THE emerging facts…on the state of our fiscal health are dismaying, [as well as] the potential consequences for the Commonwealth,” Gov. Arnold I. Palacios said in his inaugural address on Jan. 9, 2023. “To get ourselves back to fiscal stability,” he added, “we must do so by exercising fiscal discipline…. The time to live within our means has truly come.”
In his first press conference, the CNMI’s 10th governor assured the public that he did not want “to go out and raise taxes again and impose the penalty on the businesses and the people of the Commonwealth because of the misappropriation [and] misdeeds [of] government officials.”
Overcommitted
The transition team assigned to Finance reported that the $481.8 million in American Rescue Plan Act funding provided by the federal government had been “overcommitted,” and that the CNMI government was facing an $86 million deficit. This was largely caused by overtime incurred by the Department of Public Safety, the Department of Fire and Emergency Medical Services, the Department of Corrections and the Department of Finance-Customs Services in responding to the Covid-19 pandemic.
Budget cut
In April, the governor signed a revised fiscal year 2023 budget with “proportionate reduction [to] ensure fairness in allocating the budget cuts across all three branches.” Public Law 23-4, which appropriated $116.1 million, included an eight-hour cut for government employees. In April, the governor submitted a fiscal year 2024 budget proposal that included a business gross revenue tax hike.
Touchback and HR 560
The governor also testified before a U.S. Senate panel in February and a U.S. House panel in August to, among other things, express support for U.S. Congressman Gregorio Kilili Camacho Sablan’s bill that would suspend the “touchback” provision in the NMI U.S. Workforce Act. But Congress did not act on the measure, and hundreds of CNMI-Only Transitional Workers or CWs had to leave the CNMI, affecting the operations and revenue of many local businesses — and the government itself.
Pivot
Arnold I. Palacios
In March, the governor informed U.S. Indo-Pacific Command commander Adm. John Aquilino that the CNMI would “pivot away from its reliance on the Chinese tourism market, which comprised more than 50% of our tourism base, or about 200,000 visitors (pre-pandemic).” Palacios also said that the loss of the Chinese market during the pandemic years “has had a considerable adverse economic and financial impact on the Commonwealth.” Hence, he said the CNMI was also requesting “direct [federal] aid to replace the economic loss that we have experienced as a result of the CNMI’s pivot away from China.”
Ten months later, tourist arrivals from China are still way below what they were before the pandemic, and there is still no new and major federal assistance that could somewhat halt the CNMI’s economic downturn.
For their part, the Saipan Chamber of Commerce, the Hotel Association of the Northern Mariana Islands, the CNMI Senate and U.S. Congressman Gregorio Kilili Camacho Sablan are pushing for the implementation of the CNMI Economic Vitality.and Security Travel Authorization Program, which would provide enhanced security provisions and transparency while allowing a 14-day visa-free travel for Chinese nationals.
To further address federal concerns, the local business community has also proposed banning Chinese workers from the CW-1 program.
Still broke
In October, the governor signed a $114.2 million budget for FY 2024 that would result in at least a $9 million deficit without the tax hikes that he said the Legislature should approve. The new budget also includes a 10-hour cut in government employees’ working hours and 100% reprograming authority for the governor.
Tax/fee hikes
In response to the governor’s call for “revenue-generating” measures, Rep. John Paul Sablan introduced House Bill 23-7, which would “properly” tax tobacco products by applying a tax imposed on “roll your own” tobacco products. Rep. Marissa Flores, for her part, introduced H.B 23-41 to impose an excise tax on imported betel nut; H.B. 23-78, to raise to 15 cents from 5 cents the tax on each softdrink and alcoholic beverage container; and H.B. 23-79 to increase marriage license fees.
BOOST probe
Rep. Ralph N. Yumul, who chairs the House Special Committee on Federal Assistance & Disaster-Related Funding, speaks during a meeting on Thursday in the House chamber.
Speaker Edmund S. Villagomez picked up where the previous House of Representatives, which he also led, left off in the investigation of the federally funded, $15 million Building.Optimism, Opportunities and Stability Together or BOOST program. The speaker created the House Special Committee on Federal Assistance & Disaster-Related Funding in May.
Chaired by Rep. Ralph N. Yumul, the committee issued subpoena duces tecum to former Finance Secretary David DLG Atalig, former Department of Commerce-Economic Development Director Jesus Taisague, and BOOST contractors Robert Travilla, Salina Sapp and Shane Villanueva.
Yumul said all of them had responded to the subpoena before the deadline on Dec. 19, 2023. The committee, he added, would convene on Dec. 28, 2023, at 1 p.m. in the House chamber. He said the committee was also discussing the possibility of issuing subpoenas to Marianas Variety, Saipan Tribune and KKMP.
Yumul said they want to see how the BOOST program, which was funded by the American Rescue Plan Act, was administered and whether all the applicants were treated fairly and equally. In the 22nd Legislature, the BOOST investigation was handled by the House Committee on Judiciary and Governmental Operations chaired by then-Rep. Celina Babauta, who is now a member of the 23rd Senate.
According to the Department of Finance, the offices of the public auditor and attorney general are investigating the BOOST program awards.
Meanwhile
Local businesses, especially the small ones, said they are in “dire straits.” The hotel industry is “in absolute desperation mode.” A HANMI official said he was “not sure how long some of our members can hang on with losses month over month over month.” A small business owner told lawmakers: “I’m hurting…. I’m down 25%. I don’t know how long I can last. Honestly, I really don’t know how long I can hold on.”
<p style=”text-align: center;”><em>“To get ourselves back to fiscal stability,” Governor Palacios </em><em>said, “we must do so by exercising fiscal discipline…. The </em><em>time to live within our means has truly come.”</em>
