GOVERNOR Arnold I. Palacios on Thursday announced a “proportionate” budget reduction in the current fiscal year, which ends on Sept. 30, 2024.
In his letter to Senate President Edith Deleon Guerrero and Speaker Edmund S. Villagomez, the governor cited Finance Secretary Tracy B. Norita’s third quarter report, which indicates a cumulative $3.4 million revenue shortfall in the current fiscal year.
The third quarter covers the period from April 1 to June 30, 2024.
The governor said, “Although collections in the remaining months of the fiscal year may offset these shortfalls, it would be prudent to initiate a conservative reduction in the budget authority to mitigate the anticipated fiscal year-end deficit.”
In her quarterly report to the Legislature on Wednesday, Norita said the cumulative revenue forecast for the first three quarters of the year was $124 million, but the actual collection was only $120.5 million.
The governor told the Senate president and the speaker that pursuant to 1 CMC Section 7604(c)(4) or the Planning and Budgeting Act, he is “mandating an immediate proportionate reduction in the allotment authority of all branches, offices, departments, agencies, and instrumentalities of the Commonwealth which are subject to appropriations.”
“The effect of this reduction will be reflected in the budget authority remaining for the fiscal year,” he added.
The Office of Management and Budget, the governor said, has revised the remaining budget allotments for the last two months of the fourth quarter, or from August to September 2024, amounting to $16.6 million. He said the proportionate reduction will result in a total budgetary decrease of over $2.3 million or 2.15%. This cut, the governor said, will offset the third quarter lapses of over $1.2 million as of June 30, 2024, as reported by Finance.
“I realize that this reduced budget allocation will have an impact on government operations and services. However, the current financial condition of the CNMI requires that we quickly realign government spending with available resources. To meet this challenge, it is imperative that agencies and activities examine their operations and identify areas where they may be reduced or eliminated altogether, while we maintain the reduced work week at 70 hours,” the governor said.
He said his administration is committed to collaborate with the Legislature to “increase government revenue” and avoid “further fiscal challenges.”
He has been urging lawmakers to pass tax-hike measures, several of which have been passed by the House of Representatives but are still pending in the Senate, which, unlike the House, conducted public hearings on the controversial bills.
“We must work together to enact measures that will both protect the livelihoods of our government employees as well as the critical services upon which our entire community depends,” Palacios said in his letter Thursday.
In the House of Representatives, the Ways and Means Committee is finalizing the FY 2025 budget measure, which reflects the governor’s revised budget proposal.
In an interview on Wednesday, Ways and Means Committee Chair Ralph N. Yumul said they made some changes to the administrative provisions of the budget proposal, but they did not touch the numbers on the budget spreadsheet.
However, he said, they have noticed that a lot of personnel costs in various agencies are not funded in FY 2025. Although there is a dollar amount for each of the job positions, they will not be funded in the next fiscal year, Yumul said.
He said his committee will come up with a final draft of the FY 2025 budget bill by next week.
