Officials seek ways to finance deficit

In view of swelling budgetary shortfall that is threatening to thrust the Northern Marianas into its worst financial woes, Gov. Pedro P. Tenorio yesterday said he will convene his financial advisers to draw up ways to wipe out the deficit.

However, thinning revenue collections which can hardly meet the funding needs for government operations, make it unlikely for the commonwealth to meet the constitutional requirement to retire the deficit next year.

“We have to reserve money to retire our deficit,” the governor said in an interview, “This means we will have to continue with our austerity measure and find other revenues to retire this without interrupting essential services provided to the public.”

Cumulative deficit grew to a record $53 million in FY 1997 under former governor Froilan C. Tenorio from $32 million posted the previous fiscal year, but the incumbent leader has warned that deficit in FY 1998 could balloon beyond this amount.

Tenorio previously said unsettled bills for various contracts left by his predecessor amounting to $27 million and more than $28 million in tax rebates his administration had to pay for the previous tax year would push the deficit to an all-time high.

In a separate interview, Rep. Karl. T. Reyes, chairman of the powerful House Committee on Ways and Means, suggested that the cash-strapped government set aside money to be raised from local taxes for government payroll and retiring of deficit alone.

Reyes explained funding requirements for construction of key infrastructure, including Capital Improvement Projects, in the Northern Marianas should be sourced from bond flotation or outside financing in order to preserve revenues generated locally for government operations.

“We have to seek outside financing so we don’t have to worry about matching funds for the CIP projects and other infrastructure projects that require appropriation. Any collection realized locally would have to be used to cover payroll and retire the deficit,” Reyes said.

Beginning next year, some $50 million in federal grants will be released to the CNMI government to start several CIP projects, and local officials are optimistic massive construction activities could provide a relief to the ailing economy.

Due to lack of funds, the Tenorio administration is weighing third party financing or bond flotation to meet the dollar-for-dollar match for millions of federal grants.

The commonwealth has identified local sources to meet the matching requirement for at least $58 million worth of projects that will be carried out in the next four year, including some $15 million in public land lease fees and $6 million in interest earned from bond accounts of the Commonwealth Development Authority.

The government said it still has to raise $18 million to bridge the funding gap in the local matching requirement for federal grants under the Covenant Section 702.