NMI faces $370M cumulative deficit

The $25.8 million budget deficit in fiscal year 2011 brings the “estimated” total cumulative deficit to $370 million—more than triple the government’s current budget of $102 million.

Press secretary Angel Demapan said yesterday that the $370 million cumulative deficit includes the government’s unpaid employer contributions to the NMI Retirement Fund.

Budget deficit is a combination of overspending and revenue shortfall.

Gov. Benigno R. Fitial told the Legislature that the government overspent by over $25.2 million and had a revenue shortfall of $565,456 in fiscal year 2011, at a time when the budget was $122 million and despite the biweekly 16-hour work cuts, unpaid holidays for most government employees, and other austerity measures.

Demapan said the fiscal year 2011 over-expenditure rate “is net of the austerity measures, which equaled some $16 million in funds that the government did not have to pay to government employees.”

“As you can see in the report, the bulk of the deficit was caused by [the hospital], Medicaid, patient referral, and government utilities,” he added.

Demapan said there is no additional austerity measure being planned at this time.

The administration is awaiting a fiscal year 2013 budget call from the Office of Management and Budget.

House Ways and Means Committee chair Ray Basa (Cov-Saipan), in a separate interview yesterday, said it is “shocking” to have a $25.8 million deficit in just one fiscal year, and “alarming” to have a $370 million cumulative deficit.

“Surprised is a light term. It’s shocking. Overspending is certainly not helping our financial situation. We should be frugal and try to live within our means. We have to further tighten our belt,” Basa told Saipan Tribune.

Basa said all the efforts in trying to come up with a balanced and timely budget are wasted when, at the end of the fiscal year, there’s excessive overspending recorded.

“We don’t want to be like Greece and other places that file for bankruptcy. I hate to say this but we’re already heading toward that direction,” he said, adding that the government needs a more aggressive approach in budgeting and generating revenues.

Basa, a freshman lawmaker, said he will be communicating with international companies such as shoemakers and auto makers to consider setting up shop in the CNMI.

“What we need is bring in outside investments, fresh new capital, and new jobs. If we could bring in manufacturing companies here just like the garment factories of years ago, then that would help the economy,” he added.

Senate Fiscal Affairs Committee chair Jovita Taimanao (Ind-Rota) said that, while she has yet to receive a copy of the governor’s financial report to the Legislature, the big question mark is how the government managed to have a $25.8 million deficit in just a year.

“But I will get the full details Wednesday. Our goal has always been to ensure that the government [will] live within its means and operate without deficit,” she said.

Senate President Paul Manglona (Ind-Rota) and the Fitial administration expect that the transition of the Department of Public Health into the Commonwealth Healthcare Corp. on Oct. 1, 2011, would result in a much lower deficit in 2012.

About $19.9 million of the $25.2 million in overspending in fiscal year 2011—covering the period from Oct. 1, 2010 to Sept. 30, 2011—was at DPH’s medical referral, Medicaid, and Commonwealth Health Center.

The Executive Branch’s overspending was almost $20.2 million, the Judiciary was at $170,897, and the Legislature, at $11,156.

Rota exceeded its allotment by $433,761, while Tinian had a surplus of $4,274.

A CNMI Single Audit for fiscal year 2009 showed that the general fund’s unreserved fund deficit stood at $300.8 million. There is no audited report yet for fiscal year 2010. But with the Fitial administration’s estimate of some $370 million in cumulative deficit in 2011, this means the deficit grew by some $70 million in two years.

The 2009 deficit was $256.3 million.