Making sense of the budget veto

The Governor has vetoed HB 16-213, HD5, the bill passed by the Legislature for the FY2009 budget. In his letter of disapproval, the Governor has made some statements that deserve clarification.

The letter claims the Legislature “failed to address how the same number of employees and the same programs and operations will continue at the same level with the reduced resources. For example, every department’s personnel budget is reduced by 5 percent while the number of employees and their salaries remain intact.”

In the Planning and Budgeting Act the Legislature is authorized to set maximum FTE levels. These numbers mandate that an expenditure authority may not exceed this number. There are no restrictions on employing fewer.

Additionally, there is nothing in HB 16-213, HD5 that supports the governor’s statement that salaries remain intact. The bill does not address that level of detail.

In fact, it is appropriate for each expenditure authority to look at their allocation for personnel expenses and adjust their employment levels accordingly.

The veto letter goes on to say that his acceptance of the proposed budget could lead to government shutdowns, payless paydays, or layoffs and that the only option is to implement austerity measures such as have been imposed in the past.

I disagree that there is no other option beyond austerity measures. Austerity measures proved to be fundamentally unfair in their application, not only to lower paid employees, but also because of the many arbitrary and politically driven exemptions that were made. The net savings during the period in which these were applied was less than had been predicted. The measures simply did not work as projected. We must impose strict controls on hiring, and adjust employment levels to stay within budgetary resources.

As unpleasant and frightening as the economic realities appear, the government must operate within its resources.

The governor goes on by objecting to the Legislature monitoring hiring, calling it unconstitutional. Currently it appears that maximum FTE levels are not being observed. The Legislature has the authority to set maximum FTE levels during the budget process. It is time for us to follow up by making sure that these levels are not being exceeded.

Allowing austerity measures to be imposed while allowing hiring to continue without strict controls makes no sense.

Although the provision was also in the first budget bill submitted to the Governor, this time he has objected to the reporting requirement for the Department of Labor, stating that it has no bearing on the budget process. The report from the Department of Labor will in fact be crucial during the budget process for Fiscal Year 2010. The Legislature needs to know how the department is functioning with the workload and employment levels they are operating with in order to properly support their efforts. We are looking for direct feedback from them as current and future events are and will affect their operations.

The Governor claims that the Compact Impact funds are not being properly distributed in the bill. He specified the distribution of Compact Impact funds in his original budget proposal. The first budget bill he vetoed matched this original distribution. This is unchanged in the current bill. Apparently these funds are now not being distributed in the manner described in the governor’s budget proposal. This raises questions about why the Legislature was not notified via a budget amendment as provided by law and about where these funds are actually being spent.

The Governor stated in his letter that revenues continue to decline, citing this as an additional reason for his veto. If another revision of estimated revenues is projected the Governor is required to report it to the Legislature. A general discussion of an expected decline without specific numbers is not enough information for the Legislature to act upon.

The reality is that the CNMI government has financial challenges that are outside the scope of what is addressed in the budget. There is the accrued fiscal deficit from prior years, unpaid judgments, land compensation claims, and the unfunded liability owed the defined benefit plan. Even if we make it through FY 2009 without increasing any of these debts, this legislation does little to address them. In the final analysis the government must learn to not spend every penny of its revenues on current operations. It is time to buckle down and spend less so that the debts we have accumulated over the years can be paid.

The bill vetoed by the Governor tightens controls on spending and reporting. While not the entire solution to the fiscal problems of the CNMI government, it is a step in the right direction.

Needless to say, I received the letter vetoing this bill with great disappointment. I will be conferring with my colleagues about where we go from here.

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[I] Maria Frica T. Pangelinan is a senator in the 16th Northern Marianas Legislature and is chairwoman of the Senate Fiscal Affairs Committee.[/I]