Territorial governments under pressure to fill looming fiscal gaps due to federal funding cuts

 Trump’s swinging axe landing on Guam and CNMI

By Mar-Vic Cagurangan and Jayvee Vallejera

Chop. Chop. Chop. President Donald Trump’s axe is relentless and indiscriminate, causing everyone to fidget in their chair. There appear to be no sacred cows. The proverbial chopping tool flies from Washington D.C. to Guam and the Northern Marianas.

Guam anticipates $500 million for Typhoon Mawar recovery from the Federal Emergency Management Agency this year. Add this to the list of federal funds in jeopardy. While this grant may have been authorized under the Disaster Relief Supplemental Appropriations Act of 2025, it has yet to be disbursed. And Trump is not likely to cut a check for it.

FEMA, which Trump said “is not good,” is on the chopping block. Seeking the agency’s abolition, Trump wants to shift disaster response to individual states and territories. “We pay directly — we pay a percentage to the state,” he said.

Which means, disaster-prone Guam and the CNMI may have to bolster their natural disaster response and recovery efforts when the next typhoon hits.

Guam and the Northern Marianas have long been dependent on federal funds to support vital public services, including food assistance, health care, child care, housing, infrastructure, education and emergency response.

According to federal spending data, the U.S. government obligated $4.1 billion to Guam in fiscal 2024 for 9,710 prime awards, including grants, contracts, direct payments, loans and other financial assistance. Of the funding commitments, the federal government outlaid $1 billion. For the current fiscal year, Guam has received $252 million out of the $1 billion in authorized awards.

For the current fiscal year, the CNMI has received $142.2 million out of the $324 million for 374 obligated awards. In fiscal 2024, the CNMI received $630 million out of $698 million authorized for 1,181 awards.

With Trump hell-bent on making deep spending cuts and waging policy rollbacks, social services and other federal commitments are out on a limb.

Taking a cue from Trump’s domestic agenda, House Republicans last month narrowly passed a budget resolution that called for $4.5 trillion in tax cuts and a $2 trillion reduction in federal spending over 10 years.

The House budget resolution is seeking at least $880 billion worth of spending cuts expected to be extracted from Medicaid.

Low-income families on Guam and the CNMI who rely on Medicaid for health care are at risk of losing coverage. As of June 2021, a total of 33,537 individuals are enrolled in Medicaid on Guam and 16,868 in the CNMI.

The program is partially funded and primarily managed by local governments. The U.S. Congress raised the federal matching assistance percentage rate for U.S. territories from 55 percent in 2011 to 83 percent in 2021. Any federal cuts would transfer the corresponding costs to Guam and the CNMI through a larger local funding match.

Also facing the same fate as FEMA is the Department of Education. Trump plans to abolish the department to decentralize education.

“The efforts would empower state and territorial school boards to adopt curricula instead of being mandated to accept federal standards in lieu of securing certain funds,” Guam Del. James Moylan said, explaining the president’s plan for the agency.

“The concept is simple: remove the federal bureaucracy and move

 federal funding to the states and territories that have a better grasp of the education needs of the students in their district,” Moylan explained.

The Guam Department of Education is a recipient of grants managed and distributed by the USDOE. Between 2021 and 2023, the agency received $111 million from the Education Stabilization Fund under the CARES Act and $287 million in American Rescue Plan Act funds.

At the University of Guam, one of the initiatives hit by Trump's axe was the diversity, equity and inclusion program, which was funded with $11.4 million in grants managed by the Research Corp. of UOG.

UOG said that the policy change resulted in the suspension of 11 grants and the closure of one program

UOG said it is responding accordingly to federal policy changes, which have resulted in the suspension of 11 grants and the closure of one program. At least 12 employees have been reassigned to other grants. While no employees are currently furloughed, 40 student internships have been paused.

"The university is actively reallocating resources, expediting the drawdown of available grant funds, engaging in ongoing discussions with federal agencies to seek long-term solutions, and ensuring specific project deliverables are met,” UOG said in a press release.

At the Guam Housing and Urban Renewal Authority, the agency’s head warned that any cuts to the $65 million the housing program receives on average each year would result in thousands of families being made homeless and worsen Guam’s homelessness crisis.

GHURA houses approximately 13,500 individuals and families under its 750 public housing units and provides 2,700 housing choice vouchers that help families rent from private landlords.

Elizabeth F. Napoli, GHURA director, noted that since the agency is 100 percent federally funded, the suspension of any housing program will have widespread impacts. “To date, in its 62 years of existence, GHURA’s housing programs have not been affected by such budget cut threats,” she said.

GHURA also administers grant funding to partner agencies and non-profit organizations that provide services to homeless and at-risk of homelessness individuals. In fiscal 2023, GHURA received $4.5 million for eligible projects under the Community Development Block Grant, Home Investment Partnership Grant, and other programs.

Sen. Shawn Gumataotao, chairman of the Committee on Public Safety, Emergency Management and Guam National Guard, has asked Guam agencies to assess the potential impact of federal retrenchment and radical spending cuts on their future operations.

“With legislative hearings on the governor’s spending plan for fiscal year 2026 anticipated in the next few months, we must have a clear understanding of how the president’s executive orders are affecting the agencies within our oversight and their collective ability to enforce existing local and federal mandates,” Gumataotao said.

Since taking office, Trump has issued a dizzying number of executive orders—a total of 108 executive actions as of this writing—that overhaul the federal government, chop some programs, void certain mandates issued by the Biden administration and cut foreign aid, among others.

“Any reduction or elimination of federal funding for any of our public safety or emergency management agencies, or the Department of Military Affairs, resulting from an executive order or corresponding action by a federal grantor entity, will require policymakers to realign government finances to maintain critical public services,” Gumataotao said. 

In the CNMI, the sweeping federal budget cuts would exacerbate the commonwealth’s wheezing economy, which is already weakened by its anemic tourism industry and has led to business closures.

Thousands of federal employees have also been terminated and fired and entire government agencies are reportedly being “deleted.” Several federal workers in the CNMI had lost their jobs or have reduced hours.

At the Northern Marianas College, the funding cuts caused some “challenges” with scholarship funding, but the college was reportedly able to find alternative sources such as institutional funds, emergency relief funding and other local initiatives.

It was against this backdrop of funding uncertainties and an anemic tourism industry that Gov. Arnold Palacios went to the nation’s capital in late February to plead with the federal government to restore what’s called Section 702 funds.

It’s just that the 702 funds—as promised in the Covenant and designed to help the CNMI become financially independent—were supposed to be phased out in fiscal year 2023. In its final year, the CNMI reportedly received just $40 million. The CNMI is not supposed to receive any more Section 702 funding after that.

Palacios is now appealing to have that funding restored. How much are you willing to bet that the U.S. government will say yes to his request?

With the Trump administration’s penny-pinching mood, Palacios’ message to the Interagency Group on Insular Affairs last week could be seen as a long shot, but then who knows? With a mercurial Trump at the White House and a Republican-dominated Congress, it could still happen for the CNMI.

Palacios also wants to recalibrate the CNMI’s political union with the United States. In his appeal to Interior Secretary Doug Burgum at the IGIA meeting, he asked for help in amplifying his message to Trump, urging the appointment of a federal representative for the 902 talks to revisit and amend some aspects of the CNMI-U.S. relationship.

Palacios believes that now is the time to do that, noting that the current geopolitical situation of the region in the face of Chinese aggression gives the CNMI leverage.

There was no immediate word from Palacios or members of his Cabinet when asked if there is panic over the many troubles buffeting the CNMI. 

His recent appeal to the federal government, though, coupled with his recent return to the Republican fold, speaks volumes of where his hope lies: that a Republican-led Congress and White House would be the magic elixir that would turn the tide for the CNMI.

Meanwhile, CNMI Del. Kimberly King-Hinds has joined members of the Congressional Hispanic Conference in writing a letter to House Speaker Mike Johnson voicing concerns regarding the House budget resolution.

“I think it’s important we rein in spending,” said King-Hinds. “But we must balance fiscal responsibility with keeping our communities stable and afloat. Our community depends on programs like Medicaid, nutrition assistance, and Pell Grants, which are being cut in current proposals.”

While saying she agreed with most aspects of the Republican agenda, King-Hinds said the U.S. government needs to get rid of one-size-fits-all federal policies.

"We need more ICE agents in the CNMI. I will not advocate for cuts to programs that our community disproportionately depends on," she said. "I hope we can redirect the agenda away from cutting these programs.”