CNMI IN 'STATE OF SEVERE DISARRAY'

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Governor Fitial's report points to things beyond his control

By Haidee V. Eugenio SAIPAN, CNMI (Saipan Tribune, Jan. 3, 2011) – In the Northern Mariana Islands, Governor Benigno R. Fitial summed it up when he said, "Undoubtedly, the state of our Commonwealth is in severe disarray."

The governor submitted his written State of the Commonwealth report to the Legislature shortly before the closing of business day on December 30, saying that Fiscal Year 2010 ended with a deficit of US$18.6 million and that the projected shortfall for the first quarter of Fiscal Year 2011 is some US$6 million.

While veering away from a promise of "better times" which was his campaign slogan in the 2005 election, the two-term governor said his administration will redefine public service and will "reduce" government.

But he said "reducing headcount is not the only way to save. Removing redundancy, cutting non-value-added activities, reducing waste, modernizing our use of technology, and setting up more efficient reporting relationships can also benefit the cause of streamlining government expenditure," he said.

In his seven-page report to the Legislature, the governor said many of the factors affecting the Commonwealth of the Northern Mariana Islands (CNMI) economy "are beyond our control."

These include the instability of passenger air service and the global economic decline.

Fitial also blamed the U.S. government for acting in ways that have been "unnecessarily detrimental to our economy and the welfare of U.S. citizens and others living in our remote islands" over the past decade, with respect to world trade rules, immigration, and minimum wage.

The governor said "more effective consultation and greater recognition of the unique characteristics of this small island community would have produced federal rules in these areas that would have fully protected legitimate federal interests while acknowledging the needs and rights of the CNMI community altogether."

Fitial said the predictions in the MacPhee and Conway economic study in 2008 about the Commonwealth losing about 44 percent of its total gross domestic product, 60 percent of its jobs, and 45 percent of its real personal income by 2015 "have unfortunately proved to be very accurate."

"In fact, we have already suffered most of the adverse economic effects that they had projected would be realized by 2015," Fitial told Senate President Paul A. Manglona (Ind-Rota) and House Speaker Froilan C. Tenorio (Cov-Saipan).

Manglona and Tenorio said they have yet to read the governor's report before commenting.

Lt. Gov. Eloy S. Inos, in an interview with Saipan Tribune last Thursday morning, said the Fitial administration is hopeful that 2011 will bring more economic stability.

This is the first time since 2006 that Fitial has not delivered a State of the Commonwealth Address (SOCA) before a joint legislative session, but settled with a written report to the House and Senate before the end of calendar year 2010.

Fitial, who won a second term in the 2009 election, used to deliver his SOCA between April and June.

Article III Section 9(b) of the CNMI Constitution requires the governor to report at least annually to the Legislature regarding the affairs of the Commonwealth and new measures that are necessary or desirable.

The governor said the Commonwealth has endured five years combating "a very serious and dire economic depression."

"Yet, the CNMI has managed to retain its identity as a viable, coherent community determined to address its problems and prepare for a more promising future," he said.

The governor's report to the Legislature has four main topics: economy, downsizing of the Commonwealth of the Northern Mariana Islands government, increased employment of U.S. citizens in the private sector, and implementation of U.S. Public Law 110-229 or the law that placed CNMI immigration under federal control effective on November 28, 2009.

He said tourism remains the Commonwealth’s most important industry.

Fitial expressed confidence that the promised joint Guam-CNMI visa waiver program will be in effect early this year.

The Commonwealth has long been asking the federal government to include the emerging tourism markets of Russia and China to the list of visa-exempt countries.

Fitial said the Commonwealth must continue to exert all efforts to entice major airlines to include the Commonwealth as a destination of choice.

The U.S. Department of the Interior granted Fitial's request for a US$350,000 grant for the Marianas Visitors Authority to update its CNMI tourism master plan that will provide a new tourist survey, targets, strategies, and branding guidelines to help guide the Commonwealth’s destination enhancement efforts. Rota and Tinian will also have their own plans within the project.

Fitial said the 2006 tourism master plan is now obsolete because of federalization and the changing global economy.

Unlike his previous State of the Commonwealth reports, Fitial cited only one specific example of an ongoing and new investment-the US$28.2 million Sandy Beach Homes Affordable Housing Project which broke ground on December 20.

Fitial said the CNMI is also looking forward to potential economic opportunities brought by the impending military buildup in the Marianas. He also talked about the creation of the Military Integrated Management Committee which is the centralized point of contact for the conduct of feasibility and impact studies related to the buildup.

The governor reiterated his administration's push for the exploration and use of alternative and renewable energy sources.

He also cited the need to continue placing the Commonwealth Utilities Corp. (CUC) under a state of emergency "to ensure that CUC will continue to provide power, water, and wastewater services to the Commonwealth."

Fitial said as the CNMI economy has declined, so too has its population and the revenues needed to support government institutions and public services.

The MacPhee/Conway report projected a Commonwealth’s population in 2010 of about 52,000.

"It is quite possible that the 2010 census results will show even a lower figure. Nonetheless, our government should be reduced accordingly," he said.

It was at this point in his report to the Legislature that the governor disclosed the US$18.6 million in deficit for Fiscal Year 2010 which ended on September 30, and the US$6 million in projected shortfall for the first quarter of Fiscal Year 2011 which ended on December 31.

"We know very well that revenue collections continue to decline and it is increasingly indicative that necessary measures to further reduce expenditure is now inevitable," he said.

He said his administration is conducting necessary assessments of government operations and functions to ensure that spending levels remain within its limitations, besides reducing headcount.

Hundreds of government employees are subjected to a 16-hour pay cut per pay period and unpaid holidays as required by the Fiscal Year 2011 budget law.

So-called non-critical government employees have also been experiencing delayed payroll since June 2010 because of severe shortage in cash collections from taxes and fees.

Fitial said one of his highest priorities this year is to get more U.S. citizens employed in the private sector.

The CNMI government remains the biggest employer of U.S. citizens originally from here.

He said with the passage of the Commonwealth of the Northern Mariana Islands Public Law 17-1; all employers of guest workers must use the job vacancy announcement to ensure that qualified U.S. citizens are considered for the position before it is filled by a foreign worker.

The new law also reorganized the Department of Labor, splitting into two the old Employment Services Division-the Job Availability Section and the Job Placement Section.

The former has just completed its first job availability forecast, based on its identification of the number and types of jobs currently held by foreign workers.

The latter is responsible for placing citizens in jobs that become available when one-year or two-year contracts with foreign workers come to an end.

Fitial said his administration believes this program deserves a technical assistance grant under the provisions of PL 110-229 that specifically address the CNMI's need to recruit, train, and hire more U.S. citizen workers in its economy, among other things.

Fitial also reiterated that the Commonwealth's labor laws are fully consistent with, and not preempted by PL 110-229.

"Our effort to increase the number of U.S. citizens in the private sector, and reduce the number of foreign workers in the CNMI workforce, reflects the same fundamental objective that prompted the enactment of P.L. 110-229," he said.

The U.S. Department of Homeland Security (DHS), the lead agency implementing the federalization law, issued in December the final E-2 CNMI-only investor rule which allows eligible foreign long-term investors with a minimum of US$50,000 instead of US$150,000 in investments to remain in the Commonwealth through December 31, 2014.

But the DHS has yet to issue the final regulations on the transitional worker program, more than two years since the federalization law was signed on May 8, 2008.

"Regardless of the reasons for this delay, the Department's failure to implement the law in a timely fashion has created serious and unnecessary uncertainty among investors, employers, foreign workers, and local citizens," Fitial told the Legislature.

Fitial sued the U.S. government over federalization, which pushed back the release of the final rule.

The governor said his administration is "very thankful" that the U.S. District Court in Washington, D.C. prevented DHS' transitional worker rule from coming into effect "before we and others had a chance to comment on the draft rules."

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