Deficit hits $80M million in FY 98

CNMI’s cumulative deficit ballooned to more than $80 million by the end of fiscal year 1998, up by about $23 million from previous record, according to Gov. Pedro P. Tenorio.

He said the deficit would have been bigger had his administration not put in place cost-cutting measures that had drastically reduced government expenditures since assuming office in January 1998.

Tenorio attributed the increase to outstanding accounts left behind by his predecessor which his administration had to pay back.

He did not provide specific details, although a report based on the independent single financial audit of Deloitte & Touche will be released within the next few weeks.

“The latest information we received that was prepared by the independent public auditor shows that we have a deficit of $80 million in fiscal year 1998,” the governor said in an interview.

The preliminary report, received by the Tenorio administration more than two weeks ago, is now under review by the Office of the Public Auditor.

According to Tenorio, portion of the deficit was incurred during the last three months in office of former Gov. Froilan C. Tenorio.

He, however, admitted that his administration also had overspent during the first months of his term in office due to the bloated spending package adopted by his predecessor.

When he assumed office in 1998, the government ran under continuing resolution based on the $246 million spending level passed by the Legislature the previous fiscal year. The ex-governor’s tenure covered the first three months of that fiscal year, from October to December.

Based on a preliminary report of the Department of Finance, the CNMI collected close to $237 million in total revenues during FY 98.

“We did control spending when we put in place the austerity measures so that during nine months of my administration, the deficit was tremendously reduced,” said Tenorio.

“If we had followed the original budget…we would have had more deficit than what we expected,” he added.

Tenorio likewise believed that a large portion of that amount were incurred from meeting the financial obligations he inherited from his predecessor, including outstanding accounts.

But he expressed optimism that the deficit would be kept at bay when an audit of government expenditures during FY 99 is conducted.

“Once the audit takes place, I personally believe that FY 99 budget is almost a balanced budget because we did not overspend what we had collected,” said Tenorio.

Although the government has undertaken belt-tightening efforts for the past 22 months, it does not have a definite plan on how to reduce the deficit, which under the CNMI Constitution must be retired within two years.

The island government has suffered serious cash-flow problems following the economic crisis spawned by the recession in Asia, its main source of tourists and investments. The region-wide currency crunch has pulled down local revenues since late 1997.