DeLeon Guerrero: Govt overpaid Fund $25.6M

Senate President Edith DeLeon Guerrero (D-Saipan) said the government paid $25.6 million beyond what was required to the Settlement Fund during last week’s Saipan Chamber of Commerce general membership at Crowne Plaza Resort Saipan.

“…there’s an overpayment of about $25.6 million from fiscal year 2018 to fiscal year 2020 that the CNMI government paid to the Settlement Fund, according to their alternative payment of a greater amount…So as we speak right now, we are talking to the Settlement Fund, at least my office and the secretary of Finance, to resolve this issue whether what is the state government going to do about that credit balance that is showing on the report right now.”

The bottom portion of the table of her report showed that $17.6 million was paid in FY2020. “And that is for I believe FY 18 if I’m not mistaken, or 2017. That was the APGA (Alternative Payment of Greater Amount) that was paid to the Settlement Fund.”

The Settlement Fund’s portfolio performance needs to be reviewed to provide breathing room for the central government, DeLeon Guerrero said as well.

“This is very interesting, why I look into this is because obviously, when the Fund program collapsed, and went into settlement, that there is a huge amount of money that is currently invested in the market and that particular portfolio, in my opinion, needs to be looked at. We can hopefully get together with the Settlement Fund trustee and have a conversation regarding the performances of that portfolio whether there’s sufficient enough capital in there that could maybe provide some breathing room for the central government to address the financial crisis. As you can see right now we’re talking about the MAP which is a minimum annual payment and also the 17% requirement…and just for your information, the current budget right now, the revised budget was received on July 1, still coming in and holding at a ceiling of $158.6 million.

DeLeon Guerrero also discussed the CNMI’s unemployment rate and reimbursements from the Federal Emergency Management Agency, highlighted by the $60 million in cumulative reimbursements and $58 million in outstanding reimbursements.

“Unemployment rate from my last conversation with the Department of Commerce Statistics Division is 13% . . . and FEMA reimbursements, the latest article that came out, they received about $24 million from FEMA. I did do an Open Government Act awhile back, just so that we could get our hands on the numbers of how much money have come through in CNMI, with respect to how much we spend during the disaster, and how much has been reimbursed back to the Commonwealth. So, the latest information, we got $24 million, but today we have about the cumulative [amount] since FEMA started reimbursements is about $60 million and outstanding right now I believe is about $58 million.”

She also emphasized the importance of the 60-day rule for reimbursements and balloon payment in the CNMI government’s budget, that is no addressed.

“And so we put in if you notice the 60-day rule, that is very important why we are continuously talking to the secretary of Finance about this particular rule is because our opinion in the Legislature, when money comes in as a reimbursement like FEMA 60 days after the ending of the fiscal year, for example we’re in the FY2024 right now, but let’s say FY2023 ended in Sept. 30 of 2023, 60 days outside of that period when any reimbursement comes in, it will belong to the closing FY2023 period. Any money that comes in as a reimbursement, that comes in after the 60-day rule, in our opinion should be funds that should be appropriated by the Legislature so that’s what we are trying to flush out with Finance.”

The Senate president also raised concerns about a $19.8 million balloon payment in the CNMI government’s budget that is not addressed.

“So, balloon payment is coming up on Aug. 20, 2025. We have a balloon payment that is worth $19.8 million. How is the CNMI going to settle all of these obligations? Are they going to re-float this obligation out there in the market, so that they could bring down the payment obligation? These are all very critical questions, because we’re operating at a $158-million ceiling to be appropriated out after all the other obligations are taken down. Outstanding bonds, the Settlement Fund, and every other obligation that has to be removed before the net income revenue is appropriated out.”

She also highlighted the lack of data on the Tinian military buildup’s economic impact in the Marianas, including revenue generated for the local government.

“This is very important. I’ll be very honest. For two years, I’ve been asking about the military buildup data, and why this is very important is because we have an infusion of capital from a particular industry, which is military buildup that is happening on Tinian, and what is happening inside the fence and outside the fence, we need to be able to quantify the capital infusion to the Marianas. Unfortunately, as we speak today, there is no collection of that particular information. It’s just kind of like starting up trying to gather data from Tinian, trying to get a gauge from the seaport of what commodities are coming in, but I had the opportunity to go through, to get my hands on the report.”

Going through a page of the report DeLeon Guerrero said it shows how much projects have been funded in the military buildup on Tinian.

“There’s millions that are passing through the Marianas but there’s no collection, there’s no report to quantify how much have we generated as a local government based on these buildup activities… And this is very critical if we are talking about the deficit you know, budget, the lack of funding to sustain programs and employment of the public sector. So, for me, I believe that this particular sector, we need to capture the data and be able to quantify the infusion of capital and how much do we generate in terms of revenue”

The Senate president also discussed concerns with tax reporting for defense contractors, including where taxes are paid and how expenses are reported.

“… I understand based on my conversations with tax attorneys that where a normal business is domiciled, that’s where the tax is paid. And so these are the concerns, or I guess conversations I would say that would take for the administration to carry on with the federal government to see where do we fit in this particular category, and how can we again, quantify, what can we generate out of this entire activity because even for payroll expenses, withholdings, those are not being reported in the Commonwealth, they are reporting where the company is domiciled, and reporting those expenses of payroll.”