Fitial balks at built-in deficit in FY09 budget

The Fitial administration yesterday lashed out at the Legislature over the latest version of the budget bill, which leaves the governor to decide where to make cuts to prevent a $9.1 million shortfall.

The Senate on Friday passed the bill, which appropriates $174.47 million for government operations despite projections that the government will only have $165.37 million available. The bill is expected to clear the House of Representatives this afternoon.

But the proposed legislation is already drawing criticism from the administration. “Political liability is placed entirely on the governor’s shoulders,” press secretary Charles P. Reyes Jr. said yesterday.

“The legislators need to identify those cuts and the governor will either approve them or reject them. But it’s a delicate political problem. Again, our position has always been to balance the budget,” Reyes added.

The Senate-passed budget, which is the product of a joint conference committee between the House and Senate, is premised on a projection that the government will collect $169.55 million in revenue from Oct. 1, 2008, to Sept. 30, 2009. Of this amount, $12.85 million will go to debt service and other pre-existing obligations, leaving $156.7 million available for government operations.

The budget bill proposes to augment this with $3.5 million from several sources outside the general fund, and $5.17 million of “Compact Impact” funds, which is federal government’s reimbursement to the Northern Marianas’ for the cost of hosting citizens from Micronesia. These additional funds bring to $165.37 million the amount available for government operations in the 2009 fiscal year.

However, the bill provides for a total of $174.47 million in expenditures, about $9.1 million more than the available funds. It also rejects the governor’s proposals for balancing the budget, including a reduced retirement contribution rate, a no-work-no-pay policy on legal holidays, and a biweekly shutdown of government offices. Instead of proposing cuts to balance the budget, it sets out statutory provisions that the governor could use to keep costs down.

“The Governor has at his disposal cost-cutting measures, in existing law, regulations, and in accordance with Section 701 of the Joint Conference Committee’s Budget proposal, to balance the budget and prevent a deficit,” said Sen. Maria Frica Pangelinan, the chairwoman of the Senate Fiscal Affairs Committee and one of the drafters of the budget bill.

She said the governor’s budget proposal itself was not balanced.

The governor’s submission acknowledged that there are not enough resources in FY 2009 to pay for the cost of running the government. To cover the gap, Fitial provided prewritten legislation raising fees, which has now become law and is expected to raise approximately $2 million a year. To eliminate the remaining shortfall of $6 million, he proposed to implement austerity Fridays and unpaid holidays, and to cut government employer contribution from the actuarially recommended rate of 37.4 percent to 11 percent.

But Pangelinan said, “The Joint Conference Committee did not accept that this constitutes the submission of a balanced budget. We have formulated an alternate budget proposal that has been sent to the House of Representatives for consideration. In it, we are pointing out existing laws and regulations that the governor already has available to him for cutting costs to avoid deficit at the end of FY 2009. Section 701 of the Joint Conference Committee’s proposal gives him guidance regarding the prioritization of those options.”

Section 701 outlines the manner in which the governor may use existing regulations to cut wages and salaries to avoid deficit spending.