A U.S. Department of the Interior-commissioned report that Assistant Secretary for Insular Affairs Tony Babauta has shared with local stakeholders zeroes in on the CNMI's mounting cumulative deficit of over $300 million but Gov. Benigno R. Fitial said yesterday his administration's deficit reduction plan has been in place for quite sometime.
Fitial said he saw the draft weeks ago, and received the final report from Babauta on Friday.
The report also compares the percentage of funding that the CNMI allots for education, public safety, and public health, for example, compared to other insular areas.
Babauta met separately with Fitial and the Saipan Chamber of Commerce on Friday to discuss the Interior report on the CNMI government's finances, showing that expenditures almost always exceed revenues annually.
“We think there's some good information that the community and leaders can consider on how the CNMI moves forward and how change needs to occur,” Babauta told reporters in an interview at the investiture ceremony for CNMI Supreme Court Chief Justice Alexandro C. Castro on Friday.
The Interior commissioned the U.S. Department of Agriculture Graduate School to do the report, completed in September.
Babauta said he will share the report to the media on Wednesday.
He said the report is “a serious look at what the CNMI government has been going through.”
“Expenditure is always above revenue which is causing the deficit, and the deficit has accumulated over a number of years. Unless you try to tackle it with a plan to reduce the deficit, and control expenditures, the deficit will continue. You continue to have cash shortage, but the operations of CHC and other places that are critical, and providing basic services to the people of the CNMI, will find themselves in a spot where they can't recover from,” Babauta said.
Babauta is currently on island with Interior Office of Insular Affairs Nik Pula.
Deficit reduction plan
Fitial said his administration is going over the report, adding that the bulk of the over $300 million cumulative deficit is the unpaid obligations to the NMI Retirement Fund.
The governor said his administration's deficit reduction plan involves setting aside surplus funds and apply them toward reducing the government's cumulative deficit.
“Whenever we incur lapses, when there is an account that has surpluses, we set that aside until the end of the fiscal year then we apply that toward the deficit,” Fitial said in an interview at the Republican Party rally for mostly Refaluwasch members and their families at Civic Center in Susupe yesterday afternoon.
In May this year, Deloitte released an independent audit of government finances showing that the CNMI's government's unreserved fund deficit ballooned by $36.1 million or 12 percent in a 12-month period.
This brought the total to $336.9 million by the end of fiscal year 2010 compared to $300.8 million in fiscal year 2009. The Deloitte report said there's not much recovery in sight for FY 2011.
The unreserved fund deficit of $336.9 million in fiscal year 2010 is much more than the government's fiscal year 2012 budget of $102 million and the FY 2013 budget of $114 million.
Fitial said the Interior-commissioned report was part of an agreement between OIA and the CNMI during a Micronesian Chief Executives Summit in Guam early this year.
He said USDA Graduate School's Debbie Milks came to the CNMI for the report.
The governor said that same agreement also involves having the Interior award a grant to fund a fulltime certified public accountant position at the CNMI Department of Finance.
“He or she will be looking at the financial picture of the Commonwealth and see if she can help improve also the internal control that we will institute in order to control expenditures,” he said.
Other reports, issues
OIA's Babauta said there are other reports not funded by the Interior that they have also looked at.
“We believe that there are recommendations in there that need to be looked at again to see where support can be lent, to try to affect change. We all recognize that studies are done on everything. We want to pull all the studies off the shelves and go through them again,” he added.
Babauta said he has also yet to fully review the newly released the Interior-funded HealthTech analysis report on the Commonwealth Healthcare Corp.
Fitial said his administration is asking the Interior to help fund the recommended hiring of a turnaround management team at CHC.
Lawmakers and the administration said bringing in the turnaround management team could cost up to $2 million, but a request for proposal will be issued to get the best possible bid.
Babauta said he has yet to receive a formal request from the CNMI government on this matter.