Inos urges budget controls ASAP

Finance Secretary Eloy S. Inos said the CNMI has nothing on the table that is significant enough to cushion the impact of the economic contraction.

In a letter sent to Gov. Benigno R. Fitial last week, Inos recommended the immediate implementation of budgetary controls for all government agencies.

In the first two months of Fiscal Year 2009 alone (October and November 2008), the government’s collections were approximately $1.2 million less than the estimate, he pointed out.

In the midst of this continuing decline, Inos said, the CNMI is also challenged by new confirmed reports that three of the last four remaining garment manufacturers have either closed operations or will be shutting down in the next 30 days.

Inos also pointed to recent confirmed reports that Northwest Airlines will scrap its Osaka-Saipan route on March 1, 2009.

The Marianas Visitors Authority reported that this route contributes approximately $112 million into the CNMI economy. The Finance Secretary said the direct government revenue loss from the termination of this direct service is at least $3.5 million.

“Asiana Airline has plans to launch a direct flight on the same route, but not in the volume or load factor that is significant to offset the loss from the Northwest Airlines’ discontinued service,” he said.

Inos said the economic decline as witnessed in FY 2008 continues to adversely affect government revenues, even into the current fiscal year.

“In our preliminary report on revenue collections and expenditures and obligations for last fiscal year, we reported a shortfall in the revenue budget of approximately $4.5 million. This represents a decrease in general government revenues of approximately 4.6 percent over the previous year,” Inos said.

He pointed out that a few of the major assumptions and recommendations inherent in the original revenue estimate have not been institutionalized.

“Accordingly, they cannot be relied upon as viable sources of funds available for current operations,” Inos said, citing the recommended increase in the various business license fees as well as the uncertainty in the collection of receivables.

He said the original revenue budget submitted for FY 2009 was $156.8 million (a net of $1.7 million reduction) as adopted under the current House Resolution 16-2.

The Secretary proposed a revision to this revenue budget down to $148 million, which is a net reduction of $8.7 million.

“Barring any unforeseen and/or extraordinary events which might affect the revised estimates, we determine with reasonable certainty that the amount of internal resources that the CNMI will receive this fiscal year will be approximately $148,084,000,” he said.

In view of the significance of the revision of the budgetary resources for FY 2009, Inos recommended that the governor transmit a special budget message to the Legislature.

“In the message, I recommend we institute immediate budgetary control by mandating proportionate reduction in the continuing budget authority for all branches, offices, departments, agencies, and instrumentalities of the Commonwealth subject to general fund appropriations,” he said.

Inos said the levels of expenditures authorized under the Legislature’s proposed $165.4 million budget for FY 2009 without the benefit of cost cutting measures “provide another fertile ground for uncontrolled spending.”

On Wednesday, citing Inos’ report of an $8.7 million drop in estimated revenue, Fitial rejected the Legislature’s proposed $165.4 million budget for FY 2009.