Public Law 16-51, which will transform the Department of Public Health into a “market-oriented” public corporation, will be implemented this July.
Despite the worsening economy and the further decline in tourist arrivals following the massive earthquake and tsunami that hit Japan last month, the administration is sticking to its $120 million revenue projection for fiscal year 2012.
When Fitial, who promised “better times,” became governor in Jan. 2006, the government’s spending level was $213 million which he reduced to $198.5 million that year and then to $193.5 in FY 2007. Since then, the budget amount has continued to slide and the economy has remained in a slump. The FY 2011 budget amount was $132 million.
The government is the main employer of local residents.
In his transmittal letter to Senate President Paul A. Manglona, Ind.-Rota, and Speaker Eli D. Cabrera, R-Saipan, Fitial said $18 million of the $120 million projected revenue is for the soon to be established Commonwealth Healthcare Corp., which will also require an additional $5 million from the general fund as “start-up capital.”
Fitial expects the new corporation to generate more revenue through increased billing and collections. He cited a recently approved contract to outsource the hospital’s billing and collection services.
“Notwithstanding the effect of the transfer of [Public Health] to the healthcare corporation, the
level of projected internal resources for FY 2012 is close to the approximate government revenues and related economic activity in the 1990’s, or some 20 years ago,” said the governor who transmitted his proposed budget to the Legislature after meeting with the CNMI mayors on late Friday afternoon. April 1 was the deadline for the budget submission. Lawmakers must pass a new budget on or before Oct. 1. Failure to do so will once again result in a partial government shutdown.
Press Secretary Angel A. Demapan, in an interview on Friday, said once the healthcare corporation is operational, the expected hospital earnings may even be higher than $18 million but they will stay with the corporation.
Demapan said P.L. 16-51 also transfers the Rota and Tinian health centers to the corporation. This means that local funding previously given to the mayors of the two islands will also be taken away.
He said the health corporation will not depend on the general fund and will have to ensure it collects receivables so it can meet the funding requirements of the hospital.
But the healthcare corporation will still get federal grants and federal programs currently handled by the Department of Public Health are not going to be affected, Demapan added.
He said the governor has tasked Public Health Secretary Joseph Kevin Villagomez to form a special team to begin the process of transitioning the department’s programs.
The administration, he added, will also work with Villagomez’s team and the Legislature to amend P.L. 16-51 to ease the requirements for the corporation’s advisory board membership.The board will have five members.
Fitial, in his letter to the Legislature, said his budget includes a 30 percent employer contribution to the Retirement Fund’s Defined Benefit Plan. The rate was approved by the Fund’s board of trustees, whose members are appointed by the governor.
He urged lawmakers to pass H.B. 17-99 to allow the government to pay the Fund 30 percent in employer contribution instead of the higher actuarial rate, which is 39 percent.
According to the governor, negotiations with the Fund regarding the government’s debt of over $300 million to the pension agency are still ongoing.
Fitial’s budget allows for the continuation of the austerity measures: reduced work hours of 16 per pay period or a 20 percent paycut; the reduction by 50 percent of “All Other” funds for nonessential services; the continuation of 13 unpaid legal holidays; the reduction of utilities budget to $5 million which will go to healthcare corporation; the reduction of full-time employee positions from 2,111 in FY 2011 to 1,779 in FY 2012 or a decrease of 332; the consolidation of the operations of the Departments of Public Safety and Corrections; and the implementation of the desk audit recommendations for DPS and the Department of Community and Cultural Affairs.
But the governor said he also proposed increased funding for the Marianas Visitors Authority to “address the potential impact of the recent disasters in Japan.”
He said the total operating budget submitted by all branches and department was $203 million and reducing it to reflect revenue projection was difficult, but “radical expenditure reduction was necessary to keep the government open.”
Compared to the $64 million allotted by the FY 2011 budget, the executive branch will get $29.3 million for the new fiscal year, a reduction of $35.2 million. The amount no longer includes the budget for Public Health.
The legislative branch’s budget will be reduced from $5.6 million to $4.2 million while the judiciary’s will be increased from $3.3 million to $4 million.
Rota’s budget will go down from $6.2 million in FY 2011 to $4.4 million in FY 2011; Tinian, $6.2 million to $4.3 million; and Saipan and the Northern Islands, $1.4 million to $1.2 million.
