EN BANC

[G.R. NO. 158791 July 22, 2005]

CIVIL SERVICE
COMMISSION, Petitioner, v. DEPARTMENT OF BUDGET
AND MANAGEMENT, Respondent.

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 P215,270,000.00 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 P285,660,790.44.1 It complains, however, that
the total fund releases by respondent to its Central Office
during the fiscal year 2002 was only P279,853,398.14,
thereby leaving an unreleased balance of P5,807,392.30.

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) ςrαlαωlιbrαrÿ

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
commission which is vested with fiscal autonomy, should
thus be construed to mean that no condition to fund
releases to it may be imposed. This conclusion is consistent
with the above-cited June 3, 1993 Resolution of this Court
which effectively prohibited the enforcement of a "no report,
no release" policy against the Judiciary which has also been
granted fiscal autonomy by the Constitution.10

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 DBMin 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)ςrαlαωlιbrαrÿ

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) ςrαlαωlιbrαrÿ

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) ςrαlαωlιbrαrÿ

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)ςrαlαωlιbrαrÿ

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 P14,548,620,000.00, which is 2.53% of the total
appropriations in the amount of P575,123,728,000.00.13 In
Year 2003 GAA, which was re-enacted in 2004, the budget
for the same agencies was P13,807,932,000.00, which is
2.27% of the total appropriations amounting
to P609,614,730,000.00.14 And in the Year 2005, the budget
for the same agencies was only P13,601,124,000.00, which
is 2.28% of the total appropriations amounting
to P597,663,400,000.00.15

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) ςrαlαωlιbrαrÿ

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
(P5,807,392.30) representing the unreleased balance of
petitioner's appropriation for its Central Office by the
General Appropriations Act for FY 2002.

SO ORDERED.

Quisumbing, Carpio, Corona, Callejo, Sr., Azcuna,

Chico-Nazario, and Garcia, JJ., concur.
Davide, Jr., C.J., see separate concurring opinion.
Puno, Panganiban, Ynares-Santiago, and Sandoval-
Gutierrez, JJ., concur with the C.J.'s separate opinion.
Austria-Martinez, and Tinga, JJ., concur with both
main and separate opinion.

Endnotes:

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.