Deficit down by $10-M in FY 99

Drastic austerity measures by the government, including cut in overtime and professional services, resulted in a $10 million reduction in the worsening budget deficit, according to Gov. Pedro P. Tenorio.

In a preliminary financial report submitted to the presiding officers of the Legislature covering Fiscal Year 1999, the governor said cumulative budget deficit declined $70.7 million from the record $80.6 million posted in FY 98.

Government finance officials are projecting a further decline in the deficit in Fiscal Year 2000 which they said could be obtained through tighter fiscal discipline and economic revitalization efforts.

This is the first time that the Commonwealth government has managed to bring down portion of the deficit since 1997, when expenditures outpaced revenue collections by $20.1 million. Under the administration of former Gov. Froilan C. Tenorio, general funds reached an all-time high of $248 million during the same period, but public spending also shot up to record $268.1 million.

According to the local chief executive, the deficit could have ballooned $133.4 million in FY 1998 if his administration did not put in place stringent cost-cutting steps.

The last three months in office of the ex-governor covered the first quarter of the fiscal year, and during this period, the report said, an analysis of the quarterly revenues and expenditures show a deficit of $9.5 million incurred between Oct. 1, 19997 and Dec. 31, 1997.

“This quarterly deficit spending was reduced to $4.8 million between January 1, 1998 and March 31, 1998, the quarter during which the change in administrations took place and fiscal discipline measures were implemented,” the governor wrote to legislators. “Expenditures were reduced to level below revenue collections over the last two quarters of the fiscal year.”

Financial results

Mr. Tenorio said his administration was able to reverse the deficit spending trends after implementing financial management controls and fiscal discipline measures.

The report shows that overall general fund expenditures decreased by 20 percent or $54 million over a two-year period, with dramatic reduction reflected in overtime. Money spent for overtime alone went down by 61 percent from FY 97 to FY 99.

The austerity policy also resulted in a 50 percent decline in professional services, 24 percent in travel, 32 percent in communications, and 29 percent in leases and rentals, the report said.

From FY 98 to FY 99, the report showed a 55 percent reduction in overtime expenditures which totaled to $3.8 million against $12 million recorded in FY 97. Last Year, the Department of Public Safety incurred the bulk of overtime expenditure at $2.3 million, followed by the Customs, Immigration and Quarantine inspectors at
$900,000 and the Department of Public Health at $500,000.

Other savings noted by the governor in the report were:

• Additional reduction in professional services from 7 percent in FY 98 to FY 99 after a 47 percent decline from FY 97 to FY 98.

• Cut in travel expenditures by 22 percent from FY 98 to FY 99.

“Despite claims that annual government expenditures continue to exceed revenues, actual financial results indicate that financial management controls and fiscal discipline measures implemented last year have, in fact, reversed the deficit spending trend of the last few years,” the governor explained.

Projections

Michael S. Sablan, the governor’s special advisor for finance and budget, said the administration is aiming to further reduce the deficit by continuing the cost-cutting measures and seeking ways to stir the slumping economy.

“This year, we’re looking at a deficit reduction similar to or greater than what we achieved in FY 99,” he said in an interview.

However, Mr. Sablan admitted that wiping out the entire deficit is unrealistic despite projected increase in revenue collections in the next two years with the passage of the Free Trade Zone and CIP appropriations measures.

“I think we have finally turned the corner but there’s still a lot of work to be done,” he said. “Given the magnitude of this deficit, it would be very, very difficult to fully retire the deficit without jeopardizing the delivery of essential programs and services.”