Governor junks FY05 budget

Gov. Juan N. Babauta vetoed in its entirety the proposed budget for fiscal year 2005, calling it unrealistic and unresponsive to the actual needs of the government and saying it contains “errors and accounting tricks.”

The governor, who justified his action during a press conference yesterday morning, said that House Bill 14-250 “is a denial by the Legislature of the real costs of providing services to the public.”

The Legislature had approved $217.7 million for this fiscal year’s budget. The administration had asked for $226 million.

The governor listed the following as reasons for his veto action:

* the budget bill is not balanced;

* it shortchanges the CNMI children’s education;

* it does not fund healthcare and public safety at the known level cost;

* it limits tourism spending, just as tourism is expanding;

* it cuts funding for utilities, putting further pressure on the Commonwealth Utilities to raise rates; and

* it promises wage increases, but fails to provide real funding to keep the promise.

In his transmittal letter to the Legislature, a portion of which he read during yesterday’s news briefing, the governor said that the bill also contains “errors and accounting tricks, and makes promises to our government employees that cannot be kept.”

“It is unacceptable to a public that wants responsible management in government, and certainly should not become a law,” he said.

Expounding on the matter, Office of Management and Budget director Ed Tenorio said that the Legislature added Tobacco Control Funds twice, “making the $217 million not the real number.”

“It’s not the correct number when you add up all those figures. So right there, it’s an error. If you add up, it’s $220 million, and they are showing $217 million. How can you approve an unbalanced budget? You can’t,” said Tenorio.

“We can’t spend the same money twice,” added Babauta.

Further, Tenorio indicated that the Legislature may not have done much research on the fiscal year 2005 budget.

“I’m afraid that the Legislature didn’t look at 2005,” he said. “When we reviewed the budget, right away we figured that what they did is to essentially use the continuing resolution and add the $4 million additional revenue, [increasing the amount] from $213 million to $217 million,” he said.

The Legislature-approved budget included a $4 million appropriation for within-grade increases and wage adjustments.

Tenorio said the Babauta administration’s submission adequately covers all the WGI (Public Law 10-76) that needed to be paid up.

Further, Babauta considers the bill not a sound fiscal plan, saying that it fails to supply realistic funding for core services: education, health care, public safety, and economic development.

He said the budget bill actually only provides $37.7 million for the Public School System, which he said is actually a cut from the current $3,378 to $3,242 per student .

“It’s another backward step in the investment we make in our children, which peaked in 1997 with spending of $4,629 per student,” he said.

H.B. 14-250, he said, “deceptively” maintains that a $50 labor fee increase per nonresident worker shall be provided to PSS.

The line item for this increase (section 201), is specifically excluded from the total local resources identified, and therefore, cannot be appropriated.

If on the other hand, the $50 per application appropriated is part of the nonresident worker fee revenue identified at section 201, then these funds are already appropriated elsewhere in the budget (section 9103) and is a double appropriation.

“In either event—and despite the promise of the subsection title: PSS additional appropriation—no additional funds have been appropriated in section 9103 for PSS,” he said.

On the utilities payment, Babauta said the bill only provides $4 million, which is way below the needed $7.8 million annually.

The governor said the budget bill underfunded public health and public safety. The DPH was appropriated $36.9 million and DPS $13.1 Babauta pointed out that DPS expenditure was $16.3 million in FY 2001, $15.9 million in FY 2002, and $15.9 million in FY 2003; while DPH had $45.5 million in FY 2001, $38.5 million in FY 2002, and $40.8 million in FY 2003.

Further, he said the budget contained a “short-sighted” decision to cut funding for the Marianas Visitors Authority.

“How has the Legislature responded to the obvious lesson that by investing in the economic activity in which we have the greatest natural advantage we can grow and prosper by cutting the funding for the agency that takes the lead for the growth?” he asked.

The MVA funding is currently at $6.1 million; the budget bill reduced it to $5.9 million.

Lastly, the governor said that the budget bill “promises increases in compensation for government workers, but does so in a way that will never happen and amounts to simple deception.”

The budget bill, he cited, provides that WGI and other wage adjustments for government employees would be funded in part with 30 percent of lapsed funds every quarter.

“This is false. The truth is there can be no unused funds in a budget that funds health care, public safety, and government payments to CUC below their actual cost,” he said.

Also, the bill partly sets aside funds generated from the tax amnesty law but these, he said, should be applied to public health, public safety, utility services, and MVA.

The Babauta administration maintains that its $226 million budget request was “based on the realities of what the Commonwealth needs and an honest reckoning of the real costs of providing those needs.”

The administration submitted its budget proposal on April 1, 2004. Later in the year, it submitted over $6 million in additional projected revenues following the enactment of two tax laws, as well as $1.5 million in new revenues from the $50 labor fee increase.

In September, the House approved a $212.7 million budget. The Senate raised this to $217.7 million after getting a $5.1 million additional revenue projection from the administration, which the Legislature opted to use for salary adjustment.