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Editorials 2019-June-14


ACCORDING to the Department of Finance, the government is not collecting enough cash to pay for all of its obligations.

This fact was first reported to the Legislature early this year, and, since then, reiterated in all the meetings and communications between the administration and lawmakers. All of which were duly reported by the local media.

In its annual report to the Legislature dated Dec. 31, 2018, Finance could not have been clearer:

“This report shows total revenue collections of $140,817,579 for FY 2018 which is lower than the original projection of $145,260,125. Total Expenditures were $166,728,296 or $22,692,654 over the budgeted allotment for FY 2018. The net effect of revenue and expenditures resulted in a deficit of $25,910,717.”

What was the cause of this deficit? Again, the Finance report was pretty straightforward:

“The majority of the over expenditure for the fiscal year is attributed to several factors including, but not limited to recovery activities in the aftermath of Typhoon Mangkhut, unbudgeted costs for Medical Referral as well as Medicaid, and over expenditure on personnel expenditures for overtime for the law enforcement agencies, as well as overtime and operations of the Department of Public Safety, Department of Corrections and the Department of Fire and Emergency Medical Services.”

As current and former CNMI finance and budget officials would tell us, these are the items for which overspending is more or less expected for the simple reason that “planning” for unexpected (usually emergency) expenses cannot be accurate. The only way to “control” spending on medical referrals/healthcare and disaster/emergency response is to impose a limit, and then tell members of the public that if there’s no more funding they’re on their own if they get seriously sick or in dire need of help during an emergency and/or a natural disaster.

Who among the NMI’s elected officials and politicians would dare offer such a proposal?


Painfully obvious

IN another public (and reported by the media) meeting with lawmakers in April to discuss the government’s fiscal condition, Finance informed them that revenue collection was still down, but that despite the spending cuts, the FY19 budget was still higher than the budgets in FYs 2014 to 2016. “What we see in FY 2019,” a Finance official said, “is that the expenditures have increased. [See above.] I think this is forcing us to look at ways to reduce the size of government and at the same time increase our resources.”

In short, spend less, earn more. However, as recorded human history has shown, whenever government earns more, it usually spends more. The only way government will “save for the future” is if there are enough voters that want it. Future voters, however, are not yet voters; and the voters of today may have different needs that must be met now as all politicians know.

The first thing that the CNMI government did when the local economy finally recovered after declining for 15 or so years was to pay its most outstanding obligations, and then to create new ones.


ON Tuesday, the House minority bloc members announced some of their proposed “solutions” to the government’s financial crisis. Will they “solve” the problem or just “sock it” to two of the minority bloc’s pet peeves: this governor and IPI?

The government needs an additional $30 million, at least, for the rest of the fiscal year — so repeal the pay hike for the governor and other top officials and ask cabinet officials to return their disaster OT pay? Sure. But that clearly isn’t enough. (What about taking back the $7 million provided to the judiciary for neglecting to maintain its white elephant of a building? Seven million dollars can fund five or more PSS paydays. What’s that? The judiciary has a lot of employees who are also voters? Oh.)

So raise excise and gaming taxes, too, and never mind if the economy is sputtering. But do we expect that those who will be affected will not oppose such tax hikes? Moreover, such taxes will be passed on to consumers, many of whom are likely to either buy less or even stop buying those items. As any sane economist would tell us, a higher tax rate doesn’t necessarily result in higher tax collections. To collect more revenue again, the economy must improve.

That’s exactly what happened when the NMI economy finally recovered in 2013-2014. The economy revived because tourist arrivals picked up and a new major investor decided to do business here.

And no. The minority bloc is not calling for a “bipartisan” approach in “solving this crisis.” What it wants is the unconditional surrender of the House leadership. The minority bloc wants the majority to agree to the minority bloc’s political diagnosis. The minority bloc members are making political demands to address what primarily is an economic problem. But to disagree with them can only mean that you’re “ignorant,” “afraid of the truth,” or, worse, have been “bought” and therefore “corrupt.” No one can possibly be in honest disagreement with them because they alone cannot be wrong.

Even when they are.

What needs to be done

THE House minority bloc, the other members of the opposition and their supporters are, of course, free to denounce and discredit this administration and its legislative allies, and even to kick them out of office through elections and/or other legal means prescribed by the Constitution.

But in the meantime, we hope that most lawmakers and other officials will focus on economic recovery efforts. Because if the economy continues its downward slope, then the government must eventually implement real cost-cutting measures which will include the repeal of all government pay hikes, more work-hour cuts or even a significant reduction in the number of government employees.

It is imperative that CNMI officials find ways to secure the release of FEMA reimbursements; boost tourist arrivals; and allow the investors who are already here to acquire the legal workers they need so they can complete their development projects.

And just to be clear

TYPHOON Soudelor in Aug. 2015 was not followed by another and more powerful typhoon that also made landfall in two other major NMI islands, resulting in a significant drop in tourist arrivals.

If Mangkhut and Yutu did not slam into Rota, Tinian and Saipan, CNMI funds that had to be spent on recovery and relief efforts would have gone instead to government payroll. Tourist arrivals would not have declined as much as they did. Many businesses would have remained open and continued generating economic activity. Their employees’ work-hours would not have been cut. Many job losses in the private sector could have been avoided. The government could have collected more tax revenue, and any shortfall would not have been this severe. In addition, the NMI’s economic outlook and investor confidence would have been much more conducive to growth.

It’s the economy. And natural disasters such as Mangkhut and Yutu are bad, so bad, for the economy.