$225M budget proposed for FY06

The Babauta administration is proposing a $225-million expenditure plan for fiscal year 2006, an amount that is nearly $20 million higher than this fiscal year’s level.

Almost 50 percent of the proposed budget—$106.9 million—would go to four agencies: the Public School System, which is getting its full requested amount of $50 million; Department of Public Health ($40.2 million); and Department of Public Safety ($11 million); as well as the Department of Corrections ($4.9 million).

The remaining budget, $118 million, would be divided among other agencies.

Management and Budget director Ed Tenorio said yesterday that the proposed spending plan already reflects a 6.1-percent across-the-board budget cut among departments, totaling some $7.6 million.

Tenorio said the additional projected revenues of $19.6 million would be realized by redirecting funds from the Tobacco Settlement Fund, Tobacco Control Fund, and by raising the poker licensure fee by $6,000.

Without these, he said, the current laws can only generate $206 million.

This figure takes into account a 20 percent expected decline in revenue from the garment sector this fiscal year.

He said that total revenue from the garment industry, which is currently downsizing due to the worldwide lifting of quotas, comprise 32 percent of the government’s annual revenues.

The industry contributes some $64 million a year in user fees, other taxes, excise taxes, income taxes, and other indirect payments.

Tenorio said the 20 percent projected decline was determined based on the initial consultation with garment industry leaders.

Any change in the trend, he said, would be included in the anticipated submission of a revised budget on July 1.

“We’re looking at the trend. Now if there’s any change such as a sharp decline in garment revenues, the governor can revise the budget,” said Tenorio.

Based on the plan, the administration will ask the Legislature to suspend appropriations using Tobacco Settlement Account for next fiscal year and credit all of it instead to the General Fund.

Tenorio said there is an estimated $500,000 from this account.

The Executive Office also wants the Tobacco Control Fund, which is usually shared between the CNMI Treasury (70 percent) and various programs (30 percent), remitted entirely to the General Fund.

About $3.6 million would be realized from this fund diversion.

Also part of the budget proposal is to ask the Legislature to increase the poker licensure fees by $6,000 per machine. Currently, the poker fee on Saipan is $12,000; $6,000 on Tinian, and $8,000 on Rota.

Further, the administration is asking the lawmaking body to repeal Public Law 11-2, which allows local delegations to get share of funds from poker revenues.

“That would take away money from local [delegations]. We want to have the entire revenues remitted to the General Fund,” said Tenorio.

Right now, the Saipan and Northern Island Legislative Delegation gets a 50-percent share of the poker fee or $6,000 per machine, while the Rota Legislative Delegation gets $2,000 per poker machine. Tinian, which is host to casino games, remits its poker fees to the General Fund.

Tenorio admitted that this proposal would be “controversial” and “a bomb shell.”

“But we need to raise revenues to be able to fund essential services. Is it a sin for us to impose $6,000 when we want to fund the education of our children?” asked Tenorio, adding that everybody agrees that education should be the priority by the government.

Under the law, the government is mandated to provide at least 15 percent of the annual budget to education.

The administration’s $50 million request for PSS reflects a 22 percent share of the entire budget.

Tenorio warned that failure to pass the proposed revenue enhancement measures would mean cutting further the budget of all departments, which, in turn, would likely end up in the laying-off of personnel, and possible abolition of some agencies.

He said the proposed FY 2006 budget funds only the actual positions in each department—close to 4,000 people. Government FTEs total some 5,000.

“We removed the funding for FTEs that are vacant, except for essential offices,” he said.

The administration’s budget request will be transmitted today to the Legislature. It was presented yesterday to the four mayors who, according to Tenorio, “understand the situation.”

The government is currently operating on a $213-million continuing resolution.