Revised $114M budget allots more to Fund, Medicaid, medical referral

The underlying assumptions in the governor’s revised budget also include transitioning all active employees into the U.S. Social Security retirement program.

“This change, when effectuated, reduces the employer contribution for all active DB [defined benefit] members from 37.39 percent to 6.20 percent and an increase for the DC [defined contribution] members from 4 percent to 6.20 percent,” Fitial said in his letter to legislative officials.

By accepting the $12 million increase in projected budget, the Legislature would in effect be agreeing to the transition to the U.S. Social Security for active members, according to House floor leader George Camacho (Ind-Saipan) yesterday.

The governor cited expected collection gains from business gross revenue tax, wage and salary tax, and hotel occupancy tax for the revised 2013 budget.

Fiscal year 2013 is from Oct. 1, 2012, to Sept. 30, 2013.

The revised budget still brings the CNMI back to the levels of over 20 years ago.

House Ways and Means Committee chair Ray Basa (Cov-Saipan) and Senate President Paul Manglona (Ind-Rota) separately told Saipan Tribune yesterday that they are poised to adopt a new concurrent resolution to reflect the governor’s revised 2013 budget submission.

The Senate leadership received the governor’s revised budget at 9:25pm, and the House leadership, at 9:51pm on Monday, beating the July 2 deadline for revision. The deadline was supposed to be July 1, but because it fell on a Sunday, it was moved to July 2.

“Our approach to this revision is to revamp our existing retirement program, restore efficiency in government operations, and maintain our commitment toward continued funding to the [Fund],” Fitial said.

He said his revised budget is “balanced”-where the total amount of proposed expenditures does not exceed total estimated resources available for appropriation.

Press secretary Angel Demapan said yesterday he believes the administration “has proposed, as revised, a very workable expenditure plan that addresses all the major areas of concern thus far.”

“Moreover, after two years of austerity, the administration believes that we’ve reached a point where government employees could return to earning wages at the full 80-hour work week,” Demapan added.

Lt. Gov. Eloy S. Inos, who oversees government finances, said in a chance interview Monday afternoon that a $12-million increase in projected budget for 2013 was to be expected.

‘More disposable income’

Fitial told lawmakers that a “positive effect” of the transition to U.S. Social Security will trigger an increase of 6.3 percent in take-home wages for all DB members; thus more disposal income will be spent in the local economy resulting from the planned implementation.

He said it will also save the government 31.19 percent in employer contribution and seals the unfunded liability from growing further.

The government owes the Fund some $320 million in unpaid employer contribution plus interests.

“The government’s debt to the [Fund] becomes more manageable first by developing a plan to satisfy its obligations to fulfill the payment toward the unfunded liability,” Fitial said.

The Fitial administration is drafting legislation to effectuate this change.

Camacho said the next House session could be on Friday, wherein the House will adopt a new concurrent resolution on the revised budget submission.

“The governor’s priorities are similar to what we have anticipated-going back to 80 hours, more money for healthcare and the Fund,” the House floor leader said.

Fitial’s revised budget also lifts the austerity Friday or the 16-hour work cut every two weeks. The austerity imposed on all federally funded programs will also be lifted.

‘Cautiously optimistic’

Rep. Ray Tebuteb (R-Saipan), a member of the House minority bloc, described the increase in projected revenues as “very interesting.”

“I just hope it’s not because it’s election year. I am cautiously optimistic about all these things. What’s ‘more’ to some may not be ‘more’ to others. And these are just projections. We are projecting more yet we owe a lot of vendors a lot of money. And we still have a bloated government,” Tebuteb said.

The Senate president, meanwhile, said it’s “good news” that the administration is projecting increased revenue in 2013.

“The Senate has taken the position that if the government has to cut costs, it has to cut hiring and cut its other expenditures, and not take it from government employees’ pockets. .As you may recall, the Senate didn’t want 16-hour cuts and we were requesting only eight-hour cuts that’s why the Senate and the House had a budget deadlock and there was a shutdown,” he said.

The Senate conceded to the House and administration’s 16-hour cuts to end the shutdown that forced over 1,000 government employees temporarily out of job for days.

Budgetary resources

The projected total budgetary resources for 2013 increased by $12.97 million, or from $120.671 million on March 30 to $133.641 million as of Monday.

This gross amount has been adjusted to reflect debt service appropriations, earmarked funds and other legal set-asides, resulting in net available resources of $121.007 million.

“The anticipated gains in revenues for [fiscal year] 2013 are in business gross revenue tax, wage and salary tax and the hotel occupancy tax,” Fitial said.

Although the failed launching of Saipan Air will retard any increase in the number of seats arriving directly from the China and the Japan markets, Fitial said the focus is to “mitigate what was to become a reality by looking at our available alternatives such as providing incentives to those airlines with a commitment to increase the number of seats to the Northern Marianas and promoting a vigorous campaign to maximizing all available seats if we want to grow our tourism economy within our existing regional markets.”

The governor’s budget submission still suspends certain earmarks related to the nonresident worker fund fees and general fund poker fees.

Considerations

Fitial’s revised budget has six specific considerations.

First, it vacates the existing retirement program for active defined benefit and defined contribution employees. Fitial has placed the Fund under a state of emergency, and will transfer the agency under the Department of Finance.

Second, it transitions all active government employees into the U.S. Social Security retirement program.

Third, it lifts austerity by restoring 16 work hours to all affected government employees.

Fourth, it increases Medicaid matching by an additional $1 million.

Fifth, it increases Medical referral allocation by an additional $2,135,408.

Sixth, it allocates $11 million in continued funding for the Fund. This reflects a $1-million increase from his original submission. Fitial said this is to cover a portion of the unfunded liability for unpaid employer contribution.

“The effects of the application indicated above resulted in a net budget of $121.007 million,” Fitial said.

This net budget requirement is further reduced by expenditures being absorbed by Compact Impact reimbursements and transfer of eligible expenditures into non-general fund sources of $1.907 million and $4.780 million, respectively.

Others

Fitial didn’t change the original allocation of $2.25 million to the Commonwealth Healthcare Corp.

The administration also maintains a conservative projection related to the $150 fee imposed on every foreign worker petitioned for a Commonwealth-only worker permit.

Fitial said the revised budget also increases the allocation for the Department of Community and Cultural Affairs after transferring the Historic Preservation Office, the Chamorro/Carolinian Language Commission, and the Arts Council into the Indigenous Affairs Office under the Office of the Governor. The bill that effectuates these changes remains with the House.

Fitial urged collaboration with the business community to address concerns on the $15 fee on every transient occupant in the CNMI, revenues from which will be used to promote the CNMI.

The governor also continues to encourage lawmakers to pass other revenue-generating measures “that will be earmarked towards the unfunded liability with the Retirement Fund.”

Demapan, when asked to cite examples of these revenue-generating measures the administration wants passed, said these include legalizing casinos on Saipan and the proposal to allow large scale hotels and resorts to acquire the public lands they occupy fee simple.

“The administration is also hopeful that lawmakers will work together to explore other viable options that will aid the Commonwealth generate much needed revenues. We are open to listening to their recommendations as well,” the press secretary added.