$193.5M eyed for FY07

The Fitial administration proposes to further reduce the government’s annual appropriation to $193.5 million for fiscal year 2007.

This is a $5-million cut—or a 2.5 percent decrease—from the current fiscal year’s already reduced budget of $198.5 million, and nearly $20 million lower than the last enacted operating budget of $213 million.

In his budget transmittal letter to the Legislature, Gov. Benigno R. Fitial said total submission by government offices totaled $251.8 million “but it is imperative that we all must continue to exercise great fiscal prudence.”

He said that the $193.5 million proposed budget “will be sufficient if managed accordingly to provide for essential public services, address our obligation to the Retirement Fund in a fiscally responsible manner, and fund an economic recovery plan.”

Fitial said the FY 2007 budget would be “our first balanced budget in recent years.”

AFFECTED PROGRAMS

The reduced budget will mean the elimination of certain employee benefits, removal of vacant positions and termination of funding for capital improvement equipment, implementation of a flat tax system, among others.

In view of less spending power, the administration proposes the following:

– Health insurance to be fully funded by the employee;

– Elimination of all overtime funding. If OT is unavoidable, it shall be funded from a designated reserve account, subject to approval of a centralized expenditure authority;

– Eliminate all lump sum payments of accrued leave funding. To do this, exiting employees shall be placed on terminal leave in advance. In case where accrued leave is not exhausted, positions vacated must remain vacated for a period equal to accrued leave paid;

– Delete all vacant positions;

– To fund the Commonwealth Health Center for costs of services rendered to Medicaid qualified patients exceeding federally authorized reimbursement and indigent patients only; and

– Eliminate all capital equipment acquisition funding.

Fitial also asked the Legislature to pass the administration’s proposed bill “to save the Retirement Fund,” approve a $40-million revenue bond for the financially bankrupt Commonwealth Utilities Corp., limit the unfunded liability, and stabilize the required employer contribution.

To increase government resources, Fitial said his administration would implement a flat tax rate “to ensure that all taxpayers pay their fair share of taxes to support the delivery of public services as keeping the economy on an upward trend.”

SOME TO RETAIN BUDGET

According to House Speaker Oscar M. Babauta, the FY 2007 reduced budget will be “absorbed mainly by the Executive Branch.”

He said the Legislature and the Judicial Branch, as well as the Public School System, “will retain their FY 2006 level.”

He said the 2006 level refers to the revised $198.5 million budget.

He said the Legislature, which gets an $8-million budget a year, still needs to cut costs.

“Even if the governor has mentioned and the Finance and budget experts said in our meeting this morning that the Legislative branch and other agencies would keep their budget, I would caution members of the House to continue to exercise prudence so that we may also able to contribute to the cost-saving program,” said Babauta.

CENTRALIZED EXPENDITURE AUTHORITIES

The Fitial administration proposes to create a central expenditure authority from each branch of government—Executive, Judiciary, Legislature—to control government spending.

Management and Budget special assistant Tony Muna said yesterday that expenditure authorities, a senior position, shall manage the reserve accounts for overtime, lump sum accrued leave payments, full-time equivalents, and capital asset acquisition.

“It’s going to be a centralized expenditure. All requests are subject to approval by the expenditure authorities,” he said.

The administration calls this approach “cost containment program.”

Fitial, in his letter, said that “ultimately, the challenge will be on the part of the respective [expenditure authories] to ensure that they manage their expenditures within their respective allocated resources and not to exceed such resources.”

UTILITY RATES TO RISE

Fitial said that all business units or government units will be paying their own utility bills from their approved resources effective FY 2007, which begins on Oct. 1 this year.

“We can only expect that utility rates will rise respective to the uncontrollable cost of fuel,” he said.