Crunch time, a round of déjà vu
Commonwealth government struggling to keep afloat
CNMI State Public School System Commissioner Glenn Muna, M.Ed., left, explains to members of the House Ways and Means Committee their cost-containment measures in light of the government's imposition of austerity while CNMI State Board of Education Secretary/Treasurer Herman M. Atalig of Rota looks on during a budget hearing at the House chamber at the Hon. Jesus P. Mafnas Memorial Building in Capital Hill last May. Photo by Jon Perez
Saipan — The CNMI government is pinching pennies, reminiscent of circa 2000s under Gov. Benigno R. Fitial’s administration. Austerity Fridays. Belt-tightening. These stories are all too familiar. The CNMI has been here before, following the demise of the garment industry. Years later, the controversial casino industry brought the economy back to life.
Then came the typhoons in 2018.
Now a veteran of an up-and-down economy, the CNMI government has gone into a 72-hour work schedule. Earlier this year, CNMI Gov. Ralph DLG Torres has slashed the 2019 budget by nearly $30 million to help lessen the impact of the Commonwealth’s current fiscal predicament. The government has make do with $141.5 million budget for the rest of the fiscal year, down from original appropriation of $258 million.
“While the CNMI continues to show signs of recovery through improved overall collections from the previous quarter, our administration is taking the necessary steps to curb government spending as our economy recovers,” Torres said in a press statement during the budget cut announcement.
Super Typhoon Yutu caused the cash-strapped government to upfront the cost during the recovery and relief efforts. The economy was at a standstill during the first quarter of fiscal year 2019 due to a pause in tourist arrivals following the temporary shutdown of the typhoon-damaged Francisco C. Ada/Saipan International Airport.
With no tourists arriving, hotels were almost empty, occupied only by officials and other representatives from the Federal Emergency Management Agency. The super storm also forced several hotels—Coral Ocean Point Golf & Resort, Pacific Islands Club, and Saipan World Resort—to close down after sustaining heavy damages.
Tourism is the CNMI’s main economic driver. Any activity pause in this industry affects other businesses such as retail, restaurants and other establishments frequented by foreign visitors in the three main islands of the Commonwealth.
“The effects of this loss of economic activity lingered through the first and second quarter of FY 2019 and are still widely felt today with a 39.8 percent decline in tourist arrivals in March,” Torres said in justifying the new budget cut which he said was “a very difficult decision.”
Local spending stagnated, especially in the southern part of Saipan and north of Tinian, busy picking up the pieces after Yutu destroyed their homes and means of livelihood.
Sales at restaurants and grocery shops, especially in Garapan, dropped significantly as they even compared their earnings similar to 2013, before tourist arrivals picked up. Grocery sales only picked up when the Food and Nutrition Services of the U.S. Department of Agriculture released almost $9 million in emergency food assistance to all disaster victims. Groceries were busy with residents spending their food stamps buying food and other items covered by the said program.
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One glaring figure in the CNMI’s finances is the $41,000 paid by the casino being operated by Imperial Pacific International from October 2018 to April or in two quarters of FY 2019. It posted a huge drop compared to $40.9 million in 2016, $67.7 million the following fiscal year, and $43.6 million before that amount starting in the first quarter of FY 2019.
Financial Services manager Ryan Camacho, who represented Finance Secretary David Atalig at the House Committee on Ways and Means meeting in April, estimated the budget shortfall at $29 million.
To alleviate the financial crunch, Torres has requested the Marians Public Land Trust for a $15 million line of credit, which CNMI Attorney General Edward Manibusan said is public debt. Manibusan said the line of credit is not an operating expense that can be used by the administration since it would fund the CNMI government’s bond obligations and to the Settlement Fund. “Disaster relief and recover expenses are extraordinary and unexpected expenses that are not normal government operating expenses within the meaning of Section 4 of Article X of the Commonwealth Constitution.”
House Speaker Blas Jonathan T. Attao (R-Saipan) has introduced House Bill 21-44 seeking to pledge the interest income distribution from the Marianas Public Land Trust to secure as payment for the governor’s request for the line of credit. MPLT, as of this writing, has yet made any decision whether to grant the line of credit.
But with or without a line of credit, the CNMI government’s spending habit has always been under public suspicion.
While typhoons are a convenient fall guy, the government has been overspending prior to Yutu. Under former Finance Secretary Larrisa Larson’s watch, the CNMI government incurred a $26 million deficit. Minority Leader Edwin K. Propst (Ind-Saipan) and Rep. Tina Sablan (Ind-Saipan) have found this troubling. They have repeatedly called on the administration to explain and reveal the real status of government finances in order for the legislature to make informed decisions on the fiscal 2020 budget.
At any rate, federal aid keeps flowing, to a least help the CNMI with its rebuilding efforts.
President Donald J. Trump has signed H.R. 2157 that will provides significant disaster and emergency support directly to the territories affected by natural calamities. Under the “Additional Supplemental Appropriations for Disaster Relief Act of 2019,” the CNMI is eligible for $25.2 million for disaster nutrition assistance through Sept. 30, 2020, to help address needs in response to the presidentially declared major disasters and emergencies.
The Office of Insular Affairs will receive $2 million in supplemental funding to be used for financial management technical assistance related to the impacts of Typhoon Yutu in the CNMI. The National Park Service Historic Preservation Fund will receive $50 million to fund the repair of historic sites and properties in areas across the nation that received a major disaster declaration, for which the CNMI will be eligible due to Typhoon Yutu.
The Office of Insular Affairs has awarded the CNMI $2.4 million in Technical Assistance Program and Maintenance Assistance Program, while the U.S. Department of Labor has awarded its local counterpart $1 million in Disaster Unemployment Assistance.