A grim picture of finances

Senate President Edith DeLeon Guerrero (D-Saipan) served as one of the guest speakers of the Saipan Chamber of Commerce general membership meeting last Wednesday at Kensington Hotel Saipan. (MARK RABAGO)

While not adjusted to current numbers, the CNMI government’s finances were already on shaky ground even before the purported financial mismanagement perpetrated by the last administration, based on the presentation of Senate President Edith DeLeon Guerrero (D-Saipan) during the Saipan Chamber of Commerce meeting last Wednesday at Kensington Hotel Saipan.

DeLeon Guerrero, who is the first female Senate president in CNMI history, said that based on the fiscal year 2020 financial report her office recently received, the Commonwealth already had a net deficit nearing $500 million in fiscal year 2020.

“So yes, it’s a $480-million net deficit for the Commonwealth as of 2020. Depreciable capital assets is $362 million, accumulated depreciation of that particular asset is $262 million, and the CNMI’s capital assets are very interesting as we have 28% of useful life for any of our capital assets,” she said.

DeLeon Guerrero said the last figure is “very, very serious” because, in other words, the CNMI badly needs to improve its infrastructure.

“And I’m happy to say that a lot of movement is going on with respect to construction projects here on Saipan and a lot of that is happening also on Tinian with the infusion of the military buildup, and on island of Rota I’m sure there’s many projects going on down there.”

In a further snapshot of the CNMI government’s dire financial situation, she disclosed that the CNMI’s long-term debt stands at $586 million and 214% of its assets were funded by debt. This means for every $1 of asset, the CNMI owes $2.14 to others.”

Total non-capital expenditures amounted to $538 million and, of that number, the CNMI is paying $58.9 million for principal and interest for long-term debt alone, added DeLeon Guerrero.

Moreover, she said $1.7 cents is spent on non-capital for every dollar the CNMI owes and the general fund ratio to debt is $0.37 to $1.

“We need to figure out something much, much better with respect to growing our industries, identifying viable industries for our market, so that we don’t necessarily have a higher percentage of funding through debt in order for us to save our government and to provide public service. We need to figure this out together,” she enjoined Chamber members.

One solution that DeLeon Guerrero is on board with is for the government to finally hire an economist.

“We do not have an economist in the house. How can we sit here and talk about ‘oh this is great and this is the industry for us.’ Why don’t we have an economist in the house of this government? We need that so that this person will tell us exactly what are the vital industries for the Commonwealth, What industries are not good for us because they’re just not going to make money in our area. And so we need that person and we need to find that person [fast],” she said.

With the government’s finances in dire straits, the first to be severely affected are the people and this is reflected on the standard of living in the CNMI the past several years.

“Why is it that continuously we have more than 60% of our people living in poverty? It’s a systemic issue. It’s the government that makes services happen, but yet all of these concerns are still on the books unresolved and people continue to go deeper into poverty. That is not healthy and so what have we done lately?”

And to think that federal grants in the millions of dollars are actually available and unspent, collecting dust in government agencies that could be used for the public good, she added.

“[Delegate Gregorio Kilili C. Sablan] spoke about there’s a lot of money. It’s true. I’ll be honest, when I first became a senator in 2021, I was looking at a quarterly report per department and I saw $20 million-some still sitting in the books continuously being carried over every fiscal year. So I picked up the phone and I called the department secretary. I said, ‘What’s going on and why are these monies not being committed? Why am I seeing continuous carryover of this money?’ And more money comes in and balloons itself. And if they’re not hitting the streets, they’re not becoming shovel-ready. What are we doing? Why are we not making contracts? Why are we not engaging with contractors to build these projects that we need so badly?” she asked.

DeLeon Guerrero also lamented the fact that for a territory that relies so much on federal funds, the CNMI’s record in accounting where these federal monies were spent is sadly dismal.

“We have $47.8 million in questionable costs in the current 2020 audit. What that tells us basically is that we receive all these monies and we’re managing all these grant monies, but we still have this amount of money that comes out as questionable costs. We should be worried. We should minimize questionable costs when we are managing grants.”

The Senate president also said the Division of Tax & Revenue should do a better job in collecting Business Gross Revenue Tax.

“It was revealed in one of the meetings that I attended that there was an audit conducted for retailers that are receiving or licensed to receive food stamp coupons [and there] is $24.8 million of unreported gross revenue tax. Imagine, that’s three years of audit, not today but a couple years ago. This money remains uncollected. Fast forward to more than three years and multiply that by two. What I’m saying is our system itself is hurting itself because we are not enforcing it,” she said.

DeLeon Guerrero said that $24.8 million will come in handy a month or two months from now when the government starts sending termination notices to its employees.

Before the start of her presentation, DeLeon Guerrero said that despite the depressing numbers, it’s important to know your financial situation because it’s always a panacea to what’s ailing you.

“I’m a true believer that if you don’t know your financial standing, you would never figure out where you’re going and how will you grow your economy and how you will attract industries for your market and promote investor confidence. …As businesspeople, it is important to know where we stand financially in order for us to figure out how we’re going to keep this government healthy through a really upfront and honest conversation,” she said.