Acting Commissioner of Education Jaqueline Che clarified Wednesday that the Public School System’s $4.9 million in unrestricted “lapse” funds is not hidden, but a deliberate financial cushion designed to maintain operational stability during emergencies.
Che addressed the Senate Fiscal Affairs Committee regarding PSS’s request for additional funding through House Bill 24-70, which seeks to authorize the use of the funds for FY2026. She emphasized that the lapse funds are part of PSS’s long-term financial planning, accumulated due to delayed local fund transmittals in past fiscal years and supplemented by federal emergency funding during the pandemic and disaster-related economic downturns.
Sen. Frank Q. Cruz raised concerns Wednesday said PSS’s s request, questioning why the agency was seeking more funds when it reportedly has $4.9 million in unspent, unrestricted “lapse” funds from prior appropriations.
Cruz emphasized the impact of funding decisions on other government services, noting that while he supports PSS, he wants to ensure fairness for programs like medical referrals, law enforcement, and other essential services.
“I don’t appreciate it that when you used the kids to come up and protest, even on the side of the road, you are making us look bad here in the Legislature, when in fact you still have money left unexpended,” Cruz said. “I like to give PSS adequate funding, but when you have lapse funds and are still asking for more in the following year, how do you account for other agencies and programs? My point is, let’s work together for the kids.”
The hearing focused on House Bill 24-70, which seeks to allow PSS to utilize its $4.9 million unrestricted fund for FY2026 operations. The discussion included PSS officials, Acting Commissioner Jaqueline Che, Finance Director Jonathan Aguon, Finance Secretary Tracy B. Norita, and Special Assistant for Management and Budget Vicky Villagomez.
“These funds were never intended to be hidden,” Che said. “They are part of a strategic plan to cushion the impact of funding shortfalls, especially as American Rescue Plan Act support ended on Sept. 30, 2024.”
Che explained that the $4.9 million remains in PSS accounts because federal grants covered local operation, allowing for schools, offices, and other PSS facilities to operate, and services to continue without interruptions, including salaries, and preventing layoffs. The lapse funds were always part of PSS’s constitutionally guaranteed 25 percent share of general revenue.
“The presence of these funds is a structural outcome of emergency conditions, not an act of noncompliance,” she said. “They were meant to ensure continuity for our schools while safeguarding instructional time for students.”
Che recalled that PSS officials, including Dr. Lawrence F. Camacho, requested $49 million to operate, but former Gov. Arnold I. Palacios approved $40 million, asking PSS to work within that limit. “We understood the community was struggling, so we agreed to work with $40 million, knowing the lapse funds could supplement operations,” she said.
“The $4.9 million lapse fund was intended to cushion the fiscal impact and help PSS get closer to its operational needs,” Che added. With the governor’s revised FY2026 budget of $31.7 million, PSS began planning austerity measures, including no-school Mondays.
Che underscored that operating on reduced funding affects the wider community. “I think we have to be upfront to say that we are going to suffer with the rest of the community,” she said.
She emphasized transparency and partnership with the Legislature: “We are here as partners. The funds in our accounts were documented, audited, and reported. They are not surplus or discretionary—they are constitutionally required appropriations.”
Regarding recent student protests, Che acknowledged their concerns but stressed the importance of educating them about the funding process. “Students are worried that insufficient funding will affect schools and their ability to attend college. We don’t want to stop them from expressing opinions, but we also want them to understand the process,” she said.
“Mind you, $49 million is what we need to operate. But Palacios assured us we could only get $40 million. The $4.9 million in lapse fund could help us get closer to $49 million. Right now, you are appropriating us $31.7 million. We are the only agency in the CNMI receiving the largest cut. From our ask of $49 million, to the compromise amount of $40 million, and now to $31.7 million,” Che said.
She stressed that the agency’s handling of lapse funds was proactive, transparent, and consistent with long-standing fiscal practice, intended to ensure operational continuity during emergencies and funding delays.
