G.R. No. 153266 - Gutierrez vs. Department of Budget and Management

Congress enacted Republic Act (R.A.) 6758, known as the Compensation and Position Classification Act of 1989, to rationalize government employee compensation.
Section 12 of R.A. 6758 consolidates all allowances into standardized salary rates except for specific enumerated items (e.g., representation and transportation allowances, clothing and laundry allowances, subsistence allowances for maritime and hospital personnel, hazard pay, allowances for foreign service personnel, and any additional compensation designated by the Department of Budget and Management [DBM]).
The law provided that allowances not integrated as of July 1, 1989, would continue to be paid separately.

The DBM issued National Compensation Circular (NCC) 59 on September 30, 1989, covering offices of the national government, state universities and colleges, and local government units, which integrated specific allowances (including the Cost of Living Allowance [COLA] and the Inflation Connected Allowance [ICA]) into the standardized salaries.
The DBM also issued Corporate Compensation Circular (CCC) 10 on October 2, 1989, for government-owned or controlled corporations and government financial institutions.
Subsequent re-issuances and publications of NCC 59 (May 3, 2004) and CCC 10 (March 16, 1999) further clarified the integration process.
Budget Circular 2001-03 (November 12, 2001) reiterated that only the exemptions under Section 12 of R.A. 6758 may be granted separately; all other allowances were deemed integrated.

The Commission on Audit (COA) disallowed honoraria, COLA, ICA, and other additional compensations that were deemed already integrated into the standardized salaries.
Employees of several government offices, including the Office of the Solicitor General, the Government Service Insurance System (GSIS), the Insurance Commission, and various state universities and local government units, questioned this disallowance.
Specific petitions challenged:

The propriety of integrating COLA into the standardized salary rates.
Whether ICA should continue to be granted to Insurance Commission employees.
The disallowance of allowances and fringe benefits for COA auditing personnel assigned to the GSIS.

The cases were consolidated into a class suit covering all government employees except those in government-owned or controlled corporations and government financial institutions.
Other issues included:

The effect of the non-publication of NCC 59 and CCC 10 on the validity of the integration process.
The allegation that the continued grant of COLA exclusively to military and police personnel (under Section 11) violated the equal protection clause of the Constitution.

Petitioners argued that the DBM ought to promulgate additional rules and regulations to clearly determine which allowances were integrated, while respondents contended that R.A. 6758 already provided the necessary guidelines.

Whether COLA should be deemed integrated into the standardized salary rates of government employees pursuant to Section 12 of R.A. 6758.
Whether ICA, similarly classified as an allowance, may continue to be paid to the employees of the Insurance Commission.

Whether the disallowance of allowances and fringe benefits for COA auditing personnel assigned to the GSIS is proper, given the prohibitions set forth in Section 18 of R.A. 6758.

Whether the non-publication of NCC 59 and CCC 10 in the Official Gazette or newspaper of general circulation nullifies the integration of allowances such as COLA.

Whether the continued grant of COLA to military and police personnel, to the exclusion of other government employees, violates the equal protection clause of the Constitution.