‘CNMI govt incurring deficit from the start’

Data showed that the CNMI government has been incurring a budget deficit since it first became a Commonwealth in 1978, resulting in a cumulative “unreserved” fund balance deficit of $25.3 million as of the end of fiscal year 1986, when the single audit reporting was finally implemented.

Authorities said that when first CNMI Gov. Carlos S. Camacho ended his term in 1982, the government recorded $5 million in deficit.

Based on audit reports filed with the department, the deficit rose to $27.4 million in FY 1987, then went down to $17.7 million by FY 1987, $11.5 million in FY 1989; this further went down to $6.9 million by FY 1990.

Former Gov. Pedro P. Tenorio served two terms from 1981 to 1990. His successor, former Gov. Larry I. Guerrero, served from 1990 to 1994.

Tenorio was still governor during the first three and a half months of FY 1990; Guerrero took the reins during the remaining eight and a half months of FY 1990, which showed the deficit at $6.9 million.

By end of FY 1991, the deficit increased to $19.5 million but it went down the following fiscal year to $15.7 million.

By end of FY 1993, it was up again to $19 million, then a big leap to $44 million by end of FY 1994.

Guerrero covered the first quarter of FY 1994 while his successor, former Gov. Froilan C. Tenorio, assumed leadership during the last three quarters of the fiscal year.

The following fiscal year, FY 1995, the deficit was a little down to $39.9 million and further went down to $34.9 million by end of FY 1996.

By end of FY 1997, it shot up to $57.4 million and further soared by over $20 million during that year. By end of FY 1998, the total deficit was $80.6 million—which was both shared by Tenorio for four months and his successor, third-term Gov. Pedro P. Tenorio, for nine months.

By end of FY 1999, the deficit was at $68.3 million and was almost maintained in FY 2000 at $69.5 million. By end of FY 2001, the deficit was up at $87.9 million. The following fiscal year, FY 2002, the deficit was up at $104.4 million.

Tenorio and his successor, incumbent Gov. Juan N. Babauta, shared the leadership during that fiscal year, with the first four months with Tenorio and the last remaining months with Babauta.

By the end of FY 2003, the figure was $112.9 million but, based on the 2005 audit analysis by Deloitte & Touche, the unreserved fund balance deficit by end of FY 2003 was $118.4 million.

Deloitte & Touche submitted its audit report on FY 2003 in May 2005.

The Department of Finance said it is “questioning some of the entries” made by Deloitte and Touche. The department said that the FY 2004 audit report is not completed yet.

Based on the Finance data, the years that saw a budget deficit of more than $20 million were in FY 1994 ($25.7 million), FY 1997 ($22.5 million), and FY 1998 ($23.2 million).

On a year-to-year basis, the government incurred an additional deficit of $2.10 million in FY 1987, $12.6 million in FY 1991, $3.4 million in FY 1993, $25.7 million in FY 1994, $22.5 million in FY 1997, $23.2 million in FY 1998, $1.2 million in FY 2000, $18.4 million in FY 2001, $16.5 million in FY 2002, and $8.5 million in FY 2003, based on Finance data.

The overall deficit of the government per fiscal year includes obligations to other agencies, reserves for encumbrances, related assets, continuing appropriations for certain programs, and inventories.

It also includes the cumulative liability in terms of employer contribution with the NMI Retirement Fund, which now totals $84 million.

In terms of actual revenues and expenditures, the government overspent in FY 1986 by $1.1 million; FY 1987 by $844,000; FY 1991, $5.3 million; FY 1993 by $15.4 million; FY 1994 by $28.5 million; FY 1997 by $20.1 million; FY 1998, $13.4 million; FY 2001, $17.6 million; FY 2002, $19.1 million; and FY 2003, $6.5 million.

The government received more revenues compared with expenses in FY 1988 by $13.9 million; FY 1989, $15.5 million; FY 1990, $8.1 million; FY 1992, $2.5 million; FY 1995, $12.2 million; FY 1996, $5 million; FY 1999, $4.6 million; FY 2000, $6.8 million; and $118,000 in unaudited FY 2004 data.

The Department of Finance said that FY 1995 to FY 2000 included Public Lands’ revenue/expenditure.

The CNMI government had the following total revenues and total expenditures per fiscal year:

. FY 1986—revenue: $58.3 million; expenditure: $59.3 million
. FY 1987—revenue: $66 million; expenditure: $66.9 million
.FY 1988—revenue: $87.3 million; expenditure: $$73.4 million
. FY 1989—revenue: $96.8 million; expenditure: $81.2 million
. FY 1990—revenue: $116.7 million; expenditure: $108.6 million
. FY 1991—revenue:$151 million; expenditure: 156.3 million
. FY 1992—revenue: $159.5 million; expenditure: $157 million
. FY 1993—revenue: $138.6 million; expenditure: $154.1 million
. FY 1994—revenue: $153 million; expenditure: $181.5 million
. FY 1995—revenue: $203.6 million; expenditure: $191.4 million
. FY 1996—revenue: $226.7 million; expenditure: $221.7 million
. FY 1997—revenue: $248 million; expenditure: $268.1 million
. FY 1998—revenue: $242.3 million; expenditure: $255.6 million
. FY 1999—revenue: $241 million; expenditure: $236.3 million
. FY 2000—revenue: $228.8 million; expenditure: $222 million
. FY 2001—revenue: $219.6 million; expenditure: $$237.3 million
. FY 2002—revenue: $199.7 million; expenditure: $218.8 million
. FY 2003—revenue: $211.6 million; expenditure: $218.1 million
. FY 2004 (unaudited) – revenue: $221.2 million; expenditure: $221.1 million

The data showed that the government realized the biggest total revenues in FY 1997, FY 1998, and FY 1999 with $248 million, $242.3 million, and $241 million, respectively.

Highest expenditures were also recorded in the same fiscal years: FY 1997, $268.1 million; FY 1998, $255.6 million; and FY 1999, $236.3 million; as well as FY 2001, $237.3 million.

In FY 1986, the government spending was at $59.3 million. It grew past the $100 million mark in FY 1990 ($108.6 million) and went past $200 million in FY 1996 ($221.7 million), peaking in FY 1997 at $268.1 million.

The government is currently operating on a continuing resolution of $218 million—or $213 million when one deducts the money allocated for deficit reduction and bond obligations.

The CNMI economy was adversely affected by the Asian economic crisis in 1998, the terror attacks of Sept. 11, 2001, the SARS epidemic, as well as Iraq and Afghanistan wars in 2002 and 2003.

Next year’s local economic picture remains gloomy, with the pullout of Japan Airlines in October this year and the current downsizing within the garment industry.

Government officials said any further decline would be arrested if new Japan-based airlines enter the CNMI and if a federal tariff law is amended to allow local garment manufacturers to export products with up to 70 percent foreign material content.

The existing policy is 50 percent foreign and 50 percent local materials for CNMI garment products to enter the U.S. market.

Japan remains the CNMI’s largest tourism market while the garment industry, which is currently downsizing as a result of the worldwide lifting of trade quotas in January this year, contributes about a third of government revenues.