Inos grilled; House fails to override budget veto

Members of the House of Representatives grilled Finance Secretary Eloy Inos yesterday, questioning the governor’s “eleventh hour” veto of the fiscal year 2009 budget and use of cover-over funds to eliminate the fiscal year 2008 deficit.

Earlier in the day, the House failed to achieve a two-thirds majority to override Gov. Benigno Fitial’s Dec. 24 veto of the $165.4 million budget for FY 2009. Fitial had cited a revised $8 million drop in estimated revenue to explain the veto action. He attributed the decline to the loss of Northwest Airlines’ Saipan-Osaka flights in March and the closure of the remaining garment factories on Saipan.

House members had also voted earlier in the day to support the House Ways and Means Committee’s efforts to subpoena Inos, the Bank of Guam, and the Office of Management and Budget.

Subpoenaing Inos became unnecessary because, during the afternoon portion of the session, he showed up to respond to the lawmakers’ questions.

[B]Inos grilled
[/B] Members questioned why they were not told about Northwest’s ceasing the route when they were still in talks with Inos about the budget. Rep. Heinz Hofschneider asked if it had been an oversight, which Inos denied.

“Northwest…it was never documented,” he said of the airline’s decision to stop the route. “It was through an official telephone call to the governor,” he said, adding that he was present when the call took place.

Hofschneider said he felt it was sleight-handed and used as a reason to veto the budget.

“I’m sorry it appeared that way,” Inos said. “We didn’t know beforehand…it kind of caught us by surprise.”

Lawmakers also questioned the addition of $18 million in cover-over funds to the FY 2008 budget.

Inos said the CNMI has received close to $50 million in cover-over funds from the United States. The U.S. Treasury is up to date in the funding but, he added, the administration is considering certain issues they would “like to bring to the cover-over table, but they’re still under investigation.”

The government received the cover-over funds around Nov. 26, allowing the government to accrue the funds for fiscal year 2008 because it was within 60 days of the end of the fiscal year. Nov. 26 was also the day Inos wrote to the Legislature, saying his office was showing $13.6 million in excess expenditures and obligations over the $160.1 million budget. The department was also reporting $4.5 million in revenue shortfall. The cover-over funds ultimately gave the government a surplus of $110,000 for 2008.

Hofschneider asked Inos about additional hires within the government.

“Has payroll increased?” Hofschneider asked.

“No, I don’t think so,” Inos said. “I have no reason to believe it increased.”

Hofschneider said he trusts Inos but would appreciate a certified letter stating that hiring has not increased and payroll remains static.

[B]‘Not a coincidence’ [/B]

Inos said it is not a coincidence that general fund resources dropped from the initial $156 million the Legislature used to prepare its budget to the $148 million the governor cited in his veto message. The difference is caused by $8 million in Compact Impact funds. Compact Impact funds are provided to certain U.S. jurisdictions to help offset the costs associated with migration from the Marshall Islands, the Federated States of Micronesia and Palau under the Compacts of Free Association.

Because they are federal grants, Inos said, they are not a part of the general fund, and therefore not at the Legislature’s discretion.

“It was a grant like any other federal grant,” Inos said. “The process of that money was made by way of an application through a series of data collection,” he said, adding that the government must specify where those funds will be spent.

[B]Failed override[/B]

During the morning portion of the session—before Inos appeared and was questioned —the House of Representatives failed to get a two-thirds majority to override Fitial’s veto.

After two hours of discussion, the members voted 10-8 to override the veto. Fourteen votes were needed to pass the override. Two members were absent. Many of the members who voted against the veto said they wanted to question Inos before overriding.

Tina Sablan, who voted for the override, said she was disappointed with the outcome.

“I think our action today sets a very bad precedent for future budgets, future legislatures, and future governors,” she said. “For these last-minute budget changes, essentially the governor thwarted the budget process, and we permitted it by failing to override the veto.”