Deal or no deal
IN his recent letter to the CNMI delegate, the governor stated that “[e]stablishing the CNMI as a regional hub for health and education in the Pacific should remain a priority.” This proposal was part of the 2001 platform of the local Republican Party, which swept that year’s election, and it had already been discussed earlier and since then. So what’s the hold-up? And how does the governor intend to implement it now? With more federal funding assistance on top of his “repurposing” and 702 funding requests? How likely is that under this White House and Congress?
The governor also mentioned that the CNMI’s 702 funds “were withdrawn a number of years ago at the request of another governor….” He was referring to Democratic Gov. Froilan C. Tenorio, who did not make such a request.
Thirty years ago, appearing before a congressional subcommittee chaired by a Republican from California, Elton Gallegly, Gov. Tenorio offered to make a deal with U.S. lawmakers. “[L]eave us with control of our immigration, taxation and minimum wage…. In return we’ll leave you with $27 million [in 702 funds] you can use to cut federal taxes or reduce the deficit….” Rep. Gallegly was the author of legislation that would federalize CNMI immigration and minimum wage. And his party, the GOP, was in charge of both houses of Congress for the first time since 1953. “Do you really want to shut [the CNMI’s] economic engine down?” Gov. Tenorio asked Rep. Gallegly. “We have now what your [Republican] Contract with America offers the states. It works. Don’t take it away. Don’t shut down our economy.”
That was the context of the former governor’s statement.
In any case, it was the Clinton White House that, in Feb. 1995, submitted a federal budget proposal reducing the CNMI’s federal infrastructure funds from $27.7 million to $6.1 million. Gov. Tenorio reacted by saying that he was happy with what the federal government could afford to give. But Juan N. Babauta, the CNMI’s Republican Washington representative at the time, said he would “fight this just as I did last year when the president also proposed ending Covenant funding. We won then; we can win again,” he told Variety.
Take note. “Ending Covenant funding” had already been proposed by the U.S. president before Gov. Tenorio made his “offer” to Rep. Gallegly.
More history lessons
WE should also point out that back in the day, the CNMI succeeded in diversifying the local economy by welcoming a “new” industry: garment manufacturing. By the 1990s, the garment and tourism industries were thriving, and so was the local economy. In 1992, instead of begging for federal assistance, then-Gov. Larry Guerrero told the U.S. Congress that the 14-year-old Commonwealth had “reduced the size of government relative to the private sector. We [have] decreased our burden on the Federal Treasury. We have dramatically increased local revenue and just as dramatically reduced our reliance on federal taxpayers. Economic self-sufficiency for the Northern Marianas is in sight.” However, he added, the islands’ tourism industry “and the garment factories…will collapse under the weight of mainland wage and immigration policy. Don’t send us back to a coconut economy. Don’t make us a federal welfare state again.”
Today, the CNMI is essentially telling Uncle Sam: Make us a federal welfare state again — and we promise not to call it a bailout.
One last thing
CONTRARY to what the governor said in his letter to the CNMI delegate, the garment industry did not “disappear…almost overnight….” By 1995, it was announced that, starting in 2005, international garment quotas would be lifted, thus ending the competitive advantage of local garment factories. It was a slow motion “disappearance.” In fiscal year 1999, the garment industry paid the CNMI government a user fee totaling $39.3 million (equivalent to $74.9 million today, or about 54% of the government’s FY 2025 budget).
The last garment factory on Saipan shut down in 2009. Fortunately, the CNMI still had a tourism industry, which, thanks to the efforts of former Gov. Juan N. Babauta and his successors, attracted a new market, China, resulting in the revival of the local economy in 2013-2018.
As for the current administration’s steadfast faith in the federal government’s generosity — fine. But the CNMI government still has to pay its bills. Optimism is not legal tender. While hoping for an early Christmas miracle, the administration must still exercise fiscal prudence and avoid causing further harm to the struggling private sector.
