Re: Query on the Effect of the 10% Salary Increase under Executive Order No. 611 on the Special Allowance for the Judiciary (SAJ)

Under Section 6 of Republic Act No. 9227, the Special Allowance for the Judiciary is considered an implementation of any subsequent increase in salary rates; hence, a 10% increase in basic salary under Executive Order No. 611 must be sourced from the SAJ fund and result in a corresponding 10% reduction in the monthly SAJ.

Corazon G. Ferrer-Flores, Deputy Clerk of Court and Chief of the Fiscal Management and Budget Office, was the judiciary official responsible for fiscal management and budget matters. Republic Act No. 9227 granted special allowances to justices, judges, and all other positions in the Judiciary with the equivalent rank of Court of Appeals justices and Regional Trial Court judges, and its Section 6 governed the effect of subsequent salary increases on those allowances. Executive Order No. 611 authorized a 10% increase in the basic monthly salaries of civilian government personnel covered by the Compensation and Position Classification System under Republic Act No. 6758, as amended. The Department of Budget and Management issued implementing circulars, but they did not provide guidelines on the effect of Executive Order No. 611 on the SAJ in light of Section 6, Republic Act No. 9227.

On March 14, 2007, President Gloria Macapagal-Arroyo issued Executive Order No. 611 directing the implementation of a 10% increase in the basic monthly salaries of civilian government personnel whose positions are covered by the Compensation and Position Classification System under R.A. No. 6758, as amended, effective July 1, 2007. On June 18, 2007, the Department of Budget and Management issued National Budget Circular No. 511 prescribing the rules and regulations governing the grant of compensation adjustments authorized under E.O. No. 611. The circular, however, failed to provide guidelines on the effect of E.O. No. 611 on the SAJ of justices, judges, and those of equivalent rank in light of Section 6 of R.A. No. 9227. The Court's Joint Circular with the DBM dated January 13, 2004, which provided guidelines for the implementation of R.A. No. 9227, also did not resolve the issue. Consequently, Flores, in her first Memorandum dated June 26, 2007, sought guidance from the Court.

On July 2, 2007, during the technical hearing on the Calendar Year 2008 budget of the Court and the lower courts, DBM representatives referred to Section 6 of R.A. No. 9227 and advised that 10% should be deducted from the SAJ of justices, judges, and court officials of equivalent rank corresponding to the 10% increase in salary effective July 2007. When informed that National Budget Circular No. 511 did not provide the mechanics of the adjustment, the DBM representatives said that a circular on implementing guidelines was being prepared and would be issued soon. The DBM panel further explained that the 10% to be deducted from the SAJ would not be remitted to the National Treasury but would be kept in the SAJ fund until 100% conversion of the SAJ into salary had been effected. Fund releases by the DBM for basic salaries of justices, judges, and court officials entitled to SAJ would be the net of the 10% increase, and the 10% deficiency would be sourced from the SAJ fund pursuant to Section 6, R.A. No. 9227. The DBM said it would provide funding for the 10% increase in the basic salary only of court officials and employees who were not direct beneficiaries under R.A. No. 9227.

The DBM thereafter issued Circular Letter No. 2007-9 of June 29, 2007, providing additional guidelines on the release of funds to cover compensation adjustments of national government personnel effective July 1, 2007. Under the circular letter, where personnel of national government agencies had been granted special allowances under special laws and those allowances were considered as advance payment of any future increase in basic salary as may be provided by law, the special allowance equivalent to the amount of the authorized increase under E.O. No. 611 was to be integrated into the basic salary, and any excess in the amount of special allowance not converted as part of the basic salary would continue to be granted as such. Flores promptly brought the Court up to date on these developments with a second Memorandum dated July 4, 2007.

Flores' most recent Memorandum of November 20, 2007, brought to the Court's attention the DBM's issuance, on November 13, 2007, of Special Allotment Release Order No. SARO-BMB-C-07-0006137 in the amount of ₱165,000,000.00 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 of SARO Issued on even date, the DBM qualified the purpose of the release as covering the SAJ authorized under R.A. No. 9227 and the 10% compensation adjustment under E.O. No. 611, as implemented under National Budget Circular No. 511, for justices, judges, and all other positions with equivalent rank of Court of Appeals justices and Regional Trial Court judges in the Judiciary. The Advice stated that the 10% increase in the basic salary of the justices and judges would result in a parallel reduction in the amount of special allowance they receive, while the total monthly compensation would remain unchanged.

It thus appeared that the DBM qualified the purpose of the SARO on the basis of Section 6 of R.A. No. 9227. Applying the condition set forth in the SARO, the basic monthly salary of incumbent justices, judges, and officials with the equivalent rank of Court of Appeals justices or Regional Trial Court judges would receive a 10% increase pursuant to E.O. No. 611, sourced from the ₱165,000,000 subsidy, while the monthly SAJ would have a corresponding reduction of 10%. These developments prompted Flores to seek the Court's clarification, and the Court resolved the query in its March 28, 2008 Resolution.

• Deduction from SAJ: Whether to deduct 10% from the monthly SAJ of incumbent justices, judges, and judiciary officials with the equivalent rank of Court of Appeals justices and Regional Trial Court judges corresponding to the 10% increase in their basic salary as authorized under E.O. No. 611.
• Source of 10% Salary Increase: Whether to source the 10% salary increase from the SAJ fund.

• Deduction from SAJ: Yes. Under Section 6, R.A. No. 9227, the SAJ is considered an implementation of any subsequent increase in salary rates, so the 10% increase in basic salary under E.O. No. 611 results in a corresponding 10% reduction in monthly SAJ.
• Source of 10% Salary Increase: Yes. The 10% salary increase is to be sourced from the SAJ fund, pursuant to Section 6, R.A. No. 9227, as reflected in the DBM's SARO and Advice of SARO.

• Deduction from SAJ: Section 6, R.A. No. 9227 provides that upon implementation of any subsequent increase in salary rates under R.A. No. 6758, as amended, all special allowances granted under the Act to justices and all other positions with the equivalent rank of Court of Appeals justices and Regional Trial Court judges, and any additional allowance granted to other personnel of the Judiciary, shall be considered as an implementation of the salary increases. The special allowance equivalent to the increase in basic salary shall be converted as part of basic salary, and any excess not converted shall continue as special allowance. E.O. No. 611 authorized a 10% increase in basic monthly salaries effective July 1, 2007. Because the SAJ is considered an implementation of subsequent salary increases, the 10% increase must apply to justices, judges, and equivalent officials but sourced from the SAJ fund, resulting in a corresponding 10% reduction in monthly SAJ. The Court acknowledged that continued implementation would eventually convert the SAJ fully into salary, reduce take-home income because the converted amount becomes taxable, and may benefit indirect beneficiaries more than intended, thereby defeating the purpose of R.A. No. 9227 to attract lawyers to the Judiciary. Nonetheless, the express words of Section 6 are clear and must be enforced; verba legis non est recedendum and dura lex sed lex apply. The Court also relied on its prior ruling in Re: Request of Retired Justices of the Supreme Court for Upgrading of their Retirement Gratuities, which recognized the SAJ as part of basic salary, and declined to reverse that characterization. Future legislation was encouraged to rectify the law.
• Source of 10% Salary Increase: Section 6, R.A. No. 9227 requires the special allowance equivalent to the increase in basic salary to be converted as part of basic salary, with any excess continuing as special allowance. The DBM's SARO No. SARO-BMB-C-07-0006137 and Advice of SARO qualified the ₱165,000,000 release to cover the SAJ authorized under R.A. No. 9227 and the 10% compensation adjustment under E.O. No. 611, stating that the 10% increase in basic salary would result in a parallel reduction in SAJ while total monthly compensation remained unchanged. The Court therefore instructed the Fiscal Management and Budget Office to source the 10% salary increase from the SAJ fund. The DBM had explained that the 10% deducted would not be remitted to the National Treasury but kept in the SAJ fund until 100% conversion, and that releases for basic salaries would be net of the 10% increase, with the deficiency sourced from the SAJ fund. The Court adopted this mechanism.

• Verba Legis Non Est Recedendum — This principle provides that from the words of a statute there should be no departure. Where the legislature has used clear language capable of only one meaning, the law must be enforced even if it is absurd or mischievous. In this case, despite the Court's recognition that continued implementation of Section 6, R.A. No. 9227 would eventually defeat the purpose of attracting lawyers to the Judiciary, the express wording of Section 6 was held to require the 10% salary increase under E.O. No. 611 to be sourced from the SAJ fund and to reduce the monthly SAJ by 10%.
• Dura Lex Sed Lex — The law may be harsh but it is the law. The Court applied this maxim to justify enforcing Section 6, R.A. No. 9227 even though the long-term effect would be a reduction in the take-home income of incumbent justices and judges because the converted portion would become taxable, and even though the ruling ran contrary to the Court's own self-interests.
• SAJ as Implementation of Subsequent Salary Increases — Under Section 6, R.A. No. 9227, all special allowances granted under the Act to justices, judges, and positions with equivalent rank of Court of Appeals justices and Regional Trial Court judges, as well as additional allowances granted to other Judiciary personnel, are considered an implementation of any subsequent increase in salary rates under R.A. No. 6758, as amended. The special allowance equivalent to the increase in basic salary is converted as part of basic salary, while any excess not converted continues as a special allowance. The Court applied this doctrine by treating the 10% increase under E.O. No. 611 as an implementation of the SAJ, resulting in a parallel 10% reduction in the monthly SAJ.
• SAJ as Part of Basic Salary / Advance Salary Increase — The Court reiterated that the SAJ is intended to be part of the basic salary of justices, judges, and equivalent officials, and that the special allowance is merely an advance salary increase. This characterization, previously recognized in Re: Request of Retired Justices of the Supreme Court for Upgrading of their Retirement Gratuities, barred the Court from declaring the SAJ free of income tax or exempt from deductions corresponding to each salary increase.
• Purpose of R.A. No. 9227 — The law was enacted to attract lawyers to the Judiciary through an attractive compensation package. The Court observed that continued implementation of Section 6 would, over time, convert the SAJ fully into salary, subject the converted amount to tax, and allow indirect beneficiaries to benefit from the surplus, thereby defeating the law's main objective. Nevertheless, because the statutory text was clear, the Court left correction to future legislation.

• "The law is clear. The SAJ is to be considered as an implementation of any subsequent increase in salary rates. This would include the 10% increase in basic salary under E.O. No. 611. Hence, the 10% increase in basic salary shall be made to apply to justices, judges and other court personnel of ranks equivalent to CA justices and RTC judges but will be sourced from the SAJ funds and result in a corresponding 10% reduction in SAJ." — This passage states the ratio decidendi, answering both issues by holding that the 10% increase is implemented through the SAJ and must be sourced from the SAJ fund.
• "Well-established is the rule that \"from the words of the statute there should be no departure.\" Hindi dapat lumihis sa mga titik ng batas. Where, by the use of clear and equivocal language capable of only one meaning, anything is enacted by the legislature, it must be enforced even though it is absurd or mischievous." — This passage articulates the verba legis principle that compelled the Court to enforce Section 6 despite its long-term consequences.
• "The law may be harsh but it is the law. Ang batas ay maaaring mahigpit ngunit ito ang batas." — This passage encapsulates the dura lex sed lex rationale for enforcing the clear statutory command notwithstanding the harsh result.
• "The net effect of converting 10% of the monthly SAJ to basic salary is a corresponding decrease in the monthly income of incumbent justices, judges and judiciary officials of equivalent rank, since the 10% increase in their salary, formerly part of their SAJ, will now be subject to income taxation." — This passage explains the practical consequence of the ruling and the Court's acknowledgment that the law would reduce the incumbents' net income.

• 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 — The Court cited this prior resolution to reiterate that the SAJ is intended to be part of the basic salary of justices, judges, and equivalent positions, and that the special allowance is merely an advance salary increase. It relied on this to maintain consistency and refuse to recharacterize the SAJ as tax-exempt or exempt from deduction.
• Nitafan vs. Commission on Internal Revenue, G.R. No. 103524, April 15, 1992, 152 SCRA 284 — Cited in footnote 7 in connection with the observation that the converted salary would be subject to income tax. The decision does not elaborate on its holding.
• R. vs. City of London Court, 1 Q.B. 273, 290 (1892) — Cited in footnote 9 as authority for the rule that from the words of the statute there should be no departure. The Court invoked it in applying verba legis non est recedendum.

• Section 6, Republic Act No. 9227 — Provides that upon implementation of any subsequent increase in salary rates under R.A. No. 6758, as amended, all special allowances granted under the Act to justices and all other positions in the Judiciary with the equivalent rank of Court of Appeals justices and Regional Trial Court judges, and any additional allowance granted to other personnel of the Judiciary, shall be considered as an implementation of the salary increases; the special allowance equivalent to the increase in basic salary shall be converted as part of basic salary, and any excess not converted shall continue to be granted as such. The Court applied this provision to require the 10% increase under E.O. No. 611 to be sourced from the SAJ fund and to reduce the monthly SAJ by 10%.
• Section 3, Republic Act No. 9227 — Provides the funding source for the SAJ and states that if the amounts are insufficient to cover the grant of allowances in the last year of implementation, the National Government shall subsidize the SAJ for justices, judges, and equivalent positions in an amount not exceeding ₱165,000,000.00 per annum. The DBM issued SARO No. SARO-BMB-C-07-0006137 for ₱165,000,000.00 pursuant to this provision.
• Paragraph 3, Section 3, Republic Act No. 9227 — Provides that if collections from any increase in current fees and any new fees imposed after the effectivity of the Act exceed the amount needed to fund the special allowances, the surplus may be used by the Chief Justice to grant additional allowances exclusively to other court personnel not covered by the benefits granted under the Act. The Court discussed this provision in noting that other court personnel may benefit from the surplus created by the 10% deduction from the SAJ.
• Section 4, Republic Act No. 9227 — Provides for the continuance and non-diminution of benefits under the Judiciary Development Fund, stating that existing allowances and other fringe benefits of members and personnel of the Judiciary funded from the JDF shall continue to be funded and paid from that fund and shall not be stopped or discontinued by reason of the implementation of the additional compensation. The Court cited this to note that other court personnel already have their salaries augmented by the JDF.
• Republic Act No. 6758, as amended — The Compensation and Position Classification System referred to in Section 6, R.A. No. 9227. The 10% increase under E.O. No. 611 was for civilian government personnel covered by this system, and it triggered the conversion mechanism in Section 6.
• Executive Order No. 611 — Issued on March 14, 2007, it directed the implementation of a 10% increase in the basic monthly salaries of civilian government personnel covered by the Compensation and Position Classification System under R.A. No. 6758, as amended, effective July 1, 2007. The Court held that this increase was subject to the conversion and sourcing rules of Section 6, R.A. No. 9227.
• Presidential Decree No. 1949, Section 1 — Establishes the Judiciary Development Fund. It is cited in Section 4, R.A. No. 9227, which the Court referenced in discussing the JDF as a separate source of allowances for other court personnel.

The Resolution lists the following under "WE CONCUR": Chief Justice Reynato S. Puno; Associate Justices Leonardo A. Quisumbing (with the notation "On official leave"), Consuelo Ynares-Santiago (marked with an asterisk; footnote states "On official leave per Special Order No. 497 dated March 14, 2008"), Antonio T. Carpio, Ma. Alicia Austria-Martinez, Renato C. Corona, Conchita Carpio Morales, Adolfo S. Azcuna, Dante O. Tinga, Minita V. Chico-Nazario, Presbitero J. Velasco, Jr., Antonio Eduardo B. Nachura, Teresita J. Leonardo-De Castro, and Arturo D. Brion.