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By Ulysses Torres Sabuco Variety News Staff

SAIPAN, Northern Mariana Islands (August 7, 2002 – Marianas Variety)---The government has enough money for its operation until the end of the fiscal year, but the administration cannot tap the funds without legislative approval, Gov. Juan N. Babauta said yesterday.

"The issue is not the availability of money, but the expenditure authority," the governor told reporters yesterday.

"We are not in a real financial problem. The money is there, but we cannot spend more than $193 million because we need legislative approval to do so," Babauta added.

The governor was reacting to Speaker Heinz S. Hofschneider’s earlier statement that contrary to the administration’s "crisis" pronouncements, the government had enough funds.

According to the governor, however, he still needs legislative approval before he could spend the money.

He said the administration invoked its authority to "impound" government funds because the House of Representatives refused to grant him spending flexibility.

But Babauta said he was still hoping that the House would reconsider its decision.

He said he will not allow the Commonwealth Health Center, the Public School System and the Department of Public Safety to shut down.

If the House continues to reject the administration’s request for spending flexibility, the governor said, "I will not sit down and do nothing."

He added, "Frankly, I am willing to go to jail. I will (authorize deficit spending) because I am not willing to see critical services suffer."

The House, Babauta said, has made it appear that it is his administration that incurred the $18 million shortfall.

He said the deficit was the result of the under funding of DPS and the Department of Public Health, and his predecessor’s revenue projection that had to be reduced twice due to the Sept. 11 events.

Babauta said he still prefers to get legislative authorization rather than invoke his emergency powers.

"We want to work with the Legislature," he added.

In a media release, Finance Secretary Frank Villanueva said his statements regarding the current government fiscal situation were taken "out of context."

He said the CNMI government faces "a serious fiscal situation" as "our expected revenues are less than our expected spending."

However, he added, "this can be confusing because we do have sufficient cash to meet some of our essential spending needs. We have enough cash to meet payroll, for instance."

The problem, he said, "is a legal one; we have insufficient ‘budget authority’ to pay for other essential needs, such as health and public safety and to pay tax refunds and rebates."

To solve this problem, he said the administration proposed legislative action to approve deficit spending.

At the same time, he added, "we have taken action resulting in spending cuts of $8 million, and we will continue to cut spending."

According to Villanueva, the Senate "took (the) correct and responsible action by passing Senate Bill 13-84." This would give the administration the authority to go on deficit spending.

Villanueva said the Senate "should be congratulated for understanding the problem and taking quick action to avoid a crisis."

"We are hopeful that the House will now also approve Senate Bill 13-84. This is the responsible action to take. We will be glad to work with the House to be sure that all the members understand why this action is necessary at this time," Villanueva said.

For additional reports from the Marianas Variety, go to PACIFIC ISLANDS REPORT News/Information Links: Newspapers/ Marianas Variety.

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