KOROR (Palau Horizon) — President Tommy Remengesau has signed legislation allowing the national government to use Compact interest earnings of up to $5 million to cover the shortfall in local revenues for fiscal year 2002.
He signed House Bill 6-164 during his weekly press conference on Wednesday.
Remengesau, however, clarified that the new law is not a supplemental budget but a “reallocation to address current cash flow problems.”
“This does not mean additional money but only for us to implement what the Budget Act requires us to do,” he said.
The Olbiil Era Kelulau earlier said the measure was a “supplemental budget,” which caused misunderstanding between the executive and legislative branches.
Remengesau said Palau is facing a shortfall of $4.4 million in local revenue collection, including the anticipated $1.3 million shortfall in sin tax collection.
In his letter to the lawmakers, Remengesau said the government lost around $600,000 or 66 percent in tax revenue collection for beer alone.
Remengesau said he had instructed Ministry of Finance to tap Compact interest earnings as the local revenues would not be able to meet the $35 million target for this fiscal year.
“We all know that this shortfall in local revenues are attributed to the Sept. 11 attacks and the reduction in sin taxes,” Remengesau said in an interview.
He said the law allows flexibility if there is a shortfall, but only up to $5 million.
“I cannot touch the interest earnings unless…the OEK authorizes it,” he said.
The president signed the amended version of the bill submitted by the OEK.
According to the new law, the money would be obtained from the Compact Capital Account Investment Earnings, instead of getting some of it from the Compact Energy Production Investment Earnings as earlier proposed by Remengesau.
Remengesau also allowed the inclusion of specific projects under the State Block Grants section of the new law.
Allocation for the repair and upgrading of the Koror-Airai water and wastewater systems have been reduced from the original proposal of $1.09 million to $650,000.
