EN BANC

CIVIL SERVICE COMMISSION, G.R. No. 158791

Petitioner,

Present:

DAVIDE, JR., C.J.,

PUNO,

- versus - PANGANIBAN,

QUISUMBING,
YNARES-SANTIAGO,
SANDOVAL-GUTIERREZ,

CARPIO,

AUSTRIA-MARTINEZ,

DEPARTMENT OF BUDGET AND CORONA,

MANAGEMENT,
CARPIO MORALES,
Respondent.
CALLEJO, SR.,

AZCUNA,

TINGA,

CHICO-NAZARIO, and

GARCIA, JJ.

Promulgated:
 July 22, 2005

_______________________

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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)

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
month[12] 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 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)

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.

CONCHITA CARPIO MORALES

Associate Justice