On Monday, March 3, six months into Fiscal Year 2008, the House deliberated on both the House Concurrent Resolution, which identified the budget resources for the year, and the draft budget bill, House Bill 16-51.  The Concurrent Resolution passed, 19-1, and so did the budget bill, 14-6.  I voted no on both the resolution and the budget bill; the other five members who voted no on the budget bill included Rep. Heinz Hofschneider, Rep. Justo Quitugua, Rep. Rosemond Santos, Rep. Ed Salas, and Rep. Edwin Aldan. 

I voted no on the Concurrent Resolution for two reasons.  First, the Resolution was incomplete and not in compliance with the requirements of the Planning and Budgeting Act.  The Act clearly states that both estimated resources and expenditures must be identified in the Concurrent Resolution; the Resolution that was passed on Monday only identified estimated resources.  It was said that identifying the budget ceiling was the equivalent of identifying the expenditures, but I disagreed.  We do not have to appropriate every penny of what we expect to earn – and in fact, it would be more fiscally responsible to appropriate less.  In any case, the Act requires that we should at least indicate estimated expenditures as well, and we did not do that in the Concurrent Resolution. 

Second, it was unclear whether or not the resources identified in the Resolution equaled the outlays established in the budget bill, which raised the question of whether or not the budget was even balanced.  The Resolution did not take into account Compact-Impact funds in the estimate of available resources.  However, the budget bill identified the use of those Compact-Impact funds in the outlays.  The bill proposed to cut the budgets for certain critical agencies (the Department of Public Health, the Department of Public Safety, the Public School System, the Northern Marianas College, the Division of Youth Services, the Department of Correction, and the Public Defender) by hundreds of thousands, and in some cases millions, of dollars, and to replenish those accounts through Compact-Impact funding.      

I was concerned that the above-mentioned critical agencies would be severely shortchanged if, for whatever reason, the Governor chose not to replenish their accounts in the amounts identified in HB 16-51.  Compact-Impact funds are considered grants to the government, and the Governor has authority to distribute those funds according to the terms of the grant agreement, and also to reprogram.  It was not at all clear to me that there would be anything binding the Governor to follow the recommendations of the House for the distribution of these funds. 

I voted no on the budget bill for several reasons, including my concerns about the funding for critical agencies, mentioned above.  Related to that, I felt that essential public services had not been properly prioritized and adequately funded.  It seemed to me that we should have ensured that at least the critical services received adequate funding, and that all remaining resources would be distributed to other agencies and programs in order of agreed-upon priorities.  That did not happen – and, of course, it did not help that we did not have all the information that we needed from the Administration in order to make rational decisions about what agencies actually needed in order to operate. 

Second, I voted no on the budget bill because it provided no relief measures whatsoever for the residents and businesses that have long been suffering under exorbitant power rates.  The original draft of the bill had proposed to subsidize fuel through funds freed up by cutting government salaries (cuts of three percent, and then seven percent, had been proposed; I had favored a proportional cut).  We knew that the CUC state of emergency that the governor had declared would be expiring soon, which meant that power rates would roll back to approximately 17 cents/kwh, in accordance with Public Law 15-94.  We also knew that implementing PL 15-94 would mean that CUC would face a serious shortfall in the millions to pay for fuel if a subsidy were not identified soon to cover the true cost of power.   

The provision to cut salaries in order to create a fuel subsidy was removed from the budget bill because some members deemed it unfair to government employees, but it was replaced with nothing to address the shortfall created by PL 15-94.  I asked about this omission on the floor, and also asked if there would then be a move to repeal the law to allow CUC to charge for the full cost of power.  Both the Speaker and Rep. Dave Apatang said that they were working on a repealer that would be prefiled later in the week.  I was glad to hear that, but it has yet to happen.   

I have always thought that it was a mistake to artificially lower the power rates through legislation, not only because funding was never identified to cover the shortfall, but also because of the effect that such political interventions have on CUC’s credit rating (which is admittedly shot anyway, but it does not need to be made worse).  Moreover, in the event of a future privatization effort, government meddling in the corporation’s ability to recover costs would raise an enormous red flag for potential legitimate bidders.   

The third reason I voted no on the budget bill was because of the effect that it would have on the Retirement Fund.  The Fund has long been treated like a cash cow by past – and present – legislators.  The government’s abysmally low financial performance rating stems largely from debts owed to the Fund.  Actuarial studies have indicated that the government’s contribution to the Retirement Fund should be approximately 36%.  The 15th legislature passed a law that required only an 18% contribution, which is less than ideal, but at least still more than the Governor’s proposal of 11%.  The 16^th House, however, proposed to allow the government to reduce contributions to the Retirement Fund by any amount in which appropriations authorized under the budget Act exceeded available funding for the fiscal year.  It was stated on the floor that this would allow the government to withhold payments to the Retirement Fund in order to avoid painful personnel cuts. If the Fund itself came up against any cash shortfall, the budget bill would allow the Fund’s Trustees to draw upon investment earnings and liquidate assets.   

Some members were uncomfortable with this provision and began to brainstorm amendments that ultimately did not make it into the bill.  These members said that they would attempt to make these amendments through separate legislation.  Until that happens, however, hemorrhaging of the Retirement Fund will continue. 

The fourth reason I voted no on the budget bill was because we did not have a remotely clear picture of the impact that this budget would have on government services and on people’s lives.  In addition to the earmarks that the Governor had proposed to suspend in his budget, the House sought to suspend the Tobacco Control Fund, the Solid Waste Revolving Fund, and the Deportation Fund, and it was not clear to me what effects these suspensions would have on critical programs dependent on those funds, such as those related to public health, the operations of the landfill, and vocational training.   

Moreover, the budget bill did not take into account actual expenditures made by the government to date, which means that it is quite likely that some agencies have already overspent, and will have to make further cuts in personnel and operations in the remaining six months of the fiscal year in order to live within their means.  If public services are threatened as a result, we have no idea how, and if more people will have to be let go, we have no idea who, or how many, or from which agencies, or when.  It is clear, however, that as a result of this budget, at least 397 people will be out of a job by the end of March, and more are likely to follow in the remaining months of the fiscal year.   

Finally, I voted no on the budget bill because I did not feel that it was ready to be passed to the Senate on First and Final Reading.  Under the House Rules, any bill that is amended more than twice on the floor should be sent back to committee, the assumption being that it is clearly not ready for passage.  However, the rules were suspended and about half a dozen amendments were made on the floor to address errors in the bill, some technical and some rather substantial.  The passage of at least two other pieces of legislation (the repeal of PL 15-94, and another one related to Retirement Fund contributions, both previously mentioned) would also be required in order address significant problems identified in the budget bill.   Although commitments were made on the floor to introduce bills related to both those subjects, there is no guarantee that those bills would actually be enacted, or how soon.  Quite a few members voted “yes, with reservations” to the bill for that reason, and trusted that their concerns would be addressed in future legislation.  I personally felt that it would be better to vote no and send the bill back to the committee and address the other concerns first, than to vote yes to a bill that is seriously flawed in its present form.     

I could not, in good conscience, endorse a budget that I am convinced is not balanced, that does not clearly prioritize essential services, that lacks any relief measures to address the power crisis, and for which I have no clear understanding of what the full impacts would be.   Moreover, I certainly could not endorse any bill with that many problems on First and Final Reading.    

I have been asked a number of times if this budget is “better” than no budget.  An irresponsible budget is as bad as no budget.   It is my hope that the Senate will scrutinize this bill with extreme care, and improve upon the budget that the House has just handed them.  Perhaps then the two chambers will finally work jointly – as we should have been doing from the beginning — to pass a more acceptable budget.    

Looking ahead now to Fiscal Year 2009: we will have learned some very hard lessons from this 2008 budget, and I hope we do not repeat history with the next budget.  The deadline for the 2009 budget proposal from the Governor is fast approaching — April 1.  We should hold him to that, and hold ourselves to a much higher standard of fiscal responsibility with the 2009 budget than we have demonstrated with the budget for 2008.