RE: QUERY ON THE EFFECT OF THE 10% SALARY INCREASE UNDER EXECUTIVE ORDER NO. 611 ON THE SPECIAL ALLOWANCE FOR THE JUDICIARY (SAJ) OF JUSTICES, JUDGES AND COURT OFFICIALS WITH EQ…

Re: Query on the Effect of the Ten Percent Salary Increase on the Special Allowance for the Judiciary

The Case

This is an administrative matter that arose not from a dispute between private parties but from an internal query brought before the Supreme Court by the Deputy Clerk of Court and Chief of the Fiscal Management and Budget Office, who sought guidance on how to apply a government-wide salary increase to the special allowance enjoyed by justices and judges. The Court sat not to adjudicate conflicting claims but to construe its own compensation law and to instruct its own fiscal office. The case matters because it fixes the character of the Special Allowance for the Judiciary as an advance salary increase, and it shows the Court enforcing a clear statute even where the long-term consequence runs against the very purpose of the law and against the Justices' own self-interest.

Procedural History

There was no trial court and no Court of Appeals. The matter began within the Supreme Court itself, when the Chief of the Fiscal Management and Budget Office submitted a series of memoranda in June, July, and November 2007 asking for instructions on the effect of the ten percent salary increase on the Special Allowance for the Judiciary. The Court treated these memoranda as a query for resolution and rendered its ruling en banc. The Justices who were directly affected nevertheless participated, and the Court noted that its ruling ran contrary to its own self-interest.

Facts

On March 14, 2007, the President issued Executive Order No. 611, directing a ten percent increase in the basic monthly salaries of civilian government personnel covered by the Compensation and Position Classification System, effective July 1, 2007. The Department of Budget and Management then issued National Budget Circular No. 511 to implement the order, but the circular gave no guidelines on how the increase would affect the Special Allowance for the Judiciary under Republic Act No. 9227. The Court's own joint circular with the budget department likewise gave no answer.

During a budget hearing in July 2007, budget officials took the position that ten percent should be deducted from the special allowance of justices, judges, and officials of equivalent rank, corresponding to the ten percent increase in salary. They explained that the deducted amount would not be remitted to the National Treasury but would remain in the special allowance fund, and that fund releases for basic salaries would be net of the ten percent increase, with the deficiency sourced from that fund. A subsequent circular letter of the budget department provided that the special allowance equivalent to the authorized increase shall be integrated into the basic salary, and that any excess not so converted shall continue to be granted as such.

In November 2007, the budget department issued a special allotment release order in the amount of 165,000,000 pesos to subsidize the special allowance. The accompanying advice stated that the ten percent increase in the basic salary of justices and judges shall result in a parallel reduction in the amount of special allowance they receive, while the total monthly compensation will remain unchanged. The fiscal office thus asked the Court whether to deduct ten percent from the monthly special allowance, and whether to source the ten percent salary increase from the special allowance fund.

Issues

• Whether or not ten percent should be deducted from the monthly Special Allowance for the Judiciary of incumbent justices, judges, and judiciary officials of equivalent rank, corresponding to the ten percent increase in their basic salary under Executive Order No. 611.
• Whether or not the ten percent salary increase should be sourced from the Special Allowance for the Judiciary fund.

Applicable Provisions

Section 6 of Republic Act No. 9227 provides:

Section 6. Effects of Subsequent Salary Increase. Upon implementation of any subsequent increase in the salary rates provided under Republic Act No. 6758, as amended, all special allowances granted under this Act to justices and all other positions in the Judiciary with the equivalent rank of justices of the Court of Appeals and judges of the Regional Trial Court as authorized under existing laws and any additional allowance granted to other personnel of the Judiciary shall be considered as an implementation of the said salary increases as may be provided by law. The special allowance equivalent to the increase in the basic salary as may be provided by law shall be converted as part of the basic salary: Provided, that, any excess in the amount of special allowance not converted as part of the basic salary shall continue to be granted as such.

This is the provision the Court construes, and it is the textual basis for treating the ten percent increase as already paid through the special allowance, so that the allowance must be reduced accordingly.

Paragraph 3 of Section 3 of Republic Act No. 9227 provides:

If the collections from any increase in current fees and any new fees imposed after the effectivity of this Act exceed the amount needed to fund the special allowances granted to justices, judges and all other positions in the Judiciary with the equivalent rank of justices of the Court of Appeals and judges of the Regional Trial Court as authorized under existing laws, the surplus may be used by the Chief Justice of the Supreme Court to grant additional allowances exclusively to other court personnel not covered by the benefits granted under this Act.

This provision identifies the additional allowances of other court personnel that Section 6 also affects, and it shows who the incidental beneficiaries of the fund are.

Section 4 of Republic Act No. 9227 provides:

Section 4. Continuance and Non-Diminution of Benefits under the Judiciary Development Fund. The existing allowance and other fringe benefits, if any, of the members and personnel of the Judiciary which are currently paid or augmented chargeable against the increase in the rates of the legal fees prescribed in the amendments to Rule 141 of the Rules of Court which accrue to the Judiciary Development Fund established under Section 1 of Presidential Decree No. 1949 shall all continue to be funded and paid chargeable against said Development Fund, and in no case shall these be stopped or discontinued by reason of the implementation of this additional compensation.

This provision assures the Court that other court personnel already receive augmented allowances through the Judiciary Development Fund, so the incidental benefit they draw from the special allowance fund is not their only support.

Ruling

On the first issue, the Court held that ten percent must be deducted from the monthly special allowance. The law is clear: the special allowance is to be considered as an implementation of any subsequent increase in salary rates, and this includes the ten percent increase under Executive Order No. 611. The increase therefore applies to justices, judges, and officials of equivalent rank, but it is sourced from the special allowance fund and results in a corresponding ten percent reduction in the allowance. The Court acknowledged that continued implementation of Section 6 would, over time, defeat the purpose of Republic Act No. 9227, which was to attract lawyers to the Judiciary through an attractive compensation package. It observed that every subsequent salary increase would reduce the allowance by an equivalent amount, until at a full one hundred percent increase the allowance would be completely converted to salary, and the justices would in fact receive less than before because their salaries would then be subject to income tax, while other government personnel would enjoy the same increase without any reduction in allowance. The real long-term beneficiaries would thus be the indirect beneficiaries under paragraph 3 of Section 3, who already receive augmented allowances through the Judiciary Development Fund.

Despite this, the Court held that there was no escaping the express words of the statute. It invoked the maxim that from the words of a statute there should be no departure, and it quoted the rule that where clear language capable of only one meaning enacts something, it must be enforced even though it be absurd or mischievous. It closed with the familiar line that the law may be harsh but it is the law.

On the second issue, the Court held that the ten percent increase must be sourced from the special allowance fund. It added that it could not go back on its prior rulings recognizing the special allowance as part of basic salary for purposes of computing retirement benefits, and that to now declare the allowance free of tax and of deductions would be inconsistent. It expressly encouraged future legislation to rectify what it called a blip in the law.

Doctrine

First, the Special Allowance for the Judiciary is in the nature of an advance salary increase. Under Section 6 of Republic Act No. 9227, all special allowances granted under that law are considered an implementation of any subsequent increase in salary rates, and the allowance equivalent to the increase is converted as part of basic salary, with any excess continuing to be granted as such.

Second, when a subsequent salary increase takes effect, the special allowance is correspondingly reduced by the same amount, and the increase is sourced from the special allowance fund. The total monthly compensation remains unchanged, but the converted portion becomes taxable as part of basic salary.

Third, the rule of plain meaning controls. Where the words of a statute are clear and capable of only one meaning, they must be applied as written even if the result appears absurd or contrary to the law's purpose. The remedy lies in future legislation, not in judicial rewriting.

Fourth, the special allowance, having been recognized as part of basic salary for retirement purposes, cannot later be treated as tax-exempt or immune from deductions without reversing settled rulings.

Disposition

The Court instructed the Chief of the Fiscal Management and Budget Office to deduct ten percent from the monthly special allowance of incumbent justices, judges, and officials of equivalent rank, and to source the ten percent salary increase from the special allowance fund.

Remember This

Memorize the line that the Special Allowance for the Judiciary is merely an advance salary increase, so every subsequent salary increase reduces it peso for peso. Examiners use this case to test the plain meaning rule and the principle that a harsh but clear law must be applied as written, even against the Court's own interest.