Govt incurs $18.1M deficit in ’08

Overspending and slow revenue collections pushed the Commonwealth government to a deficit of $18.1 million in the 2008 fiscal year, according to the Department of Finance.

Finance Secretary Eloy S. Inos, in a preliminary report to the House of Representatives, said the government incurred the deficit after earning $4.5 million less than expected, and spending $13.6 million more than continuing appropriations.

Because of failure to pass a budget for FY2008, the government went on “continuing resolution,” spending at the prior year’s level of $160.1 million. However, the government collected only $155.6 million, and spent $173.7 million.

“As expected, this preliminary report shows total expenditures and other financing uses exceeding revenues and other financing sources, closing fiscal year 2008 at a budgetary deficit of approximately $18.1 million,” Inos said.

He added that the report was “preliminary and unaudited.” A final report will be issued by Dec. 31 and it will include the final audit report for FY2008.

Revenue shortfall

In his report, Inos attributed revenue shortfall to the significant decline in business gross revenue tax collections, which reached $3.4 million less than estimate, another $2.6 million less in excise taxes, and at least $2.6 million less in garment user fees.

“Although a notable increase [$2.6 million] in hospital collections was achieved, and modest increases were realized in various license fees, nonresident worker and alien registration fees, and MPLT interest income, such increases were not significant enough to offset the combined effect of the severe decline in the former three major revenue sources,” Inos said.

He added that the much anticipated “cover-over” taxes—or taxes collected by the federal government from Northern Marianas workers since the islands became a U.S. commonwealth—have not been received.

Excess expenditures

The excess expenditures, Inos said, were a combination of personnel costs accounting for approximately $8 million, $3.5 million in operations, and utilities expense of $2.1 million.

Inos said the excess payroll cost resulted mainly from the lack of austerity measures in place during the fiscal year.

He added that the projected decrease in personnel outlays due to reduction in employer contribution to the NMI Retirement Fund was not achieved because the anticipated savings were “plowed back into the system and expensed by way of fuel subsidy to [the Commonwealth Utilities Corp.].”

“If that subsidy was in fact treated as payment of government utilities, [the] $2.1 million over-expenditure in utilities expense could and would have been averted,” he said.

Further, Inos said the $3.5 million in excess expenditures under the operations category was primarily attributed to excessive medical referral costs and unbudgeted local share of Medicaid expenditures.

“These expenditures are net of Compact Impact fund transfers. The unfunded and unremitted portion of the employer contribution to the NMIRF calculated at approximately $16.3 million has not been accrued and therefore, does not affect the expenditure amounts reported,” he said.