CNMI deficit soars to $218.2M

The Commonwealth is facing a mounting deficit that has climbed to $218.2 million, a $30.1 million jump since the last estimate, despite a host of controversial steps Gov. Benigno Fitial’s administration has taken to cut costs, according to a new independent report released Monday by the CNMI Office of the Public Auditor.

Declining tax revenues due to the slow death of the Commonwealth’s once prosperous garment manufacturing industry and increasing debts the government owes the NMI Retirement Fund, the pension fund for its employees, are the major factors contributing to the deficit, the report says. Efforts to curb government spending, it adds, have resulted in only a modest cost savings of $15.9 million.

The new report comes as House lawmakers on Capital Hill are preparing to draft legislation based on the Fitial administration’s proposed fiscal year 2009 budget. The deepening deficit, OPA chief Michael Sablan said in an interview, is a sign the government’s financial status is going from bad to worse.

“What the deficit tells us is that the financial condition of the government has worsened as of one year ago,” Sablan said.

Unpaid Retirement Fund contributions and other employee benefit-related debts, the report says, stood at $175.1 million at the close of fiscal year 2007. Revenues collected in the general fund meanwhile dropped $32.8 million from the previous year to $159.9 million.

Much of the revenue drop is due to garment industry’s demise, Sablan noted, with projections suggesting that user fees—the tax on shipments of exports like manufactured clothing—will reach an eventual low of $1 million a year compared to an annual high several years ago of $39 million. Sablan noted the reduced revenue is a “sign the garment industry is winding down” in the Commonwealth.

Responding to the deficit, the Fitial administration has already implemented a series of controversial steps to the cut government costs, such as reducing salaries, cutting back on the operating hours of government offices and cracking down on expenses like utility and travel costs.

“This administration has not added to the deficit,” said Charles Reyes, the governor’s spokesman. “We have come in and tried to curtail it.”

Yet whether those cost-cutting moves will have a significant impact remains to be seen as the government’s total expenditures have dropped a mere 7.6 percent, according to the report, far less than the growth of the Commonwealth’s rising debts. The bulk of those cuts was salary and wage reductions, an expense that decreased 7.4 percent overall to $101.2 million under the prior total of $109.3 million.

Meanwhile, Saipan is hosting more than 200 public auditors for an annual conference of the Association of Pacific Islands Public Auditors. The event, held through the rest of the week at the Saipan World Resort, include auditing and financial courses for government auditors. CNMI Attorney General Matthew Gregory, in a speech before the conference attendees yesterday applauded the work of OPA’s Sablan, who is preparing to depart from the agency.

“Today, he has shown that people from the CNMI can police themselves in matters of government ethics and public corruption,” Gregory said. “The naysayers said it couldn’t be done; he has proved them wrong.”