CNMI LEGISLATOR REYES SUGGESTS FOREIGN BORROWING IF ECONOMIC

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CRISIS CONTINUES

By Zaldy Dandan

SAIPAN, Northern MARIANA ISLANDS (November 16, 1998 - Marianas Variety)---To prevent the mass lay-off of its employees, the cash-strapped government may have to borrow money from international banks or even float bonds, according to the chair of the House Committee on Ways and Means.

Rep. Karl T. Reyes (R-Prec. 1, Saipan) told reporters Friday that the "across-the-board" budget cuts that will be applied on all government agencies -- with the probable exception of the Departments of Public Health, Public Safety and the Public School System -- could total at least 24 percent per agency.

Reyes was reacting to the administration's recent announcement that, due to the continuing decline in revenues, the $249 million budget for the current fiscal year will have to be slashed by $32.5 million.

House Speaker Diego T. Benavente (R-Prec. 2, Saipan), in a separate interview Friday, said he will urge House members to cooperate with the administration's austerity program and curtail off-island travel to "a bare minimum."

The speaker said he will ask members to delay any new purchases and control expenditures to a minimum.

"We're in real cash-flow crisis now and I think we have to find ways of managing with it," he said. But a new round of steep budget cuts may be too hefty to manage, according to Reyes.

"I don't think it's feasible for some agencies to sustain the reduction of almost a quarter of their budget," Reyes said. "The lawyers in the Attorney General's Office will probably run away. I don't know whether the Departments of Commerce and Lands and Natural Resources could cope."

He added, "We may have to ask (Gov. Pedro P. Tenorio) to seek outside financing."

Reyes said such U.S. cities as Sacramento and Pittsburgh have floated bonds for its financial needs.

Some bonds could be paid in 30 years, he said.

"There's nothing new with the concept."

Reyes said he may propose floating a $300 million bond, which could pay the government's unfunded liability of the same amount to the Retirement Fund (RF).

"Out of this total, RF could invest $200 million, and make available $100 million -- on top of $50 million from local banks -- as housing loans to RF members or to match federal CIP funds," Reyes said.

"Then there will be a lot of construction activities, and the multiplier effects will certainly result in an increase in revenues."

Reyes added, however, that his proposal should be carefully studied.

He said it's a "last resort" measure for a government facing the prospect of laying-off a significant number of its employees.

The CNMI government is the largest employer of locals.

"If we lay-off people the multiplier effect on the economy would be very bad," Reyes said. "It's better to borrow money."

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