Questions
IN the cover letter for his revised FY 2025 budget submission, the governor said: “As mandated by the CNMI Constitution, the budget submitted…is balanced such that the total amount of proposed expenditures does not exceed the total estimated resources available for appropriation.”
OK. But are payments for all the government’s obligations included in the budget? For example, the government’s utility bills, the retirees’ 25%, medical referrals, among other items. Well?
According to the governor, “The gross budgetary resources reported by the Secretary of Finance and available for general appropriation for Fiscal Year 2025 remain unchanged at $158,614,274. The gross amount is adjusted to reflect earmarked funds, debt service, and other legally obligated set-asides, resulting in available resources for appropriation of $111,474,011.”
About four years ago, citing a controversial ruling of the CNMI Supreme Court, PSS said it should get 25% of the gross (projected) revenues. In this case, 25% of $158.6 million is about $39.6 million. And yet PSS is getting over $33 million only. (The original allotment was $27.7 million, which was roughly 25% of the “available resources for appropriation,” $111.47 million.)
For the revised budget submission, how did they compute PSS’ 25%? To be sure, no one’s complaining among the education officials. But what if, down the road, the Board of Education decides to question the PSS budget amount because it is less than what PSS is constitutionally entitled? That happened in 2020 when the BOE took the administration to court.
Positive?
THE governor’s cover letter did not mention the Hyatt and Asiana office closures, let alone the CNMI’s only industry, tourism. But he remains optimistic about the “positive economic developments…already in progress in the CNMI,” referring to federally funded construction projects, including those initiated by the U.S. military on Tinian.
As pointed out by actual businesspersons who know how the economy actually works: “It is critical…to note the difference between tourism spending and government spending, such as those provided through federal grants. When a visitor chooses to spend his or her dollars it can go to a range of businesses across sectors — services, restaurants, hotels, amusements, etc. These components of the visitor’s expenditure rely on each other for revenue and resources to support employment. Thousands of local residents have built experience and careers within these fields. Turning off the source of revenue that provides for these businesses and individuals is not replaced by government spending which finds itself largely within the construction and professional services industries. As we have seen, the injection of resources in these sectors, while certainly a beneficial component to our economy, resides within sectors predominated by outside firms or within sectors with the largest dependency on foreign labor.”
In other words, the local ripple effects from tourism surpass those of construction, and benefit more CNMI businesses and, ultimately, the government itself in terms of additional revenue collection. A local economist recently noted that 54% of all customer expenditures were from tourists compared to 4% from construction contractors.
Why can’ we have both? Federally funded construction projects and more tourist arrivals?
Skeletal?
THE administration said it has “moved aggressively to stabilize the government’s fiscal condition.” Which, in plain English, means: it didn’t spend nonexistent money. Households and businesses do that all the time, but apparently, it is a big deal for this government, which is funded by other people’s money, not to spend more than it should.
According to the governor, the administration has “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.”
Is he referring to ARPA-funded employees and contracts? That’s it? “Eliminating vacant FTEs” simply means not hiring anyone else for the moment. And what is the result so far of the directive to reduce fuel and utility costs?
“Skeletal” is the last word one could think of while looking at a long list of redundant government offices and programs, often with overlapping duties. (See Fiscal Response Summit report.) In any case, the administration should tap federal funds and hire an independent firm that will conduct a desk audit of the entire CNMI government, and come up with recommendations. Let’s see how truly “skeletal” this government is.
Incidentally, what “vital public services” will be “jeopardized” if government offices are consolidated? No one is proposing significant budget cuts for truly essential government agencies such as PSS, CHCC, NMC or DPS/DFEMS/Corrections.
And what about the actual and ongoing “ripple effects” of low tourism arrivals?
No — a thousand times no
THE main point of the governor’s cover letter is a plea for tax hikes in this sputtering economy.
But if the government would, for once, live within its means, it would not need to demand more money from the business community and other struggling taxpayers.
It is this government that needs to be “modernized,” and not the current tax and fee structures. The government was too big when the economy was booming and remains preposterously gargantuan even as the islands’ population, businesses and tax base are dwindling.
No to tax and fee hikes. The government should set its spending priorities based on the actual revenue it can collect. The government, in other words, should pivot from spending money it doesn’t have. It should live within its means. Households and businesses are doing it. It’s high time for the government to do the same.
