The Supreme Court has unanimously affirmed the legality of two circulars of the Department of Budget Management (DBM) that integrated the cost of living allowances (COLA) into the basic salary of government workers.

The circulars – the National Compensation Circular (NCC) 59 and Corporate Compensation Circular (CCC) 10 – were issued in 1989 in line with the implementation of Republic Act 6758 or the Salary Standardization Law.

In a 23-page decision penned by Associate Justice Roberto A. Abad, the High Court said it found the inclusion of COLA in the standardized salary rates of civil servants proper.

The court said RA 6758 did not bar the DBM from identifying for the purpose of implementation what fell into the class of “all allowances.” RA 6758 was enacted to rationalize the compensation of government employees.

Its Section 12 directed the consolidation of allowances and additional compensation already being enjoyed by employees into their standardized salary rates.

The law, however, exempted certain additional compensations like representation and transportation allowances, clothing and laundry allowances, subsistence allowance of marine officers and crew on board government vessels and hospital personnel, hazard pay, allowances of Foreign Service personnel stationed abroad, and other additional compensation that may be determined by the DBM.

The court said the law clearly authorized the DBM to promulgate rules and regulations identifying those excluded benefits.

“This leads to the inevitable conclusion that until and unless the DBM issues such rules and regulations, the enumerated exclusions… remain exclusive. Thus so, not being an enumerated exclusion, COLA is deemed already incorporated in the standardized salary rates of government employees under the general rule of integration,” the court said.

Besides COLA, the DBM also included into the standardized salary rates of state workers the inflation connected allowance (ICA); subsistence allowance; emergency allowance; additional compensations of public health nurses, rural health physicians and nurses in Malacañang clinic; nurses allowance in the Air Transportation Office, assignment allowance of school superintendents, and allowance of postal service office employees.

The court said it cannot exclude COLA from the list of allowances included into the standardized rates for state workers since it is “not in the nature of an allowance intended to reimburse expenses incurred by officials and employees of the government in the performance of their official functions.”

“It is not payment in consideration of the fulfillment of official duty. As defined, cost of living refers to ‘the level of prices relating to range of everyday items’ or ‘the cost of purchasing those goods and services which are included in an accepted standard level of consumption,’” it added.

“Based on this premise, COLA is a benefit intended to cover expenses in the cost of living. Thus, it is and should be integrated into the standardized salary rates.”

In the same ruling, however, the court said members of the Armed Forces of the Philippines (AFP) and the Philippine National Police (PNP) will continue to receive their COLA separate from their basic salary.

It did not give credence to the claim of the petitioners that the continued grant of COLA to military and police personnel on top of their salaries violate the equal protection clause in the Constitution.

The court said the “fundamental right of equal protection of the laws is not absolute, but is subject to reasonable classification.”

“Certainly, there are valid reasons to treat the uniformed personnel differently from other national government officials. Being in charged of the actual defense of the state and the maintenance of internal peace and order, they are expected to be stationed virtually anywhere in the country,” the court said.

“They are likely to be assigned to a variety of low, moderate, and high-cost areas. Since their basic pay does not vary based on location, the continued grant of COLA is intended to help them offset the effects of living in higher cost areas,” it added.

The court also dismissed the petition filed by Commission on Audit (CoA) auditing personnel assigned to the Government Services Insurance System (GSIS) questioning CCC.

The High Tribunal reiterated its ruling in Tejada v. Domingo that CoA personnel assigned to auditing units of government-owned or controlled corporations can receive only such salaries and allowances paid directly by the CoA out of its own appropriations and contributions.