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Republic of the Philippines

EN BANC

G.R. No. 158791 July 22, 2005

CIVIL SERVICE COMMISSION, Petitioner,

DECISION

CARPIO MORALES, J.:

The Civil Service Commission (petitioner) via the present petition for mandamus seeks to compel the Department of
Budget and Management (respondent) to release the balance of its budget for fiscal year 2002. At the same time, it
seeks a determination by this Court of the extent of the constitutional concept of fiscal autonomy.

By petitioner’s claim, the amount of ₱215,270,000.00 was appropriated for its Central Office by the General
Appropriations Act (GAA) of 2002, while the total allocations for the same Office, if all sources of funds are
considered, amount to ₱285,660,790.44.1 It complains, however, that the total fund releases by respondent to its
Central Office during the fiscal year 2002 was only ₱279,853,398.14, thereby leaving an unreleased balance of
₱5,807,392.30.

To petitioner, this balance was intentionally withheld by respondent on the basis of its "no report, no release" policy
whereby allocations for agencies are withheld pending their submission of the documents mentioned in Sections 3.8
to 3.10 and Section 7.0 of National Budget Circular No. 478 on Guidelines on the Release of the FY 2002 Funds,2
which documents are:

1. Annual Cash Program (ACP)

2. Requests for the Release of Special Allotment Release Order (SARO) and Notice of Cash Allocation (NCA)

3. Summary List of Checks Issued and Cancelled

4. Statement of Allotment, Obligations and Balances

5. Monthly Statement of Charges to Accounts Payable

6. Quarterly Report of Actual Income

7. Quarterly Financial Report of Operations

8. Quarterly Physical Report of Operations

9. FY 2001 Preliminary and Final Trial Balance

10. Statement of Accounts Payable

Petitioner contends that the application of the "no report, no release" policy upon independent constitutional bodies
of which it is one is a violation of the principle of fiscal autonomy and, therefore, unconstitutional.

Respondent, at the outset, opposes the petition on procedural grounds. It contends that first, petitioner did not
exhaust administrative remedies as it could have sought clarification from respondent’s Secretary regarding the
extent of fiscal autonomy before resorting to this Court. Second, even assuming that administrative remedies were
exhausted, there are no exceptional and compelling reasons to justify the direct filing of the petition with this Court
instead of the trial court, thus violating the hierarchy of courts.

On the merits, respondent, glossing over the issue raised by petitioner on the constitutionality of enforcing the "no
report, no release" policy, denies having strictly enforced the policy upon offices vested with fiscal autonomy, it
claiming that it has applied by extension to these offices the Resolution of this Court in A.M. No. 92-9-029-SC
(Constitutional Mandate on the Judiciary’s Fiscal Autonomy) issued on June 3, 1993, 3 particularly one of the
guiding principles established therein governing the budget of the Judiciary, to wit:

5. The Supreme Court may submit to the Department of Budget and Management reports of operation and income,
current plantilla of personnel, work and financial plans and similar reports only for recording purposes. The
submission thereof concerning funds previously released shall not be a condition precedent for subsequent
fund releases. (Emphasis and underscoring supplied)

Respondent proffers at any rate that the delay in releasing the balance of petitioner’s budget was not on account of
any failure on petitioner’s part to submit the required reports; rather, it was due to a shortfall in revenues.4

The rule on exhaustion of administrative remedies invoked by respondent applies only where there is an express
legal provision requiring such administrative step as a condition precedent to taking action in court.5 As petitioner is
not mandated by any law to seek clarification from the Secretary of Budget and Management prior to filing the
present action, its failure to do so does not call for the application of the rule.

As for the rule on hierarchy of courts, it is not absolute. A direct invocation of this Court's original jurisdiction may be
allowed where there are special and important reasons therefor, clearly and specifically set out in the petition.6
Petitioner justifies its direct filing of the petition with this Court "as the matter involves the concept of fiscal autonomy
granted to [it] as well as other constitutional bodies, a legal question not heretofore determined and which only the
Honorable Supreme Court can decide with authority and finality".7 To this Court, such justification suffices for
allowing the petition.

Now on the substantive issues.

That the "no report, no release" policy may not be validly enforced against offices vested with fiscal autonomy is not
disputed. Indeed, such policy cannot be enforced against offices possessing fiscal autonomy without violating Article
IX (A), Section 5 of the Constitution which provides:

Sec. 5. The Commission shall enjoy fiscal autonomy. Their approved appropriations shall be automatically and
regularly released.

In Province of Batangas v. Romulo,8 this Court, in construing the phrase "automatic release" in Section 6, Article X
of the Constitution reading:

Section 6. Local government units shall have a just share, as determined by law, in the national taxes which shall be
automatically released to them,

held:

Webster’s Third New International Dictionary defines "automatic" as "involuntary either wholly or to a major extent
so that any activity of the will is largely negligible; of a reflex nature; without volition; mechanical; like or suggestive
of an automaton." Further, the word "automatically" is defined as "in an automatic manner: without thought or
conscious intention." Being "automatic," thus, connotes something mechanical, spontaneous and perfunctory. As
such the LGUs are not required to perform any act to receive the "just share" accruing to them from the national
coffers. x x x" (Emphasis and underscoring supplied)9

By parity of construction, "automatic release" of approved annual appropriations to petitioner, a constitutional

Respecting respondent’s justification for the withholding of funds from petitioner as due to a shortfall in revenues,
the same does not lie. In the first place, the alleged shortfall is totally unsubstantiated. In the second place, even
assuming that there was indeed such a shortfall, that does not justify non-compliance with the mandate of above-
quoted Article IX (A), Section 5 of the Constitution.

Asturias Sugar Central, Inc. v. Commissioner of Customs teaches that "[a]n interpretation should, if possible, be
avoided under which a statute or provision being construed is defeated, or as otherwise expressed, nullified,
destroyed, emasculated, repealed, explained away, or rendered insignificant, meaningless, inoperative, or
nugatory."11

If respondent’s theory were adopted, then the constitutional mandate to automatically and regularly release
approved appropriations would be suspended every year, or even every month12 that there is a shortfall in
revenues, thereby emasculating to a significant degree, if not rendering insignificant altogether, such mandate.

Furthermore, the Constitution grants the enjoyment of fiscal autonomy only to the Judiciary, the Constitutional
Commissions of which petitioner is one, and the Ombudsman. To hold that petitioner may be subjected to
withholding or reduction of funds in the event of a revenue shortfall would, to that extent, place petitioner and the
other entities vested with fiscal autonomy on equal footing with all others which are not granted the same autonomy,
thereby reducing to naught the distinction established by the Constitution.

The agencies which the Constitution has vested with fiscal autonomy should thus be given priority in the release of
their approved appropriations over all other agencies not similarly vested when there is a revenue shortfall.

Significantly, the Year 2002 GAA itself distinguished between two types of public institutions in the matter of fund
releases. With respect to government agencies in general, the pertinent General Provisions of the GAA read as
follows:

Sec. 62. Prohibition Against Impoundment of Appropriations. No appropriations authorized in this Act shall be
impounded through deduction or retention, unless in accordance with the guidelines for the imposition and
release of reserves and the rules and regulations for deduction, retention or deferral of releases shall have
been issued by the DBM in coordination with the House Committee on Appropriations and the Senate Committee
on Finance. Accordingly, all the funds appropriated for the purposes, programs, projects and activities authorized in
this Act, except those covered by Special Provision No. 1 of the Unprogrammed Fund shall be regularly and
automatically released in accordance with the established allotment period and system by the DBM without any
deduction, retention or imposition of reserves. (Emphasis and underscoring supplied)

Sec. 63. Unmanageable National Government Budget Deficit. Retention or reduction of appropriations
authorized in this Act shall be effected only in cases where there is unmanageable national government
budget deficit.

Unmanageable national government budget deficit as used in this Section shall be construed to mean that the
actual national government budget deficit has exceeded the quarterly budget deficit targets consistent with the full-
year target deficit of P130.0 billion as indicated in the FY 2002 Budget of Expenditures and Sources of Financing
submitted by the President to Congress pursuant to Section 22, Article VII of the Constitution or there are clear
economic indications of an impending occurrence of such condition, as determined by the Development Budget
Coordinating Committee and approved by the President. (Emphasis and underscoring supplied)

In contrast, the immediately succeeding provision of the Year 2002 GAA, which specifically applied to offices vested
with fiscal autonomy, stated:

Sec. 64. Appropriations of Agencies Vested with Fiscal Autonomy. Any provision of law to the contrary
notwithstanding, the appropriations authorized in this Act for the Judiciary, Congress of the Philippines, the
Commission on Human Rights, the Office of the Ombudsman, the Civil Service Commission, the Commission on
Audit and the Commission on Elections shall be automatically and regularly released. (Emphasis and
underscoring supplied)

Clearly, while the retention or reduction of appropriations for an office is generally allowed when there is an
unmanageable budget deficit, the Year 2002 GAA, in conformity with the Constitution, excepted from such rule the
appropriations for entities vested with fiscal autonomy. Thus, even assuming that there was a revenue shortfall as
respondent claimed, it could not withhold full release of petitioner’s funds without violating not only the Constitution
but also Section 64 of the General Provisions of the Year 2002 GAA.

This Court is not unaware that its above-cited June 3, 1993 Resolution also states as a guiding principle on the
Constitutional Mandate on the Judiciary’s Fiscal Autonomy that:

4. After approval by Congress, the appropriations for the Judiciary shall be automatically and regularly released
subject to availability of funds. (Underscoring supplied)

This phrase "subject to availability of funds" does not, however, contradict the present ruling that the funds of entities
vested with fiscal autonomy should be automatically and regularly released, a shortfall in revenues notwithstanding.
What is contemplated in the said quoted phrase is a situation where total revenue collections are so low that they
are not sufficient to cover the total appropriations for all entities vested with fiscal autonomy. In such event, it
would be practically impossible to fully release the Judiciary’s appropriations or any of the entities also vested with
fiscal autonomy for that matter, without violating the right of such other entities to an automatic release of their own
appropriations. It is under that situation that a relaxation of the constitutional mandate to automatically and regularly
release appropriations is allowed.

Considering that the budget for agencies enjoying fiscal autonomy is only a small portion of the total national
budget, only in the most extreme circumstances will the total revenue collections fall short of the requirements of
such agencies. To illustrate, in the Year 2002 GAA the budget for agencies vested with fiscal autonomy amounted
only to ₱14,548,620,000.00, which is 2.53% of the total appropriations in the amount of ₱575,123,728,000.00.13 In
Year 2003 GAA, which was re-enacted in 2004, the budget for the same agencies was ₱13,807,932,000.00, which
is 2.27% of the total appropriations amounting to ₱609,614,730,000.00.14 And in the Year 2005, the budget for the
same agencies was only ₱13,601,124,000.00, which is 2.28% of the total appropriations amounting to
₱597,663,400,000.00.15

Finally, petitioner’s claim that its budget may not be reduced by Congress lower than that of the previous fiscal year,
as is the case of the Judiciary, must be rejected.

For with respect to the Judiciary, Art. VIII, Section 3 of the Constitution explicitly provides:

Section 3. The Judiciary shall enjoy fiscal autonomy. Appropriations for the Judiciary may not be reduced by the
legislature below the amount appropriated for the previous year and, after approval, shall be automatically and
regularly released.16 (Emphasis and underscoring supplied)

On the other hand, in the parallel provision granting fiscal autonomy to Constitutional Commissions, a similar
proscription against the reduction of appropriations below the amount for the previous year is clearly absent. Article
IX (A), Section 5 merely states:

Section 5. The Commission shall enjoy fiscal autonomy. Their approved annual appropriations shall be automatically
and regularly released.

The plain implication of the omission of the provision proscribing such reduction of appropriations below that for the
previous year is that Congress is not prohibited from reducing the appropriations of Constitutional Commissions
below the amount appropriated for them for the previous year.

WHEREFORE, the petition is, in light of all the foregoing discussions, GRANTED. Respondent’s act of withholding
the subject funds from petitioner due to revenue shortfall is hereby declared UNCONSTITUTIONAL.

Accordingly, respondent is directed to release to petitioner the amount of Five Million Eight Hundred Seven
Thousand, Three hundred Ninety Two Pesos and Thirty Centavos (₱5,807,392.30) representing the unreleased
balance of petitioner’s appropriation for its Central Office by the General Appropriations Act for FY 2002.

SO ORDERED.

CONCHITA CARPIO MORALES

Associate Justice

WE CONCUR:

HILARIO G. DAVIDE, JR.

Chief Justice

REYNATO S. PUNO ARTEMIO V. PANGANIBAN

Associate Justice Associate Justice

CONSUELO
LEONARDO A. QUISUMBING YNARES-SANTIAGO

Associate Justice Associate Justice

ANGELINA

SANDOVAL-GUTIERREZ ANTONIO T. CARPIO

Associate Justice Associate Justice

MA. ALICIA

AUSTRIA-MARTINEZ RENATO C. CORONA

Associate Justice Associate Justice

ROMEO J. CALLEJO, SR. ADOLFO S. AZCUNA

Associate Justice Associate Justice

DANTE O. TINGA MINITA CHICO-NAZARIO

Associate Justice Associate Justice

CANCIO C. GARCIA

Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above
Resolution were reached in consultation before the case was assigned to the writer of the opinion of the Court.

HILARIO G. DAVIDE, JR.

Chief Justice

Footnotes

1 Rollo at 6.

2 Id. at 25-35.

3 Id. at 99-100.

4 Id. at 100.

5 C.N. Hodges v. City of Iloilo, 125 PHIL 442, 447-448 (1967).

6 Manalo v. Gloria, 236 SCRA 130, 138 (1994).

7 Rollo at 9.

8 429 SCRA 736 (2004).

9 Id. at 760.

10 Art. VIII, Section 3.

11 29 SCRA 617, 628 (1969).

12 Respondent states in its Comment: "Consequently, every month, it behooves upon the department to
 coordinate with the revenue collecting agencies and determine if total revenue collections meets total
projections, if the deficit ceiling has been surpassed, and if the total disbursement program exceeds this
ceiling. On the basis of these data, total amount of cash to be released for the month is set. If the total
disbursement program is less than the ceiling, then allotments of agencies are released in full. However, if
total disbursement program exceeds the ceiling, agency allotments are only partially released." (Rollo at 100-
101)

13 R.A. No. 9162, General Appropriations Act, FY 2002.

14 R.A. No. 9206, General Appropriations Act, FY 2003.

15 R.A. No. 9336, General Appropriations Act, FY 2005.

16 Article VIII, Section 3.

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