L.4. G.R. No. 158791. July 22, 2005.
* Doctrine of Exhaustion of Administrative Remedies - The
CIVIL SERVICE COMMISSION, petitioner, vs. DEPARTMENT
OF BUDGET AND MANAGEMENT, respondent.
FACTS:
 The CSC via the present petition for mandamus seeks to
compel the DBM 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 CSC’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.
- It complains, however, that the total fund releases by
DMB 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 CSC, this balance was intentionally withheld by DBM
on the basis of its no report, no release policy whereby
allocations for agencies are withheld pending their
submission of the documents mentioned in National Budget
Circular No. 478 on Guidelines on the Release of the FY
2002 Funds.
PETITIONER’S CONTENTION:
 CSC 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’S CONTENTION
 Respondent, opposes the petition on procedural grounds. It
contends that
1) petitioner did not exhaust administrative remedies as it could have
sought clarification from respondents Secretary regarding the
extent of fiscal autonomy before resorting to this Court
2) 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, DBM , 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) particularly one of the guiding principles
established therein governing the budget of the Judiciary,
to wit:
5. The Supreme Court may submit to the DBM 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.
 DBM proffers at any rate that the delay in releasing the
balance of petitioners budget was not on account of any
failure on petitioners part to submit the required reports;
rather, it was due to a shortfall in revenues.
ISSUE: WON DBM‘s policy, ―no report, no release is a violation
of the principle of fiscal autonomy and, therefore,
unconstitutional – YES.
RULING: UNCONSTITUTIONAL
PROCEDURAL ISSUES:
rule on exhaustion of administrative remedies applies only
where there is an express legal provision requiring such
administrative step as a condition precedent to taking
action in court.
 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.
Hierarchy of Courts; A direct invocation of the SC’s original
jurisdiction may be allowed where there are special and
important reasons therefor, clearly and specifically set out
in the petition
 As for the rule on hierarchy of courts, it is not absolute.
 CSC 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.” To
this Court, such justification suffices for allowing the
petition.
SUBSTANTIVE ISSUES:
NO REPORT, NO RELEASE POLICY MAY NOT BE VALIDLY
ENFORCED AGAINST OFFICES VESTED WITH FISCAL
AUTONOMY
 Indeed, such policy cannot be enforced against offices
possessing fiscal autonomy without violating Article 9 (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.
“Automatic release” of approved annual appropriations to
the CSC, a constitutional commission which is vested with
fiscal autonomy, should be construed to mean that no
condition to fund releases to it may be imposed.
 In Province of Batangas v. Romulo, this Court, in construing
the phrase “automatic release” in Section 6, Article 10 of the
Constitution reading:
Section 6. LGUs shall have a just share, as determined by
law, in the national taxes which shall be automatically
released to them
HELD:
- Webster’s 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.
Even assuming that there is a shortfall in revenues, that
does not justify non-compliance with the mandate of Article
9(A), Section 5 of the Constitution.
 Respecting respondent’s justification for the withholding of
funds from petitioner as due to a shortfall in revenues, the
same does not lie.
1) alleged shortfall is totally unsubstantiated.
2) even assuming that there was indeed such a shortfall,
that does not justify non-compliance with the mandate
of above-quoted Article 9 (A), Section 5 of the
Constitution.
 Asturias Sugar Central, Inc. v. Commissioner of Customs
teaches that “an 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.”
- If respondents theory were adopted, then the
constitutional mandate to automatically and
regularly release approved appropriations would
be suspended every year, or even every month 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 the CSC may be subjected to withholding
or reduction of funds in the event of a revenue shortfall
would, to that extent, place it 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 be given priority in the release
of their approved appropriations over all other
agencies not similarly vested when there is a revenue
shortfall.
2 TYPES OF PUBLIC INSTITUTIONS IN THE MATTER OF
FUND RELEASES
Year 2002 GAA itself distinguished between
1) 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 beregularly and automatically released in
accordance with the established allotment period and system by
the DBM without any deduction, retention or imposition of reserves.
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.
2) 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.
 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 petitioners funds without violating not only the
Constitution but also Section 64 of the General Provisions
of the Year 2002 GAA.
SUBJECT TO AVAILABILITY OF FUNDS?
 This Court is not unaware that its above-cited June 3, 1993
Resolution A.M. No. 92-9-029-SC 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.
 This phrase “subject to availability of funds” does not,
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.
- 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.
The plain implication of the omission in Article 9 (A),
Section 5 of the Constitution of the provision proscribing a
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.
 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.
 On the other hand, in the parallel provision granting fiscal
autonomy to Constitutional Commissions, there is NO
similar proscription against the reduction of appropriations
below the amount for the previous year.
- 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. Respondents 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

P5,807,392.30 representing the unreleased balance of
petitioners appropriation for its Central Office by the General
Appropriations Act for FY 2002.