NMI deficit at $25.8M in FY 2011

Gov. Benigno R. Fitial told the Legislature that the CNMI government’s budget deficit—a combination of overspending mainly in the Department of Public Health and overall revenue shortfall—reached over $25.8 million in fiscal year 2011 when the budget was only $122 million.

This was a lot more than the $18.586 million deficit in fiscal year 2010.

In fiscal year 2011—from Oct. 1, 2010 to Sept. 30, 2011—total spending and other financing uses were over $147 million, “exceeding total revenues and other financing resources, closing fiscal year 2011 with a deficit in the amount of $25,806,718,” Fitial said.

This, despite 16-hour work cuts, unpaid holidays and other austerity measures that the Fitial administration put in place purportedly for the government to be able to live within its means.

Fitial, in his annual report to the Legislature for fiscal year ending Sept. 30, 2011, said this condition was attributed to a shortfall of $565,456 in revenue collections for the year and $25,241,262 in expenditures and obligations over amounts appropriated in Public Law 17-21 or the fiscal year 2011 budget law.

The governor issued the annual report to Senate President Paul Manglona (Ind-Rota) and House Speaker Eli Cabrera (R-Saipan) on the last day of submission, Dec. 31.

The $25.8-million deficit was more than the administration had earlier anticipated at $15 million to $20 million.

But the governor said there might be changes in his report’s figures once auditors are done with their CNMI Single Audit for fiscal year 2011.

The Senate president, in a phone interview yesterday, said he was a “little bit surprised” that the deficit was this high, although based on previous years, the overspending was mostly a result of hospital expenditures.

“I am hoping that next year we won’t see this much overspending because the Department of Public Health is now a corporation,” Manglona told Saipan Tribune. DPH became Commonwealth Healthcare Corp. on Oct. 1, the start of fiscal year 2012.

Rep. Froilan Tenorio (Cov-Saipan) separately said yesterday he knew all along that the government will have a revenue shortfall and overspending because of the March 2011 quake and tsunami in Japan that heavily impacted CNMI tourism arrival.

Tenorio said he voted against the budget bill because he estimated that the projected revenue won’t even reach $100 million, and he said the deficit of $25.8 million for fiscal year 2011 proved his point.

“So who does the governor blame now on the deficit?” he asked.

When told that overspending was mostly in the area of DPH, he said DPH was under the Executive Branch and not under the Legislature or the Judiciary.

Tenorio, a former governor and former House speaker, hopes that the revenue shortfall and overspending will help senators realize that it’s “about time to pass the casino bill” to generate additional revenue, decrease the deficit, and restore the 80 hours of work biweekly among government employees.

“It’s also time we realize we cannot afford to be rebating taxes when we’re broke,” he added.

Tenorio also said he will continue to push for the repeal of the qualifying certificate program which he said the CNMI “cannot afford anymore.” The QC program provides tax incentives to certain new and existing investors.

Revenues

Fitial, in his report to the Legislature, said actual revenue collections reached only $121,434,544, or $565,456 less than projected for fiscal year 2011.

This was mainly because of a decline in business and economic activities that resulted in business gross revenue tax and income tax collections at $1,318,772 and $2,393,045 less than the respective estimates. The Fitial administration reported a shortfall of $3,334,076 for this revenue category.

However, this was partially offset by favorable collection activities in the total excise tax, liquid fuel tax, and beverage container and other tax categories. This reduced the net shortfall on the total taxes category to $2,186,077.

A minor shortfall was realized in the licenses and fees group, but charges for services netted favorably at $163,310 which was composed of $725,000 in additional hospital receipts and offset by a shortfall of $561,690 in indirect cost and customs, immigration and quarantine reimbursements, and miscellaneous charges and services. Interest income received from the Marianas Public Land trust also exceeded the estimate by $900,000.

Spending

The revised fiscal year 2011 budget was only $122 million, from $132 million. However, the government overspent by $25,241,262, resulting in total expenditures and other financing uses of over $147 million.

Total personnel spending exceeded budget allotments by $4,176,770.

Total expenditures and obligations under the “all others” category exceeded appropriations by $21,064,492, resulting in a net over expenditure/over obligation or “deficit” of $25,241,262.

Fitial said the bulk of the expenditures for the fiscal year were attributed to “excessive expenditures” in the Department of Public Health’s Commonwealth Health Center operations, as well as Medical Referral, higher than normal Medicaid matching requirement.

The governor said government utility consumption also contributed to this.

This annual fiscal year report is separate from the governor’s State of the Commonwealth address or report, which is requested by the Legislature.

The Senate adopted a resolution seeking a joint session with the House in February 2012 to receive the governor’s SOCA, as well as Delegate Gregorio Kilili Sablan’s (Ind-MP) report on federal issues impacting the CNMI. The House has yet to adopt the joint Senate resolution.

The CNMI government continues to see decline in projected revenues available for government operations. For fiscal year 2012, government budget is at $102 million, back from the budget levels more than 20 years ago.