Govt liabilities total $113M

The CNMI government’s liabilities now stand at a whopping $113.3 million, including a $79.1-million deficit representing overdue Retirement Fund payments.

“The deficit is $79 million, which is an accumulated amount over 10 years,” said Finance Secretary Fermin M. Atalig yesterday.

Statistics from the CNMI Treasury showed that, as of April 5, 2005, the government is $79.1 million behind in its Retirement Fund contributions. It also owes $12.6 million in Retirement Fund quarterly allotments, $13.3 million in utility bills owed the Commonwealth Utilities Corp., $1.7M owed the Marianas Visitors Authority, and $6.8 million owed its vendors.

Atalig, in an April 11 letter to Sen. Joseph Mendiola, chair of the Senate Fiscal Affairs Committee, said that payments to the Fund were current until June 1998.

When a series of “outside events”—Asian economic crisis, 9/11 terror attack, Afghanistan and Iraq wars, and SARS—hit, the CNMI’s annual revenue levels quickly declined from nearly $250 million to $213 million.

“The resulting deficits and cash flow problems resulted in payments of employer contributions to the Fund being delayed or reduced,” said Atalig.

So far, he said the government has paid off outstanding amounts covering FY 1998 to FY 2001. “We’re now paying fiscal year 2002 liabilities,” he said.

He said the government paid $18 million to the Fund in FY 2004 and $8.8 million so far in FY 2005.

Current outstanding balances with the Fund include $19 million for FY 2002; $23.4 million for FY 2003; $24.5 million for FY 2004; and $12.2 million so far for FY 2005.

CNMI law mandates the government to shoulder a hefty 24 percent in employer contributions for government employee’s retirement. There are some 5,000 active members of the Retirement Fund.

Meantime, Atalig said the CUC liability is based on the amounts CUC has billed the government. This figure, though, is under litigation “over CUC’s billing practices.”

In the meantime, he said the government is paying CUC an amount “mutually agreed on under a court stipulation” every month.

Atalig said this payment is current and, in fact, the government has advanced $1 million through March 31, 2005 “to help CUC make its fuel payments to Mobil.”

Atalig said the government had paid CUC $9.5 million in FY 2003; $8.1 million in FY 2004; and $5 million in FY 2005.

The continuing resolution, Public Law 13-24, allots $5 million for government utilities.

“This is less than half of what CUC bills the CNMI government annually, forcing the Executive Branch to shoulder the burden of reducing other expenditures to stay within the overall appropriation level,” said the secretary.

Since utilities are all charged to the central government, he said, detection of billing errors and conservation at agency level “is very difficult to achieve.”

To resolve this, he said the administration’s budget submission beginning 2002 has always included utilities in the budget for each department, but the Legislature has continued to appropriate utilities in lump sum “at substantially less than the actual cost.”

Atalig said the proposed $225.8-million budget for FY 2006 includes utility costs under each department. “We hope the Legislature will retain this utility funding method in the final budget,” he said.

As for vendors, the department official said that accounts payable “are pretty much current” with $6 million of the $6.8 million owed less than 30 days old. He said only about $800,000 is more than 30 days old.

He said the department has not made a detailed analysis of the $800,000 but that it probably represents final contract payments waiting for the vendor to obtain tax clearance or is on hold for other documentation problems.

The department, he said, measures the 30-day timeframe as mandated by law “from the time a payment request—already approved and certified correct by the expenditure authority receiving the goods or services—is received by DOF.”

He said many vendors complain of delayed payments when their invoices are actually delayed in the receiving department or the vendor has provided goods or services without a purchase order or contract.

The law, he said, allows documentation as to why a payment cannot be authorized as an exception to the 30 days.

As of February 2004, the government reported a $99.3-million deficit, prompting government leaders to form a Blue Ribbon Committee. A few months later, in September, an audit of the CNMI’s financial statements for FY 2002 showed a deficit of $80.9 million, while an independent audit by Deloitte Touche Tohmatsu in 2002 showed that the CNMI government had a $69.5 million accumulated deficit and $33 million net fund deficit as of Sept. 30, 2000.

The same audit also showed that the government had a total asset of about $1 billion, total liabilities of about $324 million, and total fund equity of $696 million.