Public schools expect to end fiscal year with $5M deficit

The Public School System projects to incur a deficit of $4.5 million to $5 million by the end of current fiscal year in September, according to PSS finance director Richard Waldo.

In his report to the Board of Education on Monday, Waldo said that, after deducting the 1 percent reserved for the Office of Public Auditor, public schools will get just $29.8 million this year—significantly lower than the anticipated expenditure of $35 million for the 12-month period.

This deficit, Waldo said, may still increase depending on future utility billings for public schools.

Education Commissioner Rita A. Sablan told Saipan Tribune that the projected deficit is the result of the meager appropriation allocated for PSS this fiscal year. PSS asked for $36 million, the Legislature only approved $30 million: $2.5 million from appropriation and $500,000 from contract workers’ fees.

To bridge the “gap” of $5 million, Sablan is counting on receivables from the central government, estimated at $8 million, which includes the maintenance-of-effort requirement.

During Friday’s legislative summit for parents, PSS financial consultant Ed Tenorio emphasized the importance of the audit report for fiscal year 2010 to help determine the “right” amount of how much the central government really owes PSS for the maintenance-of-effort requirement.

This requirement is a federal funding rule that mandates the CNMI government as a grant recipient to maintain and meet certain levels of local funding to be eligible for full participation in federal grant funding.

PSS and education officials are claiming that the CNMI government has been violating this requirement and may end up returning all federal grants awarded through the ARRA’s state fiscal stabilization fund.

Waldo said that due to the projected deficit, PSS may not able to pay all its obligations to the Commonwealth Utilities Corp. but he disclosed that Finance Secretary Larissa Larson had promised to pay PSS’ utility billings directly to CUC in the amount of $400,000 a month.

Waldo said this amount is in addition to what was agreed upon in the $1.7 million memorandum of understanding signed by PSS and the administration. Under this MOU, the government pays $50,000 weekly for PSS’ utilities.

Once the $400,000 is received by CUC, Waldo said this automatically represents PSS’ payment for utilities. PSS, it was learned, is only making $100,000 monthly payments to CUC.

Since the across-the-board implementation of energy conservation at PSS, Waldo said significant savings have been recorded, now amounting to $308,000.

This summer, PSS projects to generate energy savings of $600,000 when all schools close classes on three islands. From a monthly billing of $750,000 during summer period, the projected consumption is forecast to go down to $150,000 to $200,000 a month.

Waldo is optimistic that PSS can continue pay its personnel until the end of the fiscal year.