Norita: Economic recovery expected in the coming year

Norita: Economic recovery expected in the coming year

Finance Secretary says deficit at $10.1M; Task force collects $1.42M in outstanding tax receivables

By FERDIE DE LA TORRE<br>

ferdie_delatorre@saipantribune.com<br>

REPORTER

The administration is expecting CNMI’s economic recovery in the coming year with more tourist arrivals, federally-funded construction activities are expedited, and the task force making efforts to increase tax collections, according to Department of Finance Secretary Tracy B. Norita.

In her report on Thursday about fiscal year 2023 budget status to House of Representatives Speaker Edmund S. Villagomez (Ind-Saipan) and Senate President Edith E. DeLeon Guerrero (D-Saipan), Norita said as they monitor the revenue collections and strive to sustain government operations through these economic hardships and challenges, there is hope for economic recovery.

Norita also discussed the same report on the budget status during a press briefing via an  online platform on Friday.

She said in her report that for the fourth quarter, the Marianas Visitors Authority has forecasted a total economic impact of $126 million of gross tourist expenditures from the Korea market alone, with Business Gross Revenue Taxes forecasted at $5.9 million and Hotel Occupancy Tax at $1.9 million.

The secretary disclosed that Finance has made significant progress with the Marianas Public Land Trust to facilitate expedited funding of the many federally-funded construction activities that have begun, including the Garapan Revitalization Project and other capital improvements awarded to the CNMI.

Norita said the taskforce has effectively collected approximately $1.42 million in outstanding tax receivables since its formation last July, and that this effort will increase tax collections in the fourth quarter and into the next fiscal year.

On Finance Fiscal Year 2023 Third Quarter Report, Norita clarified that a recent media article published a $68 million deficit in the general fund, however, the quarterly report indicated a budget deficit of $10.1 million.

Norita was referring to Saipan Tribune’s article that clearly quoted Legislative Bureau fiscal analyst Dave Demapan as saying during a Senate session that for the three quarters of fiscal year 2023, the CNMI government’s general fund has incurred a deficit of $68.1 million, with the Department of Finance exceeding its budget by approximately $22 million and Office of the Governor by $3.4 million.

Norita on Friday said she understands that Demapan has his analysis and that it was shared to them.

She said, however, she was not able to verify how the numbers were created.

“So what I can say is what we have provided the information that Finance has provided, and that is why I wrote a response to the Legislature just to clarify the report that came from Finance,” the secretary said.

Asked for comments about Demapan’s analysis that Finance exceeded  its budget by $22 million, Norita said her letter to the Legislature, she has broken down the deficit that she’s sharing of $10.1 million as of the third  quarter.

“Again, it’s due to COVID disasters, law enforcement operations, our financial system, and that is the information that I had provided and that’s the only comment that I can make,” the secretary said.

Norita in her letter said in her memo dated Aug. 7, 2023, Finance reported a third quarter revenue shortfall of internal resources by $10.3 million for the fiscal year as of June 30, 2023.

She said according to the report, decreases derived from overall collections in total taxes, fees, and other revenues.

However, she said, increased were realized for personal income tax, poker fees, business license fees, and Customs airport overtime charges.

Norita said in analyzing trend data provided by the Division of Customs and Biosecurity, there is a slight decrease in incoming container shipments, most likely due to external events affecting local businesses, such as the increase in price of source products, fuel, and general shipping costs.

She said other revenue observations include the decrease in cigarette and tobacco tax due to less withdrawals of product from bonded storage, thus directly  impacting these tax categories in the third quarter.

Norita said the general fund ending budget position as of June 30, 2023 is a deficit of approximately $10.1 million.

She said expenditure categories impacting the deficit include $4.4 million in COVID-19 disaster expenditures, $2.8 million in law enforcement operations, $7.6 million for Tyler Munis Financial System and single audit obligations, and the Office of the Governor at $295,000  due to expenditures made in the first quarter.

Norita said other under-appropriated programs continue to accrue such as $8.8 million in employer share for Government Health Life Insurance (GHLI) of retirees and active employees  and $10.7 million in 25% retiree pension payments as of June 30, 2023.

She said these significant expenditures remain a priority to protect the healthcare of employees and livelihoods of retirees, however, other sources of funding must be appropriated to continue this commitment.

The secretary said adjustments are necessary to reflect the pending allotment transfers to autonomous agencies such as Public School System, Northern Marianas College, and MVA at approximately $16 million as of June 30, 2023.

Norita said as they are currently in the fourth quarter of the fiscal year, they are closely tracking the fiscal performance of these last few months as significant collection efforts are underway that would impact the annual forecast.

On tourism, she said MVA has announced an increase in flights from Jeju Airlines to thrice daily from Seoul and four times weekly from Busan.

Norita said T’Way Air has also launched an additional flight twice weekly

She said this results  in forecasted arrivals for Fourth Quarter increasing by 30% (compared to Third Quarter) using an average load factor of 80% since July—September is peak summer season.

On MPLT loan, Norita said this financing partnership will help construction contractors receive timely payments while the CNMI awaits reimbursements from grantor agencies.

She said these timely payments will stimulate the economy through expenditures and tax collection.

On collection efforts, the secretary said Finance has partnered with regulating agencies that include Department of Commerce, Department of Labor, Saipan Zoning Office, and CNMI Scholarship Office.

She said the taskforce has conducted nearly 90 onsite compliance visitation to date, in addition to issuing payment notices to taxpayers, making phone contact, and collecting payments.

Norita urged the Legislature to continue providing critical funding of tax enforcement in the fiscal year 2024 budget deliberations.

The secretary said through they expect economic recovery in the coming year, she encouraged the Legislature to continue to pursue opportunities to streamline costs and increase revenue to support government operations and the delivery of public services.

Norita welcomed the recent introduction of legislative proposal to make modest increases to the construction tax.

“I appreciate your continued assistance and cooperation in our collective efforts to weather these financial challenges and move the Commonwealth forward to a fiscally stable and prosperous future,” she told speaker and the president.