An alarming report from the General Accountancy Office exposes just exactly what happened during the previous administration.

Food For Thought 2-9-07

Hi friends, this is Harry Blalock; General Manager for radio stations KZMI & KCNM. It’s that time once again to take a look at the issues of the week, and to offer some Food For Thought.

We’ve been hearing a lot lately about the imposition of the U.S. minimum wage in the CNMI and the federalization of our Immigration department. It seems there are many people on both sides of the issues, some have very good and well-articulated arguments, and others seem to be just concerned with their own self-interests. One of the things that is very important to keep in mind is that we need to take a look at all the pertinent facts and issues concerning these topics. If we go crying to the U.S. Congress and Senate that we simply can’t afford a wage hike, or that taking away control of our Immigration would have disastrous and long reaching effects without being ready to answer any of the questions or charges they may bring against us, it only makes us look foolish and ill prepared. And to be honest, we do have things we need to answer for, that we shouldn’t try overlooking or avoiding. To follow the example of our previous governor and to keep saying that everything is “pretty darn good” just won’t cut it with anybody anymore.

One of the written submissions to the Senate Energy Committee came from Jeanette Franzel, Director of Financial and Management Assurance for the United States Government Accountability Office. Her report was titled, Commonwealth of the Northern Mariana Islands, Serious Economic, Fiscal and Accountability Challenges. In the report she detailed many of the challenges we are currently facing and talked about what has happened to our economy as a result of the diminishing garment industry and the reductions in tourism. She acknowledged that we are in very bad shape at the moment and that our challenges are huge. But then as any good auditor will do, she started presenting facts and figures. There is really nothing new here, the information has been slowly coming out over the past year, but it is alarming just the same. I am going to give you some of the facts and figures contained in her report, just so we’re all on the same page and have a basic understanding of what has happened and placed us here.

I hope I don’t lose you in the sea of numbers, but I feel it is very important for you to see the trend and realize how badly and criminally our government was managed during the previous administration. For fiscal year 2001, which was the last year of former Governor Pedro P. Tenorio’s administration, the local government had combined local income and federal contributions totaling $277,057,785 with total expenditures of $258,177,431 leaving a surplus of $18,880,334 when comparing income to expenditures. We ended the fiscal year 2001 with net assets of $40,575,181. Available government funds at the end of fiscal year 2001 were $17,219,852. You may recall that when he took over, Governor Babauta blamed the deficits on his predecessor, unfortunately that simply isn’t true as shown by this G.A.O. report.

Once former Governor Babauta took over things started changing drastically and the figures speak for themselves. In fiscal year 2002, we had total revenues of $287,615,613 and total expenditures of $314,985,333, or a deficit of $27,369,720, and our net assets shrunk to $30,760,955. Available government funds at the end of fiscal year 2002 were a negative $4,249,748.

He continued his financially irresponsible spending in fiscal year 2003 as total government revenues were $282,972,842, total expenditures were $303,986,379 for a deficit of $21,013,537 and our net assets continued shrinking to $15,596,170. Available government funds at the end of fiscal year 2003 were a negative $25,263,285.

The downward spiral continued in fiscal year 2004 even as we were told things were pretty darn good. Total government revenues were $298,761,486 while total expenditures were $352,488,419 leaving a deficit for the year at $53,726,933 and our net assets were now a negative $18,656,437. Available government funds at the end of fiscal year 2004 were a negative $49,245,390.

And the final year of the Babauta administration led us to new all time lows. In fiscal year 2005 our total government revenues were $308,530,728, total expenditures were $343,370,293 leaving us with a deficit of $34,839,565. Our net assets were now a negative $38,131,589 and available government funds at the end of fiscal year 2005 were a negative $84,077,330.

Just for the record, it needs to be said that during his entire term as governor, Babauta kept claiming that he was cutting government jobs and spending, and yet the figures prove exactly the opposite. He was working hard to give the impression that things were pretty darn good by spending far more than the government was bringing in and sending it into complete bankruptcy.

The report also tells how the CNMI government increased its debt and failed to make its contributions to the retirement fund. The balance owed the retirement fund grew from $72 million in 2002 to $120 million in 2005 for an increase of 67%. And one of the most telling parts of the report states that the CNMI’s reported debt to assets ratio went from 89.8% in fiscal year 2002 to 113.5% in fiscal year 2005. In other words, at the end of fiscal year 2005, the CNMI owed $1.14 for every $1 in assets that it held.

In other words, Governor Babauta drove us into technical bankruptcy. We are now in serious debt, and don’t have anywhere near enough assets to cover it. When you look at our situation from the federal governments perspective, you can realize why they would be skeptical about anything we have to say.

And then the previous administration also tried covering up the problem by not providing their single audit reports on time. These audits are supposed to show the federal agencies that gave us grants how the money was used and that it was used in accordance with the terms and specifications of the grant. The Babauta administration didn’t seem to want to federal government to really know what was going on in a timely fashion, so they just put off filing the single audit reports, usually by more than a year. The audit report due for the fiscal year ending September 30, 2000 wasn’t due until June 30, 2001, but the Babauta administration didn’t get around to filing it until October 17, 2002, or 16 months late. The single audit report for the fiscal year ending September 30, 2001, which was also due the following June, wasn’t filed until June 6, 2003, a year late. The next one was 13 months late, the one for 2003 was a year late, and they never got around to filing their last one at all, they left that to the incoming Fitial administration to take care of, meaning it was filed 22 months late.

You could say to the federal government that we rejected Babauta for a second term because of those kinds of abuses and mismanagement. But then you would also have to answer as to why you haven’t done anything to hold him, or his Finance Secretary – Fermin Atalig, responsible for violating the Planning & Budgeting Act. The things they did were criminal, and right now it looks like they got away with it scott free. So when you have an agency like the General Accountability Office looking into your affairs and asking why you don’t uphold your own laws or prosecute those who violate them, what can you possibly say in your own defense? You obvious don’t have any accountability and therefore really have no credibility either. You can promise that we will implement our own minimum wage increase at a rate and scale we can handle if they agree not to federalize our minimum wage, but then we promised that before. We even went so far as passing laws that outlined the increases and the timelines, but then we repealed the law just as fast as we passed it as soon as we got past the Congressional hearings into our minimum wage. Let’s face it, our word isn’t worth anything in Washington, and we really haven’t done much to improve that situation.

Yes, this administration may be trying to cut their costs and not recklessly overspend the way Babauta did, but are they doing enough? And why aren’t they holding the previous administration legally liable for what they did while they were in office? Why have no charges been brought against any of the officials of the previous administration, and why don’t we believe that our laws are important enough to uphold? If you were a U.S. Congressman or Senator would you believe us? Or would you trust us to do the right thing? Would you believe that if you gave us money to help bail us out it would actually be used appropriately and not squandered?

Our real problem in Washington is that we have a serious credibility problem, and I don’t really see us doing anything that would convince them we deserve anything else. Until we get serious about holding our elected officials responsible, and show that we take our laws seriously, we can’t expect anyone else to take our laws serious either, especially the U.S. government.

That’s not to say the situation is hopeless and there are no other options, we will be looking at some of these options in coming days. But we need to wake up and realize that our number one problem is one of credibility and accountability, and then actually start doing something about it.
I’m Harry Blalock, thanking you once again for giving me a generous slice of your valuable time, and allowing me to share my Food For Thought.