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FY20 budget down by over $48M but no pension cuts

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AS a result of a drastic decline in tourist arrivals in light of the novel coronavirus outbreak, the CNMI government’s projected revenue for fiscal year 2020 has been reduced to $184.8 million from $233.2 million.

Of the $184.8 million, the administration said $106.7 million is allotted for government operations. The previous figure was $148.8 million.

In a statement on Friday, the executive branch said it will implement a 64-hour work schedule for its employees beginning on March 15, 2020 and “reinforce ongoing cost-containment measures.” But CNMI retirees will continue to receive their pensions in full, the administration added.

Also on Friday, Gov. Ralph DLG Torres informed the Legislature about the new revenue estimates and budget cuts.

Attached to the governor’s letter are the Finance Department’s first quarter report for FY 2020, the new budget spreadsheet with adjustments, and the revised estimates for the fiscal year, which started on Oct. 1, 2019 and will end on Sept. 30, 2020.

Finance Secretary David DLG Atalig informed the governor that the projected revenue for FY 2020 had been reduced to $184.8 million from the original estimate of $233.2 million.

Atalig said earmarks, debt-service payments, and Settlement Fund obligations amounted to $78.1 million.

Thus, he added, the total resources available for appropriation, also referred to as the annual operating budget, will decrease by 28.3 percent to $106,703,826.

Atalig said, in light of the anticipated decline in tourist arrivals due to novel corona virus outbreak, the projected business gross revenue tax collection is reduced by $12.7 million; wage and salary tax, $4.8 million; corporate income tax, $9.1 million; excise tax, $9.7 million; hotel occupancy tax, $6.9 million; other taxes, $2.3 million; license, fees, and miscellaneous revenue, $2.4 million.

The Finance secretary recommended the following cost-containment measures: reduced work hours; travel outside CNMI is not allowed at the government expense unless authorized in advance by the Office of the Governor (this applies to locally and federally funded travel, unless grantor agency has pre-authorized and covered the cost of travel); no personnel action involving hiring, re-hiring; no overtime pay to OT-exempt employees; no new or renewal of contracts and leases including but not limited to professional services, rentals, vehicles; no purchase of items greater than $2,500; and utilities conservation and fuel conservation.

Under the governor’s Directive 2020-002, business hours for departments and agencies under the executive branch will be closed every Friday beginning March 20, 2020 until further notice, the administration said.

“The directive is a result of lingering economic effects of Super Typhoon Yutu and the substantial adverse impact of the current novel coronavirus outbreak in China. While there is no presence of novel coronavirus in the CNMI, temporary suspension of flights from China has led to a significant loss of economic activity and revenue,” the administration added.

“This outbreak has essentially brought our tourism industry to a standstill for an undetermined period, causing a severe disruption in revenue and affecting many of our local businesses and residents accordingly,” the governor said. “As a government, we have to adapt and make adjustments for this unforeseen circumstance.”

According to the administration, it is working with the Legislature “to implement these reductions. The Office of Personnel Management and the Office of the Attorney General have been directed to work with all departments and agencies to ensure that all civil, excepted and exempted service employees are properly notified and advised of the modified work schedule.”

“These are challenging times, but we understand that almost every economy in the Asia-Pacific region [is] experiencing revenue downturns,” Lt. Gov. Arnold I. Palacios said. “This decision to reduce work hours [is] attributed to factors outside of our control.”

The governor, for his part, said: “In order to keep essential public services like education and public safety intact, we had to lay all options on the table and determine our priorities as a government. We have had to make cuts of this size in order to protect our retirees’ pensions, which provide for their basic needs. Since 2015, we have kept that commitment to ensure their full pensions, and we will continue to meet that as much as we can.”

Palacios said it is “unfortunate that certain members in the community are spreading rumors of a cut to pensions, and “that we made that decision.”

That’s not the case, he added. “We continue to be mindful to give retirees their full pensions, but at the end of the day, we continue to look at our priorities with the limited resources we now have as a result of this coronavirus outbreak.”

The governor said, “While we understand that public health is at the top of our priorities, financial recovery is being done, so that we can eventually revert back to a normal work schedule. Lt. Governor Palacios and I appreciate all our government employees for their patience during these financial challenges and for their continued commitment to serve the people of the Marianas.”

The administration and the Legislature “have determined a collective approach to addressing these challenges head-on, because this is what a responsible government should do in challenging times. We will continue to work to promote the Marianas as a world-class destination to our other source markets. Economic and financial recovery are at the forefront of our policy initiatives, so that we can return to normalcy,” the governor and the lt. governor said in their joint statement.

To amend or not to amend

Asked if lawmakers now need to amend Public Law 21-8 or the FY 2020 budget to reflect the new projected revenue numbers, House Floor Leader John Paul Sablan said the governor’s letter doesn’t explicitly recommend legislation.

“For me, the governor’s letter merely presented to us how much are we losing in terms of revenue,” Sablan said.

Speaker Blas Jonathan Attao and House Minority Leader Edwin Propst earlier stated that instead of the Legislature amending the budget, the governor should just exercise his emergency power to implement across-the-board cuts.

For his part, House Ways Means Committee Chairman Ivan Blanco said he will invite the Finance secretary, the governor’s special assistant for management, budget, and other representatives from the administration to a committee meeting. “We want to know how exactly they came up with those numbers,” Blanco said.

He added that in a meeting early last week, lawmakers were told the revenue loss was between $35 million and $40 million.

“Now they are saying, the loss is almost $50 million. So my question is, how they did arrive at that number?”

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