Date: March 16, 2023
To: All Executive Branch Department, Office, and Activity Heads
From: Governor Arnold I. Palacios
Subject: Implementation of Cost Containment Measures for FY 2023
Overview of Fiscal Crisis and FY 2023 Budget Revision
I have transmitted to the CNMI House of Representatives and the Senate my formal request to revise the Fiscal Year 2023 Budget to reflect the fiscal crisis we are facing and to ensure the continuity of essential government functions, programs, and services. This crisis has forced our hand to make difficult and painful decisions in the coming months.
The proposed budgetary changes are primarily a result of American Rescue Plan Act (ARPA) and Community Disaster Loan (CDL) funds no longer being available to sustain government operations and services. Funds awarded to the Commonwealth were supposed to cover the majority of government operational costs and 20% of personnel costs for nearly all government employees. The CDL funds were supposed to cover the CNMI’s local match for Medicaid and the 25% portion of retiree pension.
Both ARPA and CDL funds were overspent and overcommitted by the previous administration, and the proposed revised budget removes both as sources of funding. We must now rely almost entirely on local revenues to keep the government functioning for the rest of the fiscal year.
With respect to local revenues, the Acting Secretary of Finance (SOF) has advised me of a modest projected increase in local revenue collections by approximately 11%, or $11.8 million. These projected revenues must be stretched to cover essential services and operations of the government, including a portion of personnel costs that were previously covered by ARPA.
In light of the pressing financial crisis our Commonwealth government faces, I am directing all departments, offices, and activities of the Executive Branch to implement cost containment measures and to monitor and report on the effectiveness of efforts on a monthly basis from now until further notice. Your full cooperation in implementing these measures is both urgent and necessary to stop the bleeding, reduce government spending, and place our Commonwealth on a path to fiscal stability.
Who This Directive Applies To
This Directive applies to the entire Executive Branch, including departments, offices, and activities that had been funded in whole or in part by ARPA or local revenues in the current fiscal year budget. This Directive applies to all positions funded in whole or in part by ARPA or local revenues, including civil service, excepted service, and appointed positions. This Directive further applies to the Governor, Lieutenant Governor, and members of the cabinet.
The fiscal challenges we face impact our whole government, and indeed our whole community. We must all do our part to overcome this financial crisis. I therefore urge the Legislative and Judicial Branches, as well as the autonomous agencies of the government, to similarly implement cost containment measures, particularly with respect to operations or personnel that were funded in whole or in part by ARPA in FY 2023.
Cost Containment Measures for FY 2023
- Reduced Personnel Costs and Authorization of Flexible Work Schedules
All departments, offices, and activities of the Executive Branch whose personnel costs were funded in whole or in part by ARPA or local revenues, are directed to reduce personnel costs by at least 10%. In general, a 10% reduction in personnel costs will mean a 72-hour work schedule for affected employees who were funded in whole or in part by ARPA or local revenues.
The reduction in work hours will take effect beginning Monday, April 24, 2023 and continue through the end of FY 2023. Generally, Executive Branch departments, offices, and activities will shut down every other Monday following April 24, 2023. The government must remain open for business during regular working hours, Tuesday through Friday, 7:30am to 4:30pm, including lunch hour.
To minimize disruptions to public services, all government offices under the Executive Branch are directed to immediately cease the practice of shutting down for lunch during working hours. I further direct the heads of Executive Branch departments, offices, and activities to cross-train and empower staff expeditiously and as needed to ensure that public services are not stopped or delayed simply because one knowledgeable employee is on leave or otherwise unavailable.
I fully recognize that some departments, offices, and activities may need flexibility in order to fulfill their respective mandates, and may have the capacity to design and implement alternative plans to carry out their functions and duties while staying within funding constraints. I therefore encourage the heads of Executive Branch departments, offices, and activities to consider submitting alternative plans that will achieve the goal of reducing personnel costs by at least 10%. These alternative plans shall be subject to my review and approval, and may include but not be limited to:
- Shifting locally–funded or ARPA-funded employees to federally-funded accounts, where feasible; and/or
- Implementing flexible work schedules, staggered employee times, or reassignments of staff as needed to ensure that government services and hours of operation continue without disruption.
The reduction in work hours does not apply to the federally-funded programs and functions of the government, or to Commonwealth government employees who are funded 100% by other federal funding sources, or whose federally funded salaries require a local match.
I hereby direct the Office of Personnel Management (OPM) to work with all departments, offices and activities under the Executive Branch to properly implement this Directive. Please extend your full cooperation to OPM.
I further direct the Special Assistant for the Office of Management and Budget (OMB) and the Acting Secretary of Finance to monitor personnel cost savings across the Executive Branch every pay period through the end of Fiscal Year 2023, and report to me on at least a monthly basis. Please extend your full cooperation to the Special Assistant for OMB and the Acting SOF.
- Restrictions on Personnel Actions
All within-grade increases remain suspended until further notice, pursuant to Directive 2023-001. Any other personnel actions, such as reclassifications or reallocations, for which no funding source has been identified, are hereby also suspended.
All heads of Executive Branch departments, offices, and activities are further directed to review locally-funded vacancies to identify which positions may be temporarily suspended or eliminated, at least until the end of the current fiscal year. A report listing all of the suspended or eliminated positions, and the cost savings associated with each, must be submitted to my office within 30 days of the date of this Directive.
OPM is authorized to process only personnel actions for positions deemed critical for public health and welfare, public safety, fiscal recovery, or the infrastructure needs of the Commonwealth, and for which a funding source has been identified. The heads of Executive Branch departments, offices, and activities must submit detailed justifications to the Office of the Governor for prior review and approval.
- Overtime Restrictions
Unless I have authorized otherwise, the payment of overtime hours will be strictly limited to overtime-eligible employees directly involved in law enforcement, fire protection, emergency management or health services. Authorization of overtime must be in compliance with the Fair Labor Standards Act. The heads of Executive Branch departments, offices, and activities shall be responsible for monitoring and restricting the payment of overtime every pay period, and reporting to the Office of the Governor on a monthly basis.
- Travel Restrictions
The heads of Executive Branch departments, offices, and activities are directed to strictly limit locally-funded travel for essential purposes, i.e., for public health and welfare, public safety, fiscal recovery, or the critical infrastructure needs of the Commonwealth. For travel under federally funded programs, employees and appointees must obtain grantor approval prior to the issuance of travel advances.
- Limitations on Contracts, Leases, and Subscriptions
All heads of Executive Branch departments, offices, and activities are directed to identify and terminate all nonessential, locally-funded office contracts, subscriptions, and leases, including vehicle leases under their control, and submit a report of the cost savings realized thereby to the Office of the Governor within 30 days of the date of this directive. No new or renewed, locally-funded office contracts, subscriptions, or leases may be executed unless advanced approval is obtained from the Office of the Governor.
- Termination of Nonessential Cellphones and Land Lines
All heads of departments, offices, and activities of the Executive Branch are directed to identify and terminate all nonessential, locally-funded cellphones and land lines, and provide a report of the cost savings realized thereby to the Office of the Governor within 30 days of the date of this directive. No new or renewed, locally-funded office cellphones or landlines may be procured unless advanced approval is obtained from the Office of the Governor.
- Utility Conservation and Efficiency
All heads and employees of Executive Branch departments, offices, and activities are directed to take immediate steps to reduce consumption of utility services. Our target is a 25% reduction in monthly utility consumption (electricity and water) for each department, office, and activity of the Executive Branch. Simple actions such as fixing leaks, shutting off or replacing inefficient equipment, and ensuring that lights are off at the end of the work day or if an office is not in use, must be implemented immediately.
Executive Branch heads shall designate a utility conservation action leader within their respective departments, offices, or activities who shall be responsible for tracking, monitoring, and reporting utility consumption and the effectiveness of conservation and efficiency measures. Reports shall be provided to the Office of the Governor on a monthly basis.
- Fuel Conservation
I hereby direct the Acting Secretary of Finance to review and if necessary terminate or impose spending limits on government fleet cards. I further direct all department, office, and activity heads of the Executive Branch to take immediate actions to reduce and monitor the consumption of fuel. Government vehicles must be used strictly for official purposes, and all vehicular trips must be documented in a mileage logbook. Carpooling and coordination within and between offices to reduce vehicular trips throughout the day are encouraged. The Executive Branch heads are directed to appoint a fuel conservation action leader within their respective departments, offices, or activities who shall be responsible for tracking, monitoring, and reporting fuel consumption and the effectiveness of conservation and efficiency measures. Reports shall be provided to the Office of the Governor on a monthly basis.
Internal and External Communications
To provide transparency and minimize disruptions to operations and services, the heads of all Executive Branch departments, offices, and activities are directed to ensure effective communications with all employees under their supervision as well as with the general public, on the contents of this directive, how cost-containment measures will be implemented, and how they will affect their respective functions and operations. Any alternative plans for cost reduction, modifications, or exceptions that are approved subsequent to this directive must similarly be communicated with staff and stakeholders.
Modifications or Exceptions
Requests to modify or grant exceptions to the foregoing cost-containment measures must be submitted to the Office of the Governor for approval. The requesting Executive Branch head must provide a detailed justification explaining the compelling circumstances that warrant the modification or exception.
Fiscal recovery is one of my administration’s highest priorities, and I ask for the full cooperation of all government employees and appointees to ensure that public resources are used conservatively and efficiently in the delivery of essential services. We all play an important role in reducing government spending and realigning operations with available resources in order to avoid further, more drastic cuts. Our collective goals are fiscal stability, more efficient government operations, and improvements in the delivery and responsiveness of public services as efficiency measures are implemented.
Lieutenant Governor Apatang and I welcome ideas for other actions we can take as a government to reach these collective goals. We appreciate the sacrifices and hard work of all public servants, and we are confident that with everyone’s cooperation, at all levels of government, we will rise to the task of overcoming our fiscal challenges and getting our Commonwealth on track to stability and recovery.
Arnold I. Palacios