This will help them provide quality basic educational services to

the students, and uplift the standandard of education.

Law Students. This study will enable the student better understand the existaing laws

and statutes relating to the Special Education Fund (SEF), how these laws massively

affect the development of the nation and how these laws provide benefits to persons

concerned and promotes welafre of the general public.

Future researchers. This study would benefit the future researchers by giving them

ideas on how they can conduct similar studies.

E. Scope and Delimitations of the Study

This study was conducted to establish concrete basis for a proposition, regarding the

amendment of Section 7 of RA 5447, relating to the Expenditures of the SEF. This study

limits its coverage on the LGUs under the jurisdiction of Regionial Division of the

Department of Education in Region III. This study focused on the review and analysis of

the data provided by the regional office of DepEd with regard to the collection and

utilization of the SEF of the respective cities, municipalities and provinces under its

jurisdiction. The gathed information will be used in deriving propositions on Section 7 of

RA 5447.

F. Definition of Terms

For the purposes of this study, the following terms are defines ad follows:
Special Education Fund (SEF). The fund to be derived from the additional 1% tax on

real property and from a certain portion of the taxes on Virginia-type cigarettes and

duties on imported leaf tobacco, which shall be expended exclusively for the activities of

the Department of Education as mentioned in the Section 1 of RA 5447.

Basic Education. Basic education comprises primary basic education and secondary

basic education. It covers a wide variety of non-formal and informal public and private

activities intended to meet the basic learning needs of people of all ages.

Local Government Units (LGUs). As defined in Section 15 of RA 7160 otherwsie

known as the Local Government Code of the Philippines, LGU is a body politic and

corporate endowed with powers to be exercised by it in conformity with law.

General Appropriations Act. Republic Act 8174 or the General Appropriations Act of

1996 is an act which appropriates funds for the operation of the government of the

Republic of thePhilippines.

Government Budget. A government budget is an annual financial statement presenting

the government's proposed revenues and spending for a financial year that is often

passed by the legislature, approved by the chief executive or president and presented

by the finance minister to the nation.

Government Expenditure. Government expenditure includes overall public spending

carried out by the national government, in relation to acquisition of goods and services

intended to create benefits for the welfare of the general public.

Real Property Tax. A real propert tax is a local tax on the value of real property. The

RPT rate for the cities and municipalities in Metro Manila is two percent (2%) while for

provinces it is one percent (1%). To compute for RPT, the RPT rate is multiplied by the

assessed value of the property. Assessed value is the fair market value of the real

property multiplied by the assessment level.

Appropriation. Appropriation is the act of setting aside money for a specific purpose.

A company or a government appropriates funds in order to delegate cash for the

necessities of its operations.

Threshold. Threshold is used to define the limit of an acceptable cost or expenditure of

the government in carrying out its function.

Chapter II

The 1987 Constitution of the Repbulic of the Philippines provides that priority shall be

given to education, along with science and technology, arts, culture, and sports. The
Constitution further provides that all Filipinos are entitled to receive free quality basic

education. As such, the immensity of the budget allocation is provided by the

government through the Department of Education (DepEd). In view of the fact that the

national government has many other concerns and deals with a lot of national issues,

the Local Government Units (LGUs) are expected to lend a hand by providing funding

support programs on basic education services. Thus, the LGUs play a vital role in c

arrying out all efforts to develop the basic education segment.

To ensure this support, Republic Act (RA) 5447 was passed and took effect in 1969.

The Special Education Fund was originally created under RA No. 5447, entitled An Act

Creating a Special Education Fund to be Constituted from the Proceeds of an Additional

Real Property Tax and a Certain Portion of the Taxes on Virginia-Type Cigarettes and

Duties on Imported Leaf Tobacco Defining the Activities to be Financed, Creating

School Boards for the Purpose, and Appropriating Funds Therefrom,.

Under RA 5447, the allocation and utilization of the SEF was largely under the

management of the DepEd. Section 4 of RA 5447 provides for the guidelines regarding

the impostion of the additonal 1% on the real property taxes, and the procedures on the

proper disposition of those proceeds. Section 1, on the other hand, provides for the list

of activities which the SEF was meant to be expended exclusively.

However, Republic Act (RA) No. 7160, otherwise known as The Local Government

Code (LGC) of 1991, was enacted to make amendments on certain provisions of RA

5447. Section 235 of the LGC provides that a province or city, or a municipality within

the Metropolitan Manila Area, may impose and collect an annual tax of one percent

(1%) on the assessed value of real property which shall be in addition to the basic real

property tax.The proceeds of such additional 1% shall be accrued soley to the Special

Education Fund. In addition to that, Section 272 of the LGC provides that the proceeds

from the additional one percent (1%) tax on real property shall be automatically

released to the Local School Boards (LSB), which shall have the responsibility in

discharging the SEF, in accordance with the criteria set by the Bureau of Public Schools

or Bureau of Vicational Education, as the case may be, and approved by the Secretary

of Education.

The Local Government Code contains two provisions that pertain to how the SEF is to

be allocated. First, Section 100 provides that the annual school board budget shall give

priority to the construction, repair, and maintenance of school buildings and other

facilities of public elementary and secondary schools; establishment and maintenance

of extension classes where necessary; and sports activities at the division, district,

municipal, and barangay levels. Second, Section 272 provides that the proceeds of the

SEF shall be allocated for the 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 as determined

and approved by the Local School Board.

Joint Circulars and memorandums issued by the DepEd, the Department of Budget and

Management (DBM) and Department of Interior and Local Government (DILG) provided

the implementing guidelines on the utilization of the fund. Regioanl Memorandum No.

0179 series of 2017 provides for the revised guidelines on the use of SEF.

In a study funded by the Asian Development Bank (ADB), it disclosed that most LGUs

are not able to contribute considerably in financing basic education. The efficiency of

LGUs in collecting the real property tax and the income class of LGUs has a great

impact in the size of SEF. In particular, fifth and sixth income class municipalities, most

of them are mainly rural, are at a major disadvantage because values of the real

property tax values in these areas are relatively small, which implies that SEF is

likewise small, and thus hardly able to boost the operations and maintenance needs of

schools in their jurisdiction. In turn, the discrepancies in the ability to raise funds for the

SEF result in disproportion in overall funding among schools in LGUs that belong to

different income classes. (Study on the Decentralization of Basic Education

Management, 2001)

Research Methodology

To accomplish the abovementioned objectives, this study undertook the following

activities:
 Desk review and analysis of secondary data on SEF income, expenditures and

balances from the financial reports submitted by LGUs to the Commission on

Audit (COA) and Bureau of Local Government Finance (BLGF);

Field visits to selected Provincial/City Divisions and School Districts and their

corresponding LGUs for interviews and discussions; and

Analysis of recently enacted laws, recently issued memorandum circulars and

memorandum orders, and LSB budget resolutions regarding the policies in the

utilization of the SEF.

- Meaning of Basic Education - http://uis.unesco.org/en/glossary-term/basic-

education
- Local Government Code -
http://www.lawphil.net/statutes/repacts/ra1991/ra_7160_1991.html
- Republic Act 5447 -
http://www.lawphil.net/statutes/repacts/ra1968/ra_5447_1968.html
- GAA 2017 DepED http://www.dbm.gov.ph/wp-
content/uploads/GAA/GAA2017/VolumeI/DEPED/DEPED.pdf
- GAA 2016 DepEd http://www.dbm.gov.ph/wp-
content/uploads/GAA/GAA2016/VOLUME%20II-A/DEPED/DEPED.pdf
-