The CNMI gubernatorial leadership: 1978-2004

Fourth of five parts

FROM 1988 THROUGH 1998

Notwithstanding the fact that the CNMI deficit has increased dramatically since the inauguration of Gov. Juan N. Babauta, the consistent spending by the Babauta administration in several different areas have taken place, e.g., traveling to entice business investment and not adhering to “salary cap” stipulations of the CNMI law, as well as not adhering to “austerity” measures mentioned in 2003 and 2004 by granting salary increases to Department of Safety employees who were promoted. The issue is not giving the DPS employees a raise, but rather granting them a raise when the monetary picture for the Commonwealth has deteriorated and the revenue flow has not kept pace with the amount of expenditures.

Another example of spending of public funds where there has not been a “return on the investment” are the trips taken to Korea, China, Japan, and Los Angeles by Babauta with an entourage of anywhere from six to 60 people to entice so-called “potential investors” for the CNMI. Since Babauta became governor, not one Korean, Chinese, Japanese, or American company has made a commitment that stemmed from the visit by the governor. In addition to the numerous trips that have yet to produce, there was the purchase of a float for the parade held on New Year’s Day in Pasadena. The proclamation by the Babauta administration regarding these trips and promotions for the Commonwealth was, “It will take a year or so for us to realize any benefit from this investment pursuit.” We are two months away from when the New Year’s day parade took place and are there any businesses waiting in the wings to establish their company because of the $250,000 float they saw in the New Year’s Day parade in Pasadena on January 1, 2004?

The question that needs to be posed is, “Why didn’t any of the previous governors feel it was worth the cost and justified the expenditure of several hundred thousand dollars for a float that cannot guarantee the investment of American companies in the CNMI?

With respect to budgetary matters, Gov. Babauta formulated and submitted to the CNMI 13th Legislature a budget of $217.96 million, which represented a 10.18 increase compared to continuing resolution budgetary level of $197.82 established for FY 2001-2002. According to the Bank of Hawaii CNMI economic report for 2003, the total revenues collected for FY 2001-2002—which ended on Sept. 30, 2002—were $219,638,000 and the total expenditures were $237,282,000. The negative difference of $17,644,000 would be added to the existing government deficit.

For FY 2002-2003, which ended on Sept. 30, 2003, the total revenues collected were $199,713,000 and the total expenditures were $212,089,000. The negative difference of $12,376,000 would be added to the existing government deficit that is now currently in excess of $100 million.

For FY 2004-2005, Babauta submitted a budget to the 14th Legislature that reflected $228 million. Notwithstanding the fact the CNMI Department of Finance Secretary projected a revenue collection of only $213 million and that the budget submitted by the governor should be in this vicinity, the governor submitted a budget that exceeded the revenue intake projection for FY 2004-2005 by $16 million. Since the 14th Legislature did not believe that the $228 million budget proposal was realistic and/or feasible, Gov. Babauta revised his budgetary request to $218 million, which is still $5 million over what the Finance Secretary projected would come in from revenues for FY 2004-2005.

In April 2003, Babauta announced to the island community his “Integrated Fiscal Plan.” The IFP called for temporary reductions in benefits to CNMI government employees, tax increases on the hotel and garment industries, an across-the-board reduction in the income tax rebate, and a range of increased government fees. The CNMI Chamber of Commerce vehemently opposed the proposals and suggested that there should be cutbacks in government, i.e., a 3-percent reduction in payroll within a formula that would protect the lowest government wage earners, as well as a reduction of the number of representatives in the House from 18 to 12, which was submitted by Sen. Joaquin Adriano in Senate Bill 13-2.

Since Gross Business Revenues have been steadily declining since 1999, the position and opposition to the IFP of then Chamber president Jay B. Jones was justifiable. According to the BoH CNMI economic report of 2003, the total Gross Business Revenues collected from 1999 through 2002 are as follows: 1999–$221.3 million; 2000—$225.5 million; 2001–$223.2 million; 2002–$200.8 million. The clear downturn in gross business revenues is a clear indication that things are “not getting better everyday” like what Babauta indicated in his State of the Commonwealth speech made on April 30, 2004.

To be continued.

Dr. Jesus D. Camacho
Delano, California