The state of the Commonwealth: Still ‘pretty darn good’

By Gov. Juan N. Babauta

The following is the unabridged State of the Commonwealth Address that Gov. Juan N. Babauta delivered yesterday, May 19, at the Multi-Purpose Center in Susupe.

“Since 2001, [we] have been given hills to climb and found the strength to climb them.”

Those words of our President, George W. Bush, are as true for all Americans as they are for all of us here in the Northern Marianas.

Perhaps, more than most Americans our economy suffered from the attacks of 9/11. And we continued to be hit by forces beyond our control: the rise in oil prices, repeated typhoons, volcanic eruptions, and tourist caution because of SARS, tsunami, the Bali bombing, and war in Iraq. The war has taken fathers from their families, leaving over 100 mothers in the Marianas alone to manage their homes and children. This job is hard enough for a team of two people. Now it is being done by one. Could we recognize those mothers here? Please stand.

In addition to the war we are in the middle of another uphill climb: The garment industry is downsizing, because the rules of world trade are changing. These rules are beyond our control. They may change again. In fact, this week President Bush placed new quotas on Chinese garments. Soon, China could revalue its currency, also, helping the Marianas garment industry. But whatever new hills the future brings, we can trust ourselves to overcome the challenge. Just as we overcame every challenge in the last three years. Because the people of the Northern Marianas are resilient. And because the State of our Commonwealth is still “pretty darn good.”

Look what we have accomplished: Three years ago, we faced a $24 million dollar government deficit. Now, we can point to back-to-back balanced budgets. We were $20 million behind in tax rebates. Now, we have cut that down to $5 million. The government had failed to pay for retirement in 2000 and 2001. Now, every month we pay retirement: enough to cover the checks for every government retiree. Yes, there is a debt owed to retirement; but with $400 million in the bank and government covering the cost of today’s benefits the retirement system is safe. Our medical referral program was once so shaky Gov. Froilan Tenorio stopped patients from traveling to Hawaii for care. Now, medical referral is running a surplus; and we have expanded care to California. No one is denied the treatment they need.

Three years ago, relations with the US government were at a low point. The looming threat of a “federal takeover” kept investors away. So, I used the credibility I built with Congress during 12 years as Resident Representative. I traveled to Washington—yes, I traveled—regularly—to report on the progress of our reform. Because I knew that real reform of immigration and labor—not playing public relations games—was best for the Commonwealth.

I went to Washington because I knew the elected Governor—working together with our Resident Representative—was the best lobbyist the Commonwealth could have—not Jack Abramoff, the $3 million -a-year lobbyist we had been paying. What a waste! After all, why hire someone from outside when we can do the job ourselves? Today, even George Miller admits we are doing a good job. The threat of “federal takeover” is over.

Better relations with Washington save us money on lobbyists. Better relations, also, bring us more federal money. As former Lt. Governor Francisco Ada said at the naming of Saipan Airport in his honor: “…the name was secondary to what the effort stands for: working together with the federal government…”

We receive $22 million more in federal grants now than we were getting three years ago. And FEMA recently waived $2.4 million in local matching funds for typhoon recovery. Good federal relations did that. And, of course, our good CIP coordinator, Vicky Villagomez.

Another challenge we are facing is CUC. Let me be clear: We are paying CUC what we owe: $650,000 -a-month. This is the amount CUC and the Court agreed is reasonable. In fact, the government is three months ahead in payments to CUC. We will continue to pay what we owe—but we will not pay more than we owe. Because your tax dollars shouldn’t be used to pay other peoples’ utility bills. That free ride is over.

The Legislature appropriates $5 million for government utilities. That is short $2.8 million. But this Administration can pay the shortfall because we cut government personnel costs by $2.6 million per-year. No one was laid off to achieve that saving. We didn’t cut hours, as Guam had to do. There were no “payless paydays.” Instead, we replaced retiring workers with less expensive entry-level workers, and shifted costs to federal programs, saving the local taxpayers’ money.

Balanced budgets, rebates, retirement, medical referral, federal takeover, CUC, no payless paydays—we are meeting every challenge. We reformed a government that once needed $268 million to operate, and now run it for $55 million less.

Credit goes to all those Department heads and all the government workers who found the way to do their jobs—to serve the public—for less money: Like the staff at Department of Labor, using computer automation to process permits faster; like the officers of DPS, short-handed because of the military call-up, who still protect the public; like the good people of Community and Cultural Affairs, caring for our man’amko and all who need aid.

But a well run, fiscally responsible government, delivering service to the public is only part of the State of the Commonwealth. We have to look at the private sector, too. Yes, the garment industry is downsizing. But it is not the catastrophic, overnight disappearance so many people predicted. And because our laws are enforced and labor regulations followed we are sending displaced workers home with a minimum of disruption.

Meanwhile, tourism has rebounded. Arrivals and hotel occupancies are the highest since 1997. We increased market share in Japan. We opened the door to China by winning approved destination status. And we are developing visa procedures to allow more tourists from Russia. There are now direct flights to Saipan from Shanghai and Guangzhou, Taiwan, Hong Kong, and Manila. Soon, Tinian’s investment in its airport will bring direct flights there. Rota is making the same investment: it’s $10 million airport expansion is out to bid. Building transportation infrastructure will bring new economic development to Tinian and Rota. Thanks to the Delegations from Tinian and Rota.

The future of tourism is bright. Don’t take my word for it. The Hotel Association reports every single member is putting new investments in their hotels—like the $20 million water park at World Resort, or the beautiful renovations Aqua Resort just finished. These hotels are confident of the future of tourism in the Marianas. That same confidence is reflected along Middle Road and Beach Road, where new business spring up overnight. The value of new commercial buildings has grown 130 percent since 2002. You can see that growth in business receipts, too. Revenues have increased for three years running: a solid 4.3 percent annual growth. This is not an economy in decline or recession.

But our Commonwealth economy—and our Commonwealth society—are in a period of transformation. The bubble economy of the ‘90s is over. Now, we are developing a solid, sustainable economy, producing steady growth. We must continue to manage that transformation wisely, responsibly, with a steady hand, and eyes focused on the vision of the future we want for ourselves and our children.

Today, in America some of the most popular television is about transformations. We start with the overweight, out-of-fashion couch potato and in half-an-hour have Mr. Universe. We start with a rundown family home and after a weekend makeover of mad hammering and painting we have House Beautiful. We all enjoy this fantasy of easy change, quickly accomplished.

But our Commonwealth is a reality program. Real change takes time. It isn’t always easy. It takes determination. It takes a strategic vision, but also the ability to adjust as conditions change. It requires a willingness to venture into new territory. What did Pope John Paul tell us? “Be not afraid.”

Above all, it takes hard work. And we have all been working hard to transform the Northern Marianas. Now, we must finish what we started.

We began the recovery three years ago by investing $2.6 million in tourism promotion. And we continue the year-after-year effort to remain competitive. Last week, we invested another $1 million for MVA promotion in Japan. I traveled there—and will travel again when necessary—to help shore up our Japanese market. We started making the Marianas a destination worth promoting by getting Garapan revitalization plans off the shelf and into action. That project is near completion with a world-class museum opening up in a few days. It tells how the Marianas suffered in World War II and the importance of our islands to ending the war. Every visitor will want to go there.

Let me acknowledge the role of the Strategic Economic Development Council in designing and lobbying for Garapan Revitalization. Public/private partnerships like SEDC—or like the Marianas Visitors Authority—are key to our strength as a Commonwealth. We must continue to work together in partnership and finish the hard work of transforming the Marianas into a world-class tourist destination.

Using what we have learned in Garapan, we must next renew and revitalize Susupe and Chalan Kanoa. We must extend the pathways and finish the wonderful work of landscaping Beach Road, begun by the Department of Public Works and community volunteers. We must fix Cross-Island Road and pave Mt. Tapoucha, so visitors can easily see the Saipan panoramas. And soon—because of our good relations with the U.S. Congress, especially chairman Don Young—we will have $12 million to build the Talofofo loop with a roadway, bike path, and walking trail for the enjoyment of visitors and all of us who live here. We have to finish what we began when we brought the Zoning Board back to life. Careful zoning will keep poker and strip clubs out of tourist areas, out of our villages, away from our schools.

Perhaps, most important for our tourism economy, we have to finish the job of protecting our environment. We have the #1 snorkeling site in the world at Managaha, the #2 dive at the Grotto, and beaches on Rota and Saipan rank in the world’s top 100. But no tourist will want to visit—none of us will be happy living here—if we don’t keep the environment clean. God entrusted us with these beautiful islands and the waters surrounding them. Bishop Camacho is better versed than I am in these matters, but I do recall Jesus’ parable and the fate of the steward who does not care for his Master’s goods. We have a duty to care for the environment; and we are.

The economic recovery strategy we started three years ago used the oldest trick in the book to stimulate the economy: public works projects. To date we have spent $111 million—over $35 million per-year—more than the Marianas has ever spent before. That includes: $10 million for water on Saipan, $17 million for the Hospital Expansion/Hemodyalisis Center, $2 million for the Rota Courthouse, $2 million for Tinian High School, $11 million for Garapan revitalization, $7 million for Tinian airport, and $22 million for the prison.

Much of that money has, also, gone to clean up the environment. We closed the Puerto Rico dump and opened the state-of-the-art landfill in Marpi. We began to recycle garment wastes that made up half of our garbage. In fact, today the Marianas recycling rate is better than the national average.

But we have more to do: sanitary landfills for Rota and Tinian, and curbside pick-up here on Saipan to help stop the illegal dumping still going on. We have to seal the Puerto Rico dump and prevent leakage into the lagoon to finish the job we started. We have to finish the Dai Ichi drainage project. This is the single greatest non-point source of pollution in the lagoon. It took several years to get legislative backing, MPLA approval, and an easement over private land. But now plans are ready, money is approved, and we will complete the project.

This is probably a good moment to recognize the Division of Environmental Quality. DEQ just won an award from the US EPA for being the best in our region. Congratulations to the Director and all his staff. One thing DEQ does particularly well—together with the Coastal Resources Office and the Division of Fish and Wildlife—is keep watch over our coral reefs. In 2004 we won over half-a-million dollars in grants to protect coral reefs on Rota and Tinian, at Laulau Bay and in Saipan Lagoon.

The environment is the basis for all life and for economic development. But within that larger system there are subsystems that also require care: physical infrastructure and human resources. Lynn Scarlett, the Assistant Secretary of the Interior, who was here this week with investors looking at the Northern Marianas, told us investors “…are very interested in infrastructure. What are the roads like, what are the airports like, do we have access to good telecommunications? Anybody who is going to invest says, ‘How’s your human capital? Are people well-trained? Do you have educated folks?’”

Let’s look at those questions:

When it comes to infrastructure, the water task force under Lt. Governor Benavente’s leadership has made great progress toward our ambitious goal of 24-hour water for all of Saipan by the end of this year. With the installation of 4,000 “smart meters” over the next four months, and the addition of new wells producing 2 million gallons per-day we will finish pressurizing the system and delivering more water.

The Lt. Governor deserves much credit, too, for negotiating a new “702” agreement this year. He did it in record time and at minimal cost. He won a guarantee of $54 million over the next 6 years. and we can compete for another $24 million. Those are the funds we need to keep improving our infrastructure.

As Lynn Scarlett said, telecommunications infrastructure is also essential to investors and economic growth. For that reason, I am not pleased to see the Commonwealth losing Verizon, a Dow 30 multinational corporation. Another Dow 30 multinational, General Electric, just bought the phone system in Guam. In the CNMI we are going in the opposite direction. But at least the Governor’s Office negotiated agreement to protect the jobs of local employees at Verizon. We won agreement to stop the long-distance tolls between Rota, Tinian, and Saipan. We forced the new owners to commit to invest millions of dollars in the system, to keep it modern. At the same time, I continue to encourage new investors to enter the market, to build a second fiber optic cable, and to bring competition, lower prices, and improved telecom services to the Marianas. I can tell you that major investors are waiting to build telecommunications businesses here, as soon as we can bring down the costs. We will finish making the Marianas a platform for telecommunications-based industry.

The power system… In the last 90 days government has paid CUC $5.1 million. Government is paying its bill; the public is paying its bill. But still the power is going out all over Saipan. We cannot maintain our economy, we cannot expect new investment, without completely dependable electric service.

It would be easy to place blame for the situation: there have been years of neglected maintenance, failure to keep costs in line, and since 1989 unchanged rates, despite the rising price of fuel. It would be easy to criticize. But, as Governor, I do not have that luxury. I have the responsibility to take action when the Commonwealth is threatened.

And the crisis at CUC because of the lack of a long-term fuel contract is an emergency that threatens the welfare of everyone in the Commonwealth. Therefore, I am today declaring a state of emergency until this crisis is resolved. This legal action allows the Governor to protect public health and safety. I will use this power to complete negotiations for a long-term contract for fuel at a reasonable cost to the Commonwealth. This declaration also allows me to use any funds available from any source to ensure that the power does not go down. Whatever the cost, I will ensure the safety of the people of this Commonwealth.

Restoring our environment, ensuring reliable infrastructure, these are essential to the transformation of the Marianas. But there is also the human element. Part of the problem of transforming our labor force is low wages. In government, I’ve addressed this problem by giving increases—when we could afford them—and to those most underpaid. So far, nurses and police officers have gotten their raises.

For the private sector the Legislature won’t act to raise minimum wage. So, I took action requiring U.S. minimum wage on all government contracts. Today, local workers employed by Maeda Construction on the Garapan revitalization are earning US minimum wage because this administration took action.

But we cannot become a prosperous, first-world society until our people and our workforce are educated to first-world standards. So, I want to close this morning by talking about education. Alex Sablan, President of the Chamber of Commerce, put it so well at his installation in February: “The lack of a highly educated and skilled workforce impacts our community when businesses can no longer find capable qualified employees…” Government is working in partnership with the Chamber to address this issue. Before, the Workforce Investment Agency focused on putting workers into government jobs. Now, WIA is placing those workers in the private sector.

Individuals, too, are lifting themselves up with more education. We can all be inspired by people like Marie Coleman, a single parent, who returned to Northern Marianas College, earned her Bachelors degree, and became valedictorian. That’s the kind of transformation going on in our society.

But going back to school and retraining older workers is only part of the job. We have to start from the beginning to create an educated workforce. More money for education is not the only solution. But lack of money is definitely part of the problem.

When the three Kagman schools opened and Sinapalu Elementary, there was no new money to pay for books and teachers. Every year hundreds of new students enroll with the Public School System; but there is no new money from the Legislature. This means: every year per-student spending declines. We spend just half the national average for each student. Look at the result: standardized tests show only one-in-five of PSS students can read at their grade level.

So, I am taking action to improve education. The Governor has federal grant funds at his disposal. And I have put those funds into education: This summer $5 million in federal compact grants will be at work in our schools termite-proofing, repairing roofs and air-conditioners, taking care of long-neglected maintenance. Federal grant funds bought La Fiesta and will now relieve crowding at Kagman schools, where they have classrooms in closets. The Board of Education is looking favorably at turning part of La Fiesta into a new school for Marpi, Tanapag, and San Roque.

I used federal grants to start the Governor’s Education Initiative: reimbursing teachers for $250 of out-of-pocket expenses, opening a health clinic for teens at Marianas High, giving mini-grants to teachers for innovative programs in their classrooms, and equipping an entire class at Saipan Southern with laptop computers to be better students. I want to take that vision one step farther: I want to provide computers not just to one class in one school, but to one class in all public schools and hook up those students’ homes to internet service.

But this will take more than federal money. We need a local commitment to education. Every year, I have sent budgets to the Legislature to increase local funding for education. This year, in the FY06 budget I tried to make the decision as simple as possible: I proposed increasing poker license fees and giving $13 million in poker fees to education. The choice is clear: are you for poker or for our kids?

I read in the papers some people say there can’t be a budget in an election year. Who made that rule? When I read our Constitution I don’t see any “escape” clause. In fact, the most important job our Constitution assigns the Legislature is to make spending decisions. It seems to me an election year is the time when every elected official should want to demonstrate they are doing their job. Surely, it can’t be bad politics to put more money into our kids’ education? Or is the poker industry more politically powerful than parents and students?

I made my decision. My budget increases funding for education—and for public health and public safety—the core responsibilities of government. My budget cuts government spending by 6 percent everywhere else. I believe this is what the public wants.

The public wants us to complete the work of transforming the Northern Marianas. Use our federal grants strategically to restore the environment and build essential infrastructure. Control the cost of government. Target our local funds to provide quality health care, public safety, and education. This is the plan of action that took us through the tough times and crises of the last three years. This is the plan of action that took us over all the hills we had to climb. And this is the plan of action that will take us into the future. All we have to do is finish the work we have begun. Thank you.