DUE to the economic impact of the Covid-19 pandemic, the CNMI government overspent its fiscal year 2021 budget by $64.7 million, but the federal government’s financial assistance and an increase in local government revenue reduced the deficit to $42.6 million.
In his report to Speaker Edmund S. Villagomez and Senate President Jude U. Hofschneider, Finance Secretary David DLG Atalig said, “The economic contraction was offset by the infusion of federal funding stemming from the American Rescue Plan Act.”
He also informed the Legislature that the actual revenue collections in FY 2021 exceeded the projected revenues appropriated in Public Law 22-8. The budget law allotted $144,415,554 in FY 2021 while the actual collections totaled $146,742,798.
Atalig reported that business gross revenue taxes represented 36% of the total collections. For their part, income taxes in the form of Wage and Salary Tax, and the personal income tax under the NMI Territorial Income Tax, “nearly surpassed the total BGRT collections.”
The CNMI government, he said, collected $24,266,542 in Wage and Salary taxes, and $23,994,580 in NMITIT taxes. These revenues are more than the amount projected in FY2021 budget law, Atalig said.
“It is important to note that the collections presented in this section do not include casino revenues, and other licenses and fees, also known as earmarked resources,” he said.
After debt service payments and earmarked funds, the remaining financial resources available for appropriation were $96.4 million, Atalig said.
But the extent of the government’s response to the pandemic “necessitated large and continued expenses from the general fund,” he added.
Consequently, the total spending and obligations for the fiscal year exceeded the appropriated resources by 54%. The $37.9 million spent on Covid-19 prevention and mitigation and the $7.1 million for the medical referral costs resulted in a $64.7 million deficit.
Atalig said the $3.9 million spent and reimbursed for Super Typhoon Yutu expenditures was also part of the total “disaster and Covid expenditures.”
“It is the government’s rapid response and dedication to combat the spread of the virus within the community that has managed to keep the CNMI as one of the safest places within the nation,” he added.
In his ARPA expenditure plan, Gov. Ralph DLG Torres allotted $75 million of the federal monies for FY 2021 and $175 million for FY 2022.
Economic outlook
Atalig said with the spread of Covid-19 variants, there will be uncertainties for the years ahead.
While the global rate of fully vaccinated people stood at 50%, the CNMI had achieved 97% as of Jan. 13, 2022.
Atalig said this gives the CNMI “an opportunity to return to normalcy at a faster rate through a successful immunization of the population. This includes the potential of resuming full domestic commercial activity and the resumption of tourism arrivals.”
The travel bubble between the CNMI and South Korea has allowed for a partial resumption of tourism in the Commonwealth which will continue to maintain strict adherence to Covid-19 mitigation guidelines, Atalig said.
He added that the expansion of the travel bubble to Japan, China, Hong Kong and Taiwan is a necessary option to pursue to restore necessary government revenue.
He reiterated that federal funds from ARPA and other federal programs “have provided economic stability and supported commercial activity while aiding in the fight against the spread and impacts of Covid-19. This injection of federal resources has further mitigated the shortfall of available resources and allowed for the continued administration of government services.”
However, he added, “these programs will not be indefinite, and efforts to pursue larger scale resumptions in tourism and economic activity will be required to meet government obligations.”
