Difficult choices in difficult times

It’s been some time since I’ve had a chance to sit down and focus my thoughts for this purpose. Analyzing the proposed budget for FY2009 and formulating possible alternatives has been a priority, punctuated often and sharply by the CUC crisis.

The poor condition, both financial and physical, of our utilities and infrastructure is extremely disappointing and dangerous. The possibility of a long-term catastrophic failure to provide power and water is still very real. Suffering through the consequences of intermittent and recurring blackouts gives you some insight into what a long-term islandwide outage could do. It is a serious threat to our social fabric and could bring severe health hazards. We cannot, under any circumstances, allow this to happen.

I defend the decision to bring Aggreko to the island. Aggreko is not a solution, only a short-term measure, allowing CUC to repair existing current engines and assess their future capabilities. The Aggreko contract has already and will likely continue to affect the budget resources in FY2009. The financial considerations are, and must be, subordinate to the ability to provide water and power.

I am a member of the PUIC Committee. We are conducting an oversight review of the CUC, past and present. Our findings will be used to assist in charting the future course of our utility services.

I know some have objected to the idea of even having a conversation with other public agencies about the resources they may have available to assist with the CUC crisis. Exploring every possible resource is part of due diligence, it is not a commitment to a particular course of action.

Getting back to the budget, during the period that the House has been analyzing the Governor’s budget proposal, the Senate Fiscal Affairs Committee has done its own research. This was conducted at a detailed level on each business unit. It also included discussions and meetings with the Executive Branch and members of the House.

We are making many difficult choices, and the needs of the Commonwealth are complex. I wish that the issues were simple, but they are not. Now, more than ever, it is vitally important to shift the budget process to working within our means while also planning for contingencies.

As a legislator my imperative is to focus on providing safety, health, and education to the people of the CNMI, for the lowest possible cost. This means focusing our financial resources in these directions, and streamlining other areas.

This has already started happening over the last few years. Each year of economic decline has produced a corresponding reduction in government resources and employment. In FY2005 the government had approximately $200 million in general fund revenues to work with. In FY2008 that number was down to about $163 million, and for FY2009 we are working with approximately $156 million.

In February 2008, when the available fund projection was lowered from $193 to $163 million, the budgets of health, safety, and education business units were reduced by 5 percent for the second half of FY2008. All other business units dealt with a reduction in excess of 15 percent. It was heartening to see the Legislature work together to minimize the financial impact to the fundamental services of health, safety, and education.

Right now, the Commonwealth’s department, agencies, and corporations employ somewhere over four thousand people. I agree that this is still too much. The Fiscal Affairs Committee has formulated FY2009 budget options that focus on controlling payroll expenditures while preserving funds for services to the greatest extent possible and eliminating unfunded Full Time Equivalent positions.

General information about employment numbers and spending can create misunderstandings. This type of general information can come from the budget bill itself. Specifically, the FTEs approved in a fiscal year’s budget are maximum numbers, rather than actual. Actual employment levels are often below that, if for no other reason than the dollars approved for the same business unit is not enough to sustain the maximum FTEs approved. Business units by law may not use operational appropriations to fund personnel expenses. This year, the difference between the maximum FTEs approved and the actual employment levels will be much less, as we are determined to have better tools to monitor personnel levels and preserve as much of the general fund for services as possible.

Changing the maximum FTE ceiling to closely mirror the actual employment level gives the Legislature a better basis by which we can monitor hiring.

In spite of the fact that hiring does occur, total employment levels have dropped a great deal over the last two years. In 2008, the notable exceptions have been in the Department of Corrections, which must honor mandates from a federal consent decree; and the schools, which must maintain certain levels of performance in order to remain accredited.

In the schools, I would like to see proportionally more money directly reach the classrooms, and the Fiscal Affairs Committee has made an effort to look for ways to accomplish this.

I do not defend all government hiring, but there has been some that is replacement hiring, and some based on a clear and critical necessity. While there is still plenty of room for streamlining employment levels, progress is being made.

I feel it is important that as you read this, that you understand that the Legislature is not immune to the cost cutting process. The Constitution allows an expense account for each member of up to $155,000. I want to clarify that this is not the amount that is or has been actually transmitted to each member’s account for several years. We each have worked with much less than that and it will happen again in FY2009. From this account we pay our staff as well as purchasing office supplies, etc. Yes, it is also the account that funds contributions to non-profit organizations, volunteer programs, school activities, etc., which I do not support.

That being said, we have proven that we can manage with less, and I have hope that the lesson will carry forward, with frugality becoming an integral part of the process that funds these accounts. There is still a great deal of room for improvement in this area.

As a public servant I have a responsibility to participate in any austerity measures that may be implemented. I have done so, and have an understanding of some of the difficulties it brings to wage earners and their families.

The federalization of immigration will lower some staffing needs, and those changes are scheduled to start during the fiscal year we are currently considering.

We will soon elect a delegate to the federal Congress, and at that point, the costs of funding a Resident Representative to the United States will end.

Appropriation levels approved in a budget are maximums, just like the FTE maximums. Each time a mid-year budget reduction is implemented, the amount received by the business units is less than the maximum originally approved.

On a more long-range level, I’ve been advocating an organizational review of the government, a desk audit being part of that process. The Executive Branch is also exploring ways by which this can be accomplished. There are opportunities for eliminating duplications of effort, and streamlining operations that would be clearly identified by this type of review. The issue of impartiality points to the need for a third party from off-island to do the work. Part of the cost vs. benefit analysis before committing to such a process is determining how to enforce the results.

Our current budgeting process needs improvement. Existing policies and programs tend to be taken for granted, and the fundamental need to review priorities, program effectiveness, and service outcomes is often overlooked. The budget options formulated by the Senate Fiscal Affairs Committee are a product of questioning the status quo and prioritizing funding for effectiveness and improvements to public services.

A business-as-usual approach to this and future budgets will not work. People are challenging fundamental government operations, questioning its efficiency and effectiveness, and expressing distrust of their representatives. It is a clear message that all areas and processes of the government, including the formulation of a budget, must shift to focusing on prioritizing performance and results.

The FY2009 budget options formulated by the Fiscal Affairs Committee propose to impose more responsibility on department heads so that they focus on program effectiveness and not just on the preservation of existing programs and funding levels.

We are beginning a transition from a predominantly publicly employed economy to an economy where the majority of residents are employed in the private sector. Over time, the changes in immigration, labor, and the minimum wage laws will facilitate the transition. It is necessary, as the government must move from supporting the people through providing employment back to its fundamental mandate of effectively providing the basic services of health, education and safety. This shift is and must be a process, not an event.

I supported assisting Mr. Pellegrino’s non-profit trade school. He took it upon himself to make a personal commitment to the betterment of his community and made the school happen, rather than waiting for or relying upon the government. The venture is already showing results. This school will not serve the needs of every person who will be moving from public to private employment, but endeavors such as these are a transitional avenue for some.

There are others currently employed by the government who are qualified to immediately hold positions in the private sector. Those private sector jobs will not be open just because there are qualified candidates. Attrition will be the key to their availability. Then it is the responsibility of a candidate to actively seek a position, present themselves and their credentials in a professional manner, as well as prove themselves through performance on the job.

Even though the day-to-day functioning of the government continues to meet critical services, the Defined Benefit Plan is still underfunded. If we closed all government operations, shut down all public services today, and simply cut a check to the NMIRF for the entire FY2009 estimated General Fund revenues, there would still be an unfunded liability, so this is obviously not a viable option.

The recent drop in the value of the Retirement Fund’s investment portfolio added millions of dollars to the unfunded liability. Even though these losses are from investment performance, the financial responsibility does not rest on the NMIRF but on the central government, meaning ultimately individual taxpayers like you and me. The solutions for fully funding the Defined Benefit Plan lie in continued long range planning and maintaining this obligation as a high priority. This is another one of the tasks I will be focusing on once a budget for FY2009 is in place.

These are only some of the issues that are affecting the short- and long-term future of our Commonwealth. This 16th Legislature is taking the responsibilities of their office very seriously. I have the honor and challenge of participating in finding solutions to these and other issues. Although the debate often runs lively and hot, I cannot fault the dedication and sincere effort being applied to the tasks in front of us.

I look forward to receiving the FY2009 budget proposal from the House of Representatives and working with them, my fellow senators, and the Governor to get a final version implemented swiftly.