Joint resolution to access FEMA CDL is approved
The CNMI would now be able to access at least $5 million of a community disaster loan from the Federal Emergency Management Agency after the CNMI House of Representatives adopted a joint resolution that authorizes the Commonwealth to enter into the FEMA loan for as high as $93 million.
Joint Resolution 21-9, HD1, which the CNMI Senate already adopted last July 16, could provide for $5 million in funding that the Department of Finance could possibly get within the next month, which will be used to pay vendors that need to be paid for services rendered during Super Typhoon Yutu in 2018.
FEMA currently is only authorized to give up to $5 million, and an authorization from the U.S. Congress is required to access the remaining $88 million.
Finance Secretary David Atalig earlier spoke at the House chamber yesterday and informed lawmakers that the administration of Gov. Ralph DLG Torres was informed that FEMA has enough funds available, but that the deadline to request the loan is tomorrow, July 31, to give FEMA a month to review the application.
Atalig also informed lawmakers that the administration has reached out to Delegate Gregorio Kilili C. Sablan (Ind-MP) for assistance, who in turn, has already introduced a bill requesting the authorization for the CNMI.
“The CNMI is experiencing an unprecedented downturn in the economy. If we were to look back [and] look at the typical government response to shifts in economic activity, governments undertake what is called the counter-cyclical fiscal spending, which they take in debt to stimulate economic activity in the absence of the standard commercial activity,” he explained.
According to Atalig, the close-to-zero traditional economic activity in the CNMI following the lack of international tourist, along with the austerity measures in government spending and payroll, are aggravating the Commonwealth’s economic collapse.
“Our options for reasonable financing to support both the CNMI is mandatory and discretionary fiscal responsibilities are limited,” he said.
Atalig also said that the CNMI attempted to enter the bond market in 2019 to float a pension obligation bond to support the mandatory payments to the NMI Settlement Fund, but deemed the rates of interest to be unaffordable. The bond offered was at 8-12% interest, compared to FEMA’s community disaster loan, which is at .25%.
“The community disaster loan is based on the U.S. Treasury five-year loan currently at .25%. The rates of the inflation in the five-year term of the loan amounts borrowed have a negative real interest rate, which is unmatched in any financial options we have for financing,” he said. “Further, if the CNMI demonstrates a three-year deficit, following the disaster, as we presently anticipate, we can have all or parts of the loan cancelled, along with the related interest, and the loan becomes a grant.”
Last month, when Atalig appealed before the Senate for the resolution, he mentioned that the CNMI has a list of vendors that the government still owes, and that the $5 million would go to them.
If the CNMI is approved for the remaining $88 million, Atalig sought the lawmakers’ blessing on working on a spending plan, for deficit reduction, which was met positively.
“I truly appreciate that you have stated that you will include the Legislature in drafting or coming up with the spending plan,” House Ways and Means committee chair Rep. Ivan Blanco (R-Saipan) said, adding hopes for the CNMI to also be successful in terms of getting authorization for the loan at the federal level.