THE CNMI government missed its fiscal year 2023 revenue projection by 0.19% only, according to the annual report submitted by Gov. Arnold I. Palacios to the Legislature.
He said the government ended the fiscal year with an estimated $4.1 million deficit, resulting from the $313,000 in revenue shortfall and $3.8 million in over expenditures.
In his report to Senate President Edith Deleon Guerrero and Speaker Edmund S. Villagomez, the governor said the total actual revenue collections in FY2023 amounted to $163.8 million, representing a shortfall of $313,000.
Public Law 23-4 or the revised FY2023 Appropriation Act, which the governor signed on April 25, 2023 projected $164.1 million in fiscal year 2023. Of this amount, $116.1 million was available for appropriation.
The governor reported that 76% of the total tax collections in FY2023 originated from income taxes, the primary source of which was derived from business gross revenue taxes representing 44% or $70.4 million in actual collections. The BGRT, he noted, exceeded the projection based on businesses and commercial activities by $7.7 million.
The top three contributing business sectors were retail, construction, and financial institutions making up to 46% of the total BGRT collections across all business sectors.
The income tax collections from wage and salary tax amounted to $27.3 million while the corporate NMI territorial income tax amounted to $4.8 million, exceeding the projection by $2.3 million. As for the personal NMTIT, collections totaled $3.5 million, which exceeded the projection by $1.7 million, the governor’s report said.
But the excise tax collections amounted to $22.7 million only, falling short of the projection by $17.3 million.
However, the governor said the Division of Customs & Biosecurity collected a total of $26.2 million in fees and other taxes.
Visitor arrivals
The governor cited the Marianas Visitors Authority’s report, stating that visitor arrivals increased by 180% compared to FY 2022 arrivals. But FY2023 visitor arrivals were 46% only of the pre-pandemic arrivals in FY2019.
The governor noted that the CNMI Tourism Resumption Incentive Program, which was funded by the American Rescue Plan Act, was discontinued in the second quarter of FY2023. Nevertheless, he said, visitor arrivals from Korea, Guam, U.S., Japan and other countries increased in FY2023 compared to FY2022 due in large part to rising consumer confidence in travel especially in Korea, and, to a lesser extent, the softening of government travel restrictions in Japan during the post-Covid era.
But he said tourism arrivals were tempered by a weakening of the Korean won and the Japanese yen against the U.S. dollar, making the CNMI a more expensive and less favorable destination for Korean and Japanese travelers.
Expenditures
According to the governor’s report, despite austerity and cost-reduction measures, the general fund shouldered a total of $120 million in expenditures. Total spending and obligations for the fiscal year exceeded the appropriated budgetary resources by 3% or $3.8 million as a result of the government’s group health and life insurance program.
But the expenditure report reflects the payment of the full outstanding obligation to the Public School System and the Board of Education.
Outlook
The governor said MVA is expecting a 35% growth in tourist arrivals from Korea in FY 2024. The CNMI also expects an estimated 11,000 visitors from Japan in FY 2024 or a 49% increase. The government likewise anticipates that direct flights from Hong Kong will begin in 2024, projecting 14,336 visitors.
The governor said he is also looking forward “to the economic stimulus and infusion of new revenue that major federally funded projects will bring in the year, including new construction, road projects, expanded internet access and climate action initiatives made possible through the Infrastructure Investment and Jobs Act, and the Inflation Reduction Act.”
He said the $15 million revolving line of credit from the Marianas Public Land Trust will be key in facilitating the critical infrastructure projects slated for FY2024.
The CNMI also anticipates more than $24 million in disaster-related reimbursements from the Federal Emergency Management Agency in the coming months. The governor said this will be instrumental in reducing the government’s outstanding deficit and facilitating payments owed to vendors.
The governor is likewise “hopeful that revenue-generating bills now making their way through the Legislature will be passed and sent to my desk for approval this year, and provide additional much-needed fiscal stability for critical operations and public services.”
“Though not without challenges, the new year brings great promise for the Commonwealth, and we have much to look forward to,” he added. “Lt. Gov. David M. Apatang and I appreciate the continued support of the Legislature and the community in the coming year as we strive together to revitalize our economy, restore the fiscal health of our government and renew public confidence in a prosperous future.”
