Inos: Govt could shut down

The local government could shut down as early as July if no austerity measures are passed by the Legislature, Finance Secretary Eloy Inos said yesterday.

Inos, in a press conference with Gov. Benigno Fitial, said the new $156.76 million Fiscal Year 2009 budget passed on Wednesday by the Legislature will force the government to shut down or lay off employees if cost-cutting measures are not enacted immediately.

“Our bank account will run dry by August. Maybe by July, we’ll be gone,” Inos said.

On Wednesday, the budget, which includes $148 million from local resources, became law after the House of Representatives overrode Fitial’s veto.

The government is on track to overspend by $4.5 million again for a second quarter, which will total $18 million in over expenditures by the end of the year, Inos said.

The new budget allows for the employee contribution rate to decrease from 18 percent to 11 percent, estimated to save $4 million, the Finance secretary said. But that means the government will still be overspending by $14 million

With the government spending $4 to $5 million each two-week pay period, it’s easy to see that at the current rate the last three pay periods could go unpaid, Inos said.

“We can just go as we go, and when we’re up to $148 [million] that’s it. We’ll shut the valve,” he said, adding that that is why austerity measures are critical.

The administration proposed a bill introduced in the House of Representatives last month that would set austerity Fridays and unpaid holidays. Two of the set dates have already passed and one more is coming up next week.

“Every pay period we do not act, the amount of cost [reduction] will diminish,” Inos said. “Remember, we can’t go back and elect not to pay a holiday that has already been paid.”

Both Fitial and Inos said they would not allow for deficit spending. And, Inos added, deficit spending for payroll costs isn’t possible.

Unlike contractual obligations that can be paid in the future, the government must make payments every two weeks.

“It’s hard cash every two weeks,” he said. “If you can’t pump out the cash, what kind of deficit is there? You got bounced checks all over the place.”

Fitial said the administration has begun looking at reducing personnel, but the number of people currently employed by the government must first be calculated. They are working with the mayors to determine that now, he said.

The new budget allows for more than 4,000 full time employees. When asked for an estimate of how many employees could be laid off, Inos said he did not want to calculate numbers.

“I’d really hate to go that route. To go through the exercise to do that because it will be a very painful exercise and the consequence is going to be very detrimental,” he said. “I was hoping I would not need to go through that route, but with the situation the way it is, that should be the start of the planning process.”

When pressed, Inos agreed the number is “probably” in the thousands.

Civil service employees cannot be terminated.

The Legislature put the administration in a very difficult situation, Fitial said.

“And the reason why it is going to be very difficult is because the Legislature chose to not work together with the administration, and this thing has got to stop because we are working for the people.”

It’s all political, he said, adding that because he is running for re-election, members of the Legislature did not think he would make touch decisions.

“That’s wrong because I’m committed to do what is right,” he said.