SAYING the “time for debate has passed,” and “now is the time for action,” Gov. Arnold I. Palacios submitted a fiscal year 2025 budget proposal in the amount of $111.4 million, which he insists should be passed with “revenue-generating legislation,” referring to the House tax-hike measures pending in the Senate.
“Our current economic challenges require and demand legislative action,” he said in his April 1 transmittal letter to Senate President Edith Deleon Guerrero and House Speaker Edmund S. Villagomez.
Palacios also said that personnel “is the largest cost category in the CNMI’s budget, comprising 62% percent of the CNMI’s expenditures.”
“As you can see in this budget proposal,” he said, “we have reached the point where extending the reduction of work hours and making additional cuts in Fiscal Year 2025 will be necessary to sustain government operations to protect public health, safety, and the welfare of the people of the Commonwealth.”
His proposed budget includes salaries based on a 70 instead of an 80-hour biweekly work schedule “continuing from FY 2024 into FY 2025.”
The governor’s FY 2025 budget proposal identifies $158.6 in projected budgetary resources of which $111.4 million is available for appropriation.
The current FY 2024 budget identified $163.4 million in budgetary resources of which $119.1 million is available for appropriation.
The Department of Finance, however, earlier said that the government had missed its first quarter revenue target by 12%.
For the second quarter, the governor has noted a decline in excise and business gross revenue tax collections.
In his FY 2025 budget transmittal letter, Palacios said his administration has “taken a cautious approach in revenue projections.”
He reiterated that collections “for the current fiscal year already reflect a decrease in business gross revenue tax, income tax and excise taxes, which comprise the bulk of the decline in our revenues through the second quarter.”
But he said that “BGRT and excise taxes are anticipated to increase as the CNMI’s infrastructure projects that include roads, schools, the college, renewable energy and housing are currently in progress and will extend beyond Fiscal Year 2025. Additionally, military investments in the CNMI will only add to the expected growth of the construction industry.”
Palacios also anticipated “a slight increase in tourist arrivals,” which are still below pre-pandemic levels.
He said the “FY 2025 tourist arrival forecast submitted by the Marianas Visitors Authority indicates an increase by 10% to just over 300,000 in total arrivals, accounting for new direct flights from Hong Kong Airlines and additional flights from Korea. Moreover, the continuation of United Airlines direct flights from Tokyo-Narita supports the steady growth of our tourism industry. These are all positive indicators of a modest recovery.”
In 2019, 487,000 tourists visited the CNMI. The figures for 2017 and 2018 were 659,741 and 517,807.
Other highlights
Among the other highlights of the governor’s FY 2025 budget proposal:
• Allocation to fund the mandatory match for the Medicaid reimbursement program is reduced from $8.7 million to $6 million for FY 2025. “Other sources of funding will need to be identified to ensure program benefits will continue prior to the exhaustion of this funding allocation,” Palacios said.
• $2.9 million is allocated for the CNMI government’s utilities consumption, including $400,000 for the government’s annual payment of arrears as part of a payment agreement between the administration and CUC, whose biggest delinquent customer is the CNMI government. The allocation also includes $250,000 each to the Office of the Mayor of Rota and the Office of the Mayor of Tinian and Aguigan for the payment of their utilities.
“Although underfunded in the…proposed budget by $3.2 million, utilities are also part of federal programs’ allocations and federal funds will be applied as appropriate to cover utility costs associated with each grant’s respective program,” Palacios said.
He added that he has issued Directive 2024-004, “directing all Executive Branch departments, offices, and agencies to transition their power utility billing to prepaid meters so energy consumption is effectively controlled and a reduction in the usage and cost of utilities is anticipated.”
• An allocation of $800,000 for the Health Network Program, formerly known as the medical referral. The governor said $6.5 million was requested by the Commonwealth Healthcare Corporation for the program’s operations and activities.
FY 2025 begins on Oct. 1, 2024.
