GOVERNOR Arnold I. Palacios’ fiscal year 2025 budget proposal remains unchanged, but he said his revised submission on Monday increased the allocation for the Public School System by $5.75 million.
He also reiterated the need for “revenue-generating measures,” referring to tax increases.
He said this “commitment to education” required reallocating funds from the executive branch, “resulting in further reduction of personnel cost in the executive branch by $5.36 million.”
But although executive branch personnel are funded by the general fund at approximately 60 hours, Palacios said the current austerity work schedule of 70 hours will be maintained using the “recouped” American Rescue Plan Act funds that will subsidize the executive branch’s personnel funding gap.
In his revised FY 2025 submission, the PSS budget went up to $33.6 million from $27.8 million.
The CNMI Constitution mandates that PSS “shall be guaranteed an annual budget of not less than twenty-five percent of the general revenues of the Commonwealth through an annual appropriation.”
In his original submission on April 1, 2024, the governor said the Department of Finance had identified $158.6 million in budgetary resources, 3% lower than last fiscal year. The amount available for government appropriation was $111.4 million.
In his revised budget proposal on Monday, the governor stated, “the gross budgetary resources reported by the Secretary of Finance and available for general appropriation for fiscal year 2025 remained unchanged” — still $158.6 million while the net resources available for appropriation still amount to $111.4 million.
‘Cost-cutting’
The governor said from the beginning, his administration has “moved aggressively to stabilize the government’s fiscal condition.”
“We have implemented austerity hours, canceled contracts, released hundreds of employees, eliminated vacant FTEs, and directed government departments to reduce fuel and utilities costs. This government, especially the executive branch, is already operating on a skeletal budget. Further cuts will further jeopardize vital public services and create ripple effects throughout the local economy,” Palacios said.
To “restore the government’s fiscal health and protect essential services,” he said their “efforts to reduce costs must be complemented by revenue generation.”
“The importance of passing revenue-generating legislation cannot be overemphasized. We stressed this urgency in our original budget transmittal on April 1, 2024. With the Legislature’s support, we can, together, revisit existing outdated statutes and propose amendments to adjust rates and modernize tax and fee structures established, in some cases, more than two decades ago,” Palacios said.
‘Positive developments’
The governor also said that “positive economic developments are already in progress in the CNMI,” including construction work from the U.S. military activities on Tinian, multiple government road construction projects and several other capital improvement projects that will continue or will be completed in 2025.
He said Northern Marianas College, for example, anticipates the completion of its $33 million student center in FY 2025, and expects to begin construction of two other new buildings in 2025.
The governor said he and Lt. Gov. David M. Apatang are also working with cabinet members to expedite other pending projects.
He said the Division of Revenue & Taxation, and Customs and Biosecurity are “actively monitoring shipments of construction materials and supplies, and other taxable activities to boost revenue collections.”
He said his administration “remains committed to strong tax enforcement and compliance to ensure steady revenue collection.”
His four-page cover letter to the Legislature’s presiding officers did not mention the state of the CNMI’s only industry, tourism. Monthly visitor arrivals continue to be below their pre-pandemic levels.
The Department of Finance earlier said that it had missed its revenue projections for the first and second quarters of the current fiscal year by $17.22 million and $5.65 million. This was before the closure of Hyatt Regency Saipan and the local office of Asiana Airlines.
