Frica wants to stop deficit spending

Sen. Maria Frica Pangelinan hopes to introduce an initiative barring the government from future deficit spending.

The current law states that if a budget is not passed, appropriations are based on the last-passed budget. But with revenue declining each year, not passing a budget means the government often spends more than it really has.

“Right now…the law says if we do not pass a budget we spend at the same level,” she said. “It allows for deficit spending. We shouldn’t do that. If we do deficit spending nobody is held liable. We need to correct that and say, ‘If the last budget that was approved is higher than the projected revenue of the current budget, then we should follow the current budget projected revenue.’”

Since 1994 the government has been accumulating a fund balance deficit. As of Sept. 30, 2008, the deficit balance is estimated at $229 million and counting. The CNMI overspent by $4.5 million during the first quarter of this fiscal year.

The government had been on a continuing appropriation budget until recently, when a new Fiscal Year 2009 budget law of $156.76 million was passed.

Since a budget was not passed for FY 2008, the CNMI had been following the 2007 budget of $163 million.

Lawmakers probably never imagined they would have to worry about the tax base declining, Pangelinan said.

“Nobody ever anticipated that it would be lower, so there’s that gap of a deficit. I think its necessary to cut off this deficit spending, and it ties off the hand,” she said of the initiative she hopes to get passed before she leaves office.

The finance secretary, Pangelinan said, probably feels it is okay to incur deficit spending because the Constitution allows it.

It’s been going on for a while, she added.

“Unfortunately, when you really look at deficit spending, it occurred during the bubble economy, when we had the money,” she said. “We had money coming in that we were not monitoring, but you know it catches up. Like everything else, if you keep taking the risk it will not bounce, it will bounce. What is happening now is we did not save for a tough time like this.”

Creating a reserve fund to cover deficits is also an option, Pangelinan said, adding that most states have such a fund.