Revenue projections to be revised—again

The Fitial administration is poised to revise yet again the $148 million projected revenue collections for Fiscal Year 2009 in light of Northwest Airlines’ decision to use smaller aircraft and cancel nighttime flights from Osaka and Narita. These developments mean fewer tourists to the CNMI and lesser income for the government, press secretary Charles P. Reyes Jr. said yesterday.

“We don’t know [the reduced amount] yet but they have to do a calculation based on the anticipated lower tourist arrivals. It makes sense; if Northwest cuts flight capacity, that means fewer tourists and fewer revenues for the government,” Reyes said.

Gov. Benigno R. Fitial has until today to act on the $156.76 million budget bill for FY 2009 passed by the Legislature, which includes $148 million in local revenue collections.

Fitial last week said he would veto the budget bill, citing the lack of austerity measures.

House Speaker Arnold I. Palacios said yesterday an override of the governor’s veto is likely, while Senate President Pete P. Reyes said he didn’t have the general consensus of the senators yet as of yesterday. (See related story)

Palacios said the governor is mandated by law to revise revenue projections if needed.

“He did it [revise revenue projections] once, twice but that’s within his statutory mandate. …Even if the budget is passed today but the projections need to be revised tomorrow because of projected downward amount of resources, then the governor is mandated by law to make proportionate cuts in allotment in every branch, across the board,” he said.

Press secretary Charles Reyes said when the FY 2009 budget was deliberated on, Northwest’s flight reductions were not factored in.

“As the situation develops, the governor can always submit revised estimates for Finance, which is in charge of that,” he added.

In December, Fitial vetoed the Legislature’s first budget plan of $165.4 million, citing an $8 million drop in projected local revenue, and urged the Legislature to include austerity measures in any future budget measure.

After the veto, the governor slashed government budgets across the board by 5.5 percent for the rest of the fiscal year to reach $156 million, which would allow the government to finish the year in the black.

The House Ways and Means Committee used the proportionate reduction as a model for the revised budget of $156.76 million, which includes $148 million in local revenue collections. The House and the Senate passed the revised budget bill; the governor has yet to act on it.

Fewer tourists

Marianas Visitors Authority managing director Perry Tenorio said last week that Northwest Airlines will use a 182-seater B757 aircraft from the current 298-seater A330 by March 29.

In May, Northwest will cancel its nighttime flights from both Osaka and Narita in Japan.

Tenorio said that, based on a 75 percent local factor and with an estimated $827 in direct and $2,709 in indirect economic impact per Japanese visitor, the CNMI will lose 26.8 percent of its total air seats by Northwest, and $51.341 million and $168.118 million in direct and indirect economic opportunity, respectively, by the end of FY 2009.

“The loss of the Northwest Osaka-Saipan flight means 20 percent fewer air seats from Japan. That’s a tremendous loss from our major tourism market,” Tenorio said.

The loss of airline seats, coupled with exclusion of Chinese and Russian tourists from the federal visa waver program and the continued dip in visitor arrivals from Korea, will result in a revenue loss of $339 million annually, the MVA chief added.

Finance Secretary Eloy Inos warned that the government may have to resort to other “radical means” including but not limited to a reduction in force if there is no workable legislation that will authorize the implementation of measures such as austerity Fridays and unpaid holidays.

Inos, in a financial report to the governor, said the government spent $4.511 million more than the allotted $39.281 million for the first quarter of FY 2009.

The funds were allotted based on the continuing appropriation level of $156.703 million.

During the first quarter of fiscal year 2009, when the 5.5 percent budget cut was not in place, the government spent $43.793 million for the first quarter, which, if left unchanged, could result in an overspending of as much as $27.088 million for the year.

Inos said it is imperative that the government institute immediate austerity and other cost-cutting/saving measures at the earliest possible date.

Reyes said the government may also have to reduce compensation to contract workers but not civil service employees.

“We continue to give the Legislature the chance to get the austerity measures in place; if not, then the governor will have to reduce hourly compensation for the contract workers, not civil service employees. We also reserve the right to implement a reduction in force and he tried to do that before, but called it off after the Legislature…adopted austerity measures,” the press secretary added.

Reyes added that 2009 being an election year makes it more difficult to implement austerity measures.