GOVERNOR Arnold I. Palacios, on Tuesday last week, submitted a proposed budget for fiscal year 2026 with a “total identified revenue” of $179,701,969 — more than $20 million above the FY 2025 budget. These amounts include funds for earmarks and debt payments.
Tourism arrivals and hotel occupancy rates are still down, however. In addition, DFS Saipan, a major tourism-related business, is shutting down this month, prompting acting Finance Secretary Bernardita C. Palacios to warn earlier this year about a “substantial adverse effect” on the CNMI government’s revenue collections.
But in his April 1, 2025, letter to Speaker Edmund S. Villagomez and Senate President Dennis James C. Mendiola, the governor said his administration continues to work closely with the Commonwealth Economic Development Authority to secure a pension bond and that “significant effort is underway to satisfy the minimum annual payment to the NMI Settlement Fund, in the amount of $29 million.”
“This is critical to ensure continued operations and avoid cuts to government hours as our economy recovers,” the governor added.
His FY 2026 budget proposal projected that business gross revenue tax collections would increase to $77.8 million from $62.3 million in FY 2025.
He also projected increases in income tax collections to $36.2 million from $33.6 million in FY 2025, and other taxes to $20.6 million from $11.9 million in FY 2025.
However, his budget submission also indicated that the excise tax projection would decrease to $22.7 million from $38.2 million in FY 2025.
Palacios said his proposed budget would “provide departments the legal authority to allocate resources to serve our community, ensure…that key priorities are funded, and maintain…workforce hours for central government employees at 100%.”
He said the “additional revenue sources” for his FY 2026 budget proposal include “Special Revenue Funds, Federal Funds, and Autonomous Agencies.”
Palacios wants to increase the executive branch appropriation to $50.7 million in FY 2026, up from $46.8 million in FY 2025, and the Judiciary’s budget to $6.5 million, up from $6.1 million. However, he plans to reduce Legislature’s budget to $7.098 million from $7.1 million.
He said that after accounting for earmarks and debt service, net revenues available for general appropriation in FY 2026 would amount to $147.5 million, an increase of $14 million compared to FY 2025.
Palacios said tourism remains the CNMI’s primary economic driver. However, he added, “like other destinations in the region, the CNMI continues to face challenges in reaching the pre-Covid visitor levels due to a variety of reasons. These include currency fluctuations that have made visiting the CNMI less affordable; the geopolitical tensions that have led to travel restrictions; and the lack of airline options that have led to cost-prohibitive airfares for the tourists looking to visit the CNMI.”
He said that when “looking at tourism and how we can expand this industry, not only is a shift in mindset needed, it is imperative. Despite numerous promotional campaigns, the lack of measurable returns on investment has revealed repetitive missteps. It is time to break this cycle and adopt a fresh, strategic approach. In addition to emphasizing collaboration with domestic and international airlines, [the Hotel Association of the NMI], and tour operators, the Commonwealth must also continue its work in diversifying its source markets, diversify risk and shift the focus of our marketing efforts to allies and other rising markets.”
Palacios said he is urging the Marianas Visitors Authority “to prioritize diversification in its promotional and marketing efforts. This includes attracting tourists from established source markets in Asia and beyond, while incorporating initiatives that engage local communities through participation in events. By broadening our reach and fostering local involvement, we can create a sustainable path forward for our tourism industry.”
He also encouraged lawmakers “to collaborate closely with the Administration to thoroughly evaluate existing revenue streams and identify opportunities for innovative, sustainable revenue-generating measures.”
