Title
Re: 10% Salary Increase under Executive Order No. 611
Case
A.M. No. 07-8-3-SC
Decision Date
Mar 28, 2008
A 10% salary increase under E.O. No. 611 required a corresponding 10% deduction from the Special Allowance for the Judiciary (SAJ), sourced from the SAJ fund, adhering to Section 6 of R.A. No. 9227 despite long-term implications.
basic salary
consistency with the law
previous rulings
A

Case Summary (G.R. No. 233193)

Parties, Legal Framework, and Material Dates

Deputy Clerk of Court Ferrer-Flores served as the initiator through internal memoranda to the Court, while the Department of Budget and Management (DBM) and its issuances formed the administrative backdrop for the contemplated funding and implementation mechanics. E.O. No. 611 was issued on March 14, 2007 and mandated a 10% increase in the basic monthly salaries of civilian government personnel covered by the Compensation and Position Classification System under R.A. 6758, as amended, effective July 1, 2007. On June 18, 2007, the DBM issued National Budget Circular No. 511 to prescribe rules and regulations for the compensation adjustments under E.O. No. 611, but it did not furnish guidelines on the effect of the adjustment on the SAJ in view of Section 6, R.A. No. 9227. The Court’s resolution was promulgated on March 28, 2008.

The legal provisions in play were Section 6 of R.A. No. 9227, which provides that subsequent salary increases under R.A. 6758, as amended, shall operate such that special allowances under the Act are treated as implementation of those salary increases, with the special allowance “equivalent to the increase in the basic salary” converted as part of the basic salary, while any excess not converted continues to be granted as special allowance; and E.O. No. 611 itself, which authorized the 10% increase.

Factual Background and Administrative Developments

The record showed that Ferrer-Flores sought clarification because R.A. No. 9227, through Section 6, dictated a specific conversion mechanism for the SAJ upon implementation of subsequent salary increases. She specifically requested instructions on two questions: first, whether the judiciary should deduct 10% from the monthly SAJ of incumbent justices, judges, and court officials with the equivalent rank of Court of Appeals (CA) justices and Regional Trial Court (RTC) judges corresponding to the 10% increase in basic salary under E.O. No. 611; and second, whether this 10% salary increase should be sourced from the SAJ fund.

During a technical hearing on the Calendar Year (CY) 2008 budget for the Court and lower courts, DBM representatives referred to Section 6, R.A. No. 9227, and advised that 10% should be deducted from the SAJ of the covered judiciary officials to correspond to the 10% salary increase effective July 2007. When it was noted that National Budget Circular No. 511 lacked the mechanics for the adjustment of the SAJ under the statute, the DBM panel stated that an implementing circular would be issued soon. The DBM further explained that the 10% to be deducted from the SAJ would not be remitted to the National Treasury. Instead, it would remain in the SAJ fund until 100% conversion of the SAJ into salary had been effected. The Court noted that it appeared, in practice, that DBM releases for the basic salaries of SAJ-eligible justices, judges, and court officials were made as the net of the 10% increase, with the resulting 10% deficiency sourced from the SAJ fund in accordance with Section 6, R.A. No. 9227. The DBM also indicated that it would fund the 10% increase for officials and employees not directly covered by R.A. No. 9227.

The DBM then issued Circular Letter No. 2007-9 on June 29, 2007, providing additional guidelines. It stated that where personnel of national government agencies had been granted special allowances under special laws that are considered as advance payment of any future increase in basic salary as may be provided by law, the amount of the authorized increase under E.O. No. 611 should be integrated into the basic salary, while any excess not converted continues to be granted as special allowance.

Ferrer-Flores relayed these developments in a second memorandum dated July 4, 2007. Her November 20, 2007 memorandum added the issuance by the DBM on November 13, 2007 of Special Allotment Release Order (SARO) No. SARO-BMB-C-07-0006137, in the amount of P165,000,000.00, to cover the subsidy from the national government for the SAJ pursuant to paragraph 2, Section 3 of R.A. No. 9227. In the advice accompanying the SARO, the DBM qualified the purpose for which the P165 million was issued as covering “the Special Allowance for the Judiciary ( SAJ ) authorized under 9227/10% compensation adjustment.” The advice further stated that, consistent with R.A. No. 9227, the release also covered implementation of the 10% salary adjustment under E.O. No. 611 as implemented under National Budget Circular No. 511 for justices, judges, and other positions with equivalent rank. It declared that the 10% increase in the basic salary would result in a parallel reduction in the SAJ, while total monthly compensation remained unchanged. The Court took note that the DBM thus treated the adjustment through the lens of Section 6, R.A. No. 9227, such that the increase in basic salary would be sourced from the P165 million subsidy, while the monthly SAJ would correspondingly be reduced by 10%.

Issues Presented for Court Guidance

The Court was tasked to resolve two related issues: first, whether the administration of the 10% salary increase should be implemented by deducting 10% from the monthly SAJ of incumbent justices, judges, and judiciary officials with equivalent ranks of CA justices and RTC judges; and second, whether the 10% salary increase should be sourced from the SAJ fund, consistent with Section 6, R.A. No. 9227.

The Parties’ Positions and the Court’s Framing of the Problem

Although the matter was brought by an internal query rather than adversarial pleadings, the Court framed the issue around the tension between administrative confusion and the statutory conversion rule. The Court recognized that DBM’s approach, supported by its later SARO and related advice, was aligned with the idea that the 10% increase in basic salary would be implemented through a reduction of SAJ by the same proportion, leaving total monthly compensation unchanged. The question before the Court, however, remained whether the statutory design required that the adjustment be implemented by deducting 10% from SAJ and whether the shortfall in funding for the converted portion would have to be sourced from the SAJ fund as Section 6 required.

Legal Basis and Reasoning

The Court held that “[t]he law is clear.” It determined that under Section 6, R.A. No. 9227, the SAJ was to be considered an implementation of subsequent salary increases authorized by law. The Court thus ruled that the 10% increase in basic salary under E.O. No. 611 had to apply to justices, judges, and other court personnel of ranks equivalent to CA justices and RTC judges, but that it would be sourced from the SAJ funds, resulting in a corresponding 10% reduction in SAJ.

The Court further explained why continued implementation of Section 6, R.A. No. 9227 would defeat the purpose of R.A. No. 9227 in a long-term sense, yet it concluded that administrative misgivings could not override statutory commands. It described the conversion mechanism under Section 6: a percentage of the SAJ being received by incumbents would be converted as part of basic salary to correspond to the 10% increase in basic salary authorized under E.O. No. 611, which would in turn decrease the monthly SAJ of incumbents by the same proportion upon implementation in July 2007.

The Court also identified the broader consequences of the provision. It reasoned that, because the SAJ portion converted to basic salary would become subject to income tax, the net effect was a corresponding decrease in the monthly income of incumbent justices, judges, and equivalent-rank officials, while other court personnel not directly covered by R.A. No. 9227 might benefit from higher additional allowances derived from the surplus of SAJ under paragraph 3, Section 3 of the statute. The Court observed that once SAJ had been completely converted through subsequent salary increases under Section 6, the judiciary incumbents would no longer receive SAJ as such and would be in a worse position than before, particularly because their salaries would then be fully subject to income tax. Meanwhile, other personnel would receive increases without corresponding loss of allowance. The Court reasoned that this outcome could shift the actual beneficiaries away from the intended direct beneficiaries of R.A. No. 9227 and toward indirect beneficiaries, contrary to the law’s objective of attracting lawyers to the judiciary through an attractive compensation package.

Nevertheless, the Court applied the statutory construction principle that “from the words of the statute there should be no departure,” and ruled that even if the outcome seemed absurd or mischievous, clear and equivocal statutory language required enforcement. It rejected any approach that would allow the Court to disregard Section 6 solely because of its foreseeable long-term effects. Thus, the Court answered both questions in accordance with the text of Section 6: the 10% increase in basic salary for the covered judiciary personnel had to be sourced from the SAJ fund, and the monthly SAJ of incumbent justices, judges, and equivalent-rank court officials had to be correspondingly reduced by 10%.

Consistency with Prior Jurisprudence on the Nature of SAJ

In addition to enforcing the statutory text, the Court invoked consistency with its previous rulings on the nature of the SAJ. It cited its earlier resolution in In Re: Request of Retired Justices of the Supreme Court for Upgrading of their Retirement Gratuities (A.M. No. 04-11-06-SC, March 14, 2006), where the Court reiterated that the SAJ under R.A. No. 9227 was intended to form part of basic salary. The Court noted that Section 6 categorically stated that the special allowance equivalent to the increase in basic salary would be converted as part of the basic salary.

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