BREAKING NEWS: Palacios to institute major cuts, including 10% cut in work hours

Most Commonwealth government employees funded by the American Recovery Plan Act monies under the Fiscal Year 2023 budget will be taking a 10 percent cut in pay, while 500 of them will be laid off. These are among austerity measures Gov. Arnold Palacios is proposing in a revised FY 2023 budget to the legislature to keep the government from running out of money.

The original budget relied heavily upon ARPA funds and Community Disaster Loan funds that former Gov. Ralph Torres and former secretary of finance David Atalig, Jr. depleted before leaving office.

“We once had $600 million provided to the Commonwealth government,” Mr. Palacios said at a news conference announcing the proposal Wednesday afternoon. “It was depleted in 18 months.”

Within-grade pay increases, government purchase and travel cards, travel, cell phones, vehicle leases, and vacant positions all are on the cutting block because of Mr. Torres’s near-bankrupting of the Commonwealth.

Reducing the pain to public employees

If the legislature approves the revised budget, the remaining ARPA-funded employees will work only 72 of the 80 pay period hours. The governor’s fiscal team wanted to cut pay by 20 percent, or a 32-hour workweek (64-hour pay period), but Mr. Palacios relented, not wanting to cause public employees additional financial strain.

“We wanted to see whether we can at least minimize the pain to our employees,” Mr. Palacios said. “Rather than going 64, we went to 72. We will use the revenue that will be realized to cover the costs.”

The Palacios administration is tracking an $11 million increase in revenue over the original budget’s estimates. This, he says, is due primarily to increases in the business gross revenue tax collections.

Essentially, the revised budget will axe the now-phantom ARPA and CDL revenues and what those revenues were supposed to fund, and attempt to fund priority areas with local funds instead.

The originally-appropriated CDL fund toward the 25 percent portion of retiree pensions and the local match requirement for Medicaid will be erased, with the governor pledging to scrape through local funds to meet those two obligations. The budget also will transfer the constitutionally-mandated 25 percent to the Public School System, including $2.9 million in additional local revenue. There will be allocations of $859,000 in local revenue to cover government operations, and $1 million in local revenue for the government’s Group Health and Life Insurance plan. All these operations and obligations were left unfunded by Mr. Torres and Mr. Atalig.

The revised budget also will transfer about $1 million to the Commonwealth Healthcare Corporation, which Mr. Torres and Mr. Atalig shortchanged in the middle of the pandemic.

The revised budget was filed this morning in the Commonwealth Legislature, and must be approved by both houses and signed by the governor in order to go into effect. Every day the cuts and new revenue level are not authorized, the fiscal crisis compounds, requiring even deeper cuts in order for the government to survive through September 30, 2023.

“I do hope we act expeditiously,” Mr. Palacios said, as Senate President Edith Deleon Guerrero and House Speaker Edmund Villagomez sat by he and Lt. Gov. David Apatang.

Where did all those federal funds go?

According to the governor’s transmittal letter to the legislature on the revised budget proposal, “These ARPA funds should have  been sufficient to cover expenditures for three more years, through 2026. My Fiscal Response Team (FRT), however, has determined that the Commonwealth’s ARPA funds were overspent and overcommitted within 18 months of receipt.”

And that’s not the only financial scandal from the Torres administration that led to today’s austerity announcement.

David Atalig, Jr.

“[T]he former Secretary of Finance [Atalig] assured the Legislature of the availability of CDL funds to cover $7.2 million for the local match for the Medicaid Program and $13 million for the payment of the 25 percent portion of retiree pensions,” Mr. Palacios wrote to legislators. “My Fiscal Response Team has determined, however, that the CDL funds have been depleted and are not available to cover either of these obligations for the remainder of the fiscal year. These obligations will have to be covered by local revenues, including federal reimbursements owed to the Commonwealth.”

So where did all that money go? Mr. Palacios said he wants to know as well, and he wants the numbers to back up legal action the Commonwealth could take against those who misused and wasted funds.

“I’ve talked to the OPA asked them for assistance,” Mr. Palacios said. “As for the AG, he’s taking a look at some of these issues. In my discussion with OPA, we asked her, ‘Would it be possible for you to include a forensic audit to the FY 2021 and 2022 audits? She said she’s going to talk to the auditing firm. 

“Whatever I can scrape up from the bottom of this ARPA barrel, I’ll give it to her for this forensic audit. I will also send a letter to the White House requesting for funding to do those audits. Not only to do the audits, but to also provide training and assistance to revenue and tax, and for assistance for additional auditors.

In the mean time, the revised budget must be the priority, Mr. Palacios said.

“Tomorrow we will go into session at 10 a.m.,” Speaker Edmund Villagomez said. The revised budget will be considered then. Kandit will be casting the session live.

Revised Fiscal Year 2023 budget

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