CNMI ends FY 2023 with $4.1M deficit

The CNMI ended fiscal year 2023 with an estimated $4.1-million deficit, arising from a revenue shortfall of $313,310 and over-expenditure amounting to $3.8 million, according to Gov. Arnold I. Palacios.

Citing the Department of Finance’s fourth quarter report for fiscal year 2023, Palacios said the total actual revenue collections amounted to just $163.8 million, which means a shortfall of $313,310, or 0.19% of the total forecasted revenues of $164.1 million.

Following debt service payments and earmarked funds, the remaining resources appropriated for fiscal year 2023 through Public Law 23-04 is $116.2 million, said the governor in his Fiscal Year 2023 Annual Report on Friday that the Legislature received on Monday.

He noted that despite austerity and cost-reduction efforts, the general fund shouldered a total of $120 million in expenditures.

As a result, Palacios said, total spending and obligations in fiscal year 2023 exceed the appropriated budgetary resources by 3% or $3.8 million, mainly because of contributions to the government’s insurance program, the Group Health & Life Insurance Program.

He added that the expenditure report reflects the payment of the full outstanding obligation to the Public School System and the Board of Education.

Palacios said the end of fiscal year 2023 reflects his administration’s commitment to restore fiscal health while protecting critical priorities. At the beginning of 2023, he said, they were faced with severe fiscal challenges and implemented painful but necessary cost-cutting measures, including downsizing government, terminating non-essential contracts, and reducing work hours.

With the Legislature’s partnership and the passage of Public Law 23-04, Palacios said they were able to stabilize government operations, protect public health and safety, and sustain payments to 25% of retiree pensions.

Public Law 23-04 revised the budget law for the CNMI government’s operations for the remaining months of fiscal year 2023 and provided an updated spending plan.

As for tax collections in fiscal year 2023, Palacios said 76% came from income taxes. He said the primary source of income taxes is derived from the Business Gross Revenue Taxes that represents 44% or $70.4 million in actual collections, exceeding budgetary projections of all total revenue collections for fiscal year 2023, based on businesses and commercial activities by $7.7 million.

The Top 3 contributing business sectors are retail, construction, and financial institutions, making up 46% of all BGRT collections across all business sectors, the report states.

Income tax collections from wage and salary tax amounted to $27.3 million, corporate Northern Marianas Territorial Income Tax was at $4.8 million, and individual income tax was at $3.4 million.

BGRT, corporate, and personal NMTIT exceeded budgetary projections by $7.7 million, $2.3 million, and $1.7 million, respectively.

On the other hand, excise tax collection fell short of fiscal projections by $17.3 million, with total receipts amounting to $22.7 million or 14% of all revenue collection resources, Palacios said.

On other taxes and fees, the governor said the Division of Customs & Biosecurity collected $26.2 million in revenue from import taxes and fees, such as excise tax, container tax, beautification tax, and penalties and fees at the ports.

In terms of tourist arrivals, comparing arrivals in fiscal years 2023 and 2022, Palacios said the CNMI economy is continuing to recover from the impact of the COVID-19 pandemic on the industry.

The CNMI’s primary tourism markets are from Korea, Guam, and the United States.

Palacios said the CNMI’s tourism industry successfully used the travel bubble agreement with the South Korean government in the first and second quarters of fiscal year 2023, allowing for the implementation of the Marianas Visitors Authority’s Tourism Resumptive Incentive Program before the program’s closure in February 2023.

Even with the program’s closure, though, the CNMI continues to see a significant increase in total tourist arrivals, with 194,744 arrivals in fiscal year 2023 compared to 69,534 in fiscal year 2022, or an increase of 180% in tourist arrivals, Palacios added.