Resolving a fiscal crisis in the CNMI government

During the first week of October, House Speaker Benigno Fitial conveyed to the media that “88 percent or $166.647 million of the $212.65 million proposed (now $218 million) FY 2005 budget is designated to cover the expense of over 5,000 CNMI government employees.” He went on to say that the only way to slowly ease the difficulty is to help reduce the deficit. The response of the CNMI House was the unanimous approval of a 1-percent deficit reduction plan.

Fermin Atalig, CNMI Finance Secretary, asserted that the “deficit” included “overspending” by previous administrations that operated the government without approved resources. Clearly, this assessment does not apply to Carlos S. Camacho and Pedro P. Tenorio during the first 12 years of the CNMI, according to the Bank of Hawaii Report of 1995. Furthermore, Atalig did not mention that since the inauguration of Juan Nekai Babauta in January 2002, the significant “overspending” involves salaries and benefits, i.e., from $113 million when Pedro P. Tenorio left office in January 2002 to a staggering $166.647 million according to Speaker Fitial—a $54 million dollar increase over the past three years.

When Babauta assumed the gubernatorial leadership in 2001, he immediately issued two executive directives continuing the “austerity measures” initiated by the Pedro P. Tenorio during his last year as governor. In his State of the Commonwealth address in April 2004 he stated, “The CNMI government has less employees and we have reduced our expenditures by $24 million.” What the governor said in his address and the figures mentioned by Speaker Fitial recently to the media are clearly not congruent.

Since the budgetary deficit for the CNMI government has increased substantially due to “overspending” by the Babauta administration, then one can safely say that the current governor has not adhered to those austerity directives he submitted over the past three years and is directly responsible for the increases over and above what his gubernatorial predecessors left him with.

Because of the dilemma involving the budgetary deficit for the CNMI and enormous percentage allocated to employee salaries and benefits for FY 2004-2005, Rep. Claudio Norita, Covenant, introduced House Legislative Initiative 14-8 which aims to get rid of lawmakers’ salaries and expenses, which is estimated to be in the vicinity of $3.2 million. Some senators in the Senate, e.g., Pete Reyes and Paul Manglona, have expressed support for Norita’s bill.

In terms of taking members of both the House and Senate from “full time” status to “part-time” status, it should not be incorporated. The fixed per diem for each session would have a positive fiscal impact as far as the budget is concerned. However, the people who are elected into office must be able to work “full time” to enable them to work on legislation that will be for the greater good and in the best interests of the entire island community. Not being able to put in the time to formulate and deliberate on legislation, which will be for the greater good, will hurt the island community in the long run.

I know of no elected official in the capacity of a congressman or senator who is working “part-time” in the mainland. It is incumbent of them to not only put in the quality time to serve their constituents, but ensure that the legislation that is formulated by them enables the government to move forward and not backward in terms of programs and effectively serving the taxpayers who are the backbone and support of the various governments, e.g., state and federal.

In lieu of looking at the salaries of the members of both chambers of the CNMI government, there should be “an official audit” conducted by the Office of the Public Auditor regarding the significant increase in the number of government employees since Babauta became governor. Moreover, there should be an analysis in terms of the justification for all of the “special assistants” who are making salaries over $40,000 with benefits. The question that should be posed is: Can one person be a special assistant for several projects, in lieu of paying several special assistants with benefits? The taxpayers of the island community might find it prudent to see the CNMI government “consolidate” positions and reduce the amount of funding for salaries and benefits from the 88 percent Speaker Fitial mentioned to a significantly lower percentage, e.g., 44 percent or half of what it is currently.

Another pertinent question that must be posed is: How many policy and legal advisers does a CNMI governor need to have? As far as legal advice is concerned, I believe that the Attorney General is the chief law enforcement officer and advises the governor accordingly. If this is the case, why would Babauta need to have another “legal adviser” on the payroll, making a salary and benefits that would in the vicinity of about $100,000?

The recent approval for the increase of the budget from $213 million to $218 million may add to the current deficit problem if, for whatever reason, the CNMI does not receive it. Since it is always a “good idea” to be conservative when you are faced with a fiscal deficit, the $5.1 million anticipated revenues should have never been added onto the $213 million.

If it was not added to the budget and spending was below the $213 million budget, then the $5.1 million would be excess revenues that could pare the deficit down by several million and at the same time pay for outstanding payments in the area of Retirement Fund, CUC, and the unpaid medical bills mentioned in the OPA report.

If, for whatever reason, the $5.1 million does not make it to the CNMI and the Babauta administration spends up or more than the $218 million budgeted for FY 2004-2005, then the deficit will increase by whatever is spent versus what is taken in from revenues. Since the CNMI finance secretary has already made revenue projections for FY 2004-2005 to be in the vicinity of $213 million, then to go beyond this figure even if we’re told that some federal funding was enroute is essentially gambling with fiscal stability.

Hence, the recent legitimate concern voiced by the House minority leader Heinz Hofschneider and his colleague, David Apatang, regarding the $5.1 million being highly speculative as far as the anticipated additional revenues being realized; and the poignant fact that it is a “constitutional mandate” for the CNMI Legislature to put forth a concerted effort to retire the deficit, should not be shunned, taken for granted, and/or considered absurd.

The “only way” the deficit the CNMI government is plagued with will be reduced is to cut spending substantially and take what you save from adhered austerity measures, as well as any of the other funding like the $5.1 million, and apply it to the deficit. This is a “cardinal rule” for any organization in the business sector if they expect to stay afloat and continue to thrive in a marketplace. Although the CNMI government is not a “business” per se, it must begin to think like a successful business in order for them to eradicate the current red ink and allow the CNMI government to grow and become progressive for the island community in the near and distant future.

Dr. Jesus D. Camacho
Delano, CA 93215