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Editorials 2020-February-21

Editorials & Columns
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And so it came to pass

THE discussion during the recent meeting of the Board of Education’s finance committee highlighted, more or less, what we all mean when we say that the government is financially strapped: its personnel costs are quite enormous.

Of PSS’ original FY 2020 budget of $37 million, over 90% — or $34 million — was for personnel. And PSS is just one of the CNMI government’s more permanent version of the “alphabet” agencies (CHCC, CUC, DPS, DPW, etc.)

To be sure, a growing economy can pay for many of the public sector’s obligations which was why the BOE/PSS — among other agencies — approved pay raises a few years ago when the going was still good. However, the education commissioner noted that the PSS compensation plan implemented in 2017 “did not have the sustainability to meet the financial obligations nor did it have a contingency plan should the economy face a shortfall.”

Which is basically the history of government in a nutshell.

Now we say the government should not have overspent!

But when did the government not overspend?

About eight years ago, when the economy was still gasping for air, the practically bankrupt CNMI government overspent by $25 million (about 29 million in today’s dollars) while under austerity measures. The bulk of these expenditures went to public health, including medical referrals.

Starting in 1998, in any case, the local economy had been shrinking and so when it finally came to life, and the government was collecting more revenue, not just PSS but other agencies as well were more than happy to give themselves pay-raises. Government after all is basically a “company” in which the employees vote on how much they should get paid.

In 2017, moreover, the possibility that 1) two typhoons would directly hit the three main islands in two consecutive months, and that 2) a new virus outbreak would bushwhack the global travel industry if not the global economy was the furthest thing from the minds of most public officials and their constituents.

And so it came to pass, and once again members of the public and their elected officials are having the same heated conservation they have had not too long ago.

No way out but through

TO prevent (or at least delay) payless paydays and/or mass layoffs in the CNMI’s other “major industry” (government), its personnel costs must be reduced. (Not to worry. If the economy improves again, pay-hikes will be implemented again by the government — regardless of all the talk today about “the need to spend within our means.”)

In addition, the CNMI has to find new funding sources. It is, in the short- and long-run, politically untenable to continue imposing spending cuts that affect government employees (voters), their families (voters, too), and the rest of the islands’ residents (more voters).

Revenue-generating measures, however, take time before they can bear the proverbial fruit. (They are also likely to result in unintended or unforeseen consequences which may create new problems or make current ones worse. Welcome to life on Earth.)

In the meantime, every government entity has to do what it has to do, including the judiciary which is spending $7 million on a white elephant (Guma Hustisia) that it didn’t properly maintain. All officials, moreover, must announce that they are voluntarily reducing their pay. We must also accept the fact that these and other austerity measures will have to be expanded if the economic situation doesn’t improve in the next few months.

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