Govt mulls reduced rebates, others

If user fee collection declines by over 20 percent this fiscal year, the government may resort to cutting the rebates percentage and suspend the use of certain funds being tapped for some activities.

Finance Secretary Fermin Atalig said Friday that these are some options that the government is looking at in view of the ongoing downsizing in the garment industry.

“We expect some downturn but we hope it’s not more than 20 percent,” said Atalig.

The government receives an average of $30 million in user fees every year.

“There are other areas we are looking at, like maybe we can ask the Legislature to cut the rebate percentage. That’s an option. Likewise, the earmarking can be suspended so that all funds will be diverted to the general fund,” said the Finance secretary.

For instance, he said the public law that regulates the use of tobacco settlement funds can be suspended. “The funds can instead be diverted to the general funds for operations and use for other critical services,” said Atalig.

As for the rebate, he said the percentage may be reduced from 85 percent to about 80 percent.

These may still be avoided, he said, if revenues from the tourism sector shoot up. The government hopes to see an increase in tourist arrivals from China in view of the signing of the Approved Destination Status between the CNMI and China last December.

The ADS serves as travel guide for most Chinese tourists who travel outside the country in groups. The CNMI expects to receive some 50,000 additional Chinese tourists this year as a result of ADS.

Atalig said it is still premature how much would be the decline in revenues from the garment industry. He said the first quarter figure was “okay, more than okay.”

“Right now, we still don’t know what’s going to happen. I think it’s premature to say how much we’d be losing,” he said.

The Saipan Garment Manufacturing Association reported a decline of 28 percent in sales in the last two months, resulting in a $520,000 loss in government revenue.

As some local garment factories begin to close down or downsize their operations, SGMA predicts that sales would drop by as much as 50 percent this year, which could mean a decrease in user’s fee by up to $10 million.

User fee collection last month totaled $2.08 million. In February last year, the figure was up at $2.5 million.

The user fee collections began to drop in January following the lifting of quota restriction on apparel by the World Trade Organization.

User fees totaled $2.8 million in December 2004 and 2003, and $2.2 million in October of both years. In November 2004, user fee increased to $2.5 million compared with the $2.3 million collected in November 2003.

For FY 2004, user fees totaled over $30.4 million, increasing slightly from FY 2003’s $29.46 million.

In FY 2001, the revenue totaled $35.7 million while in FY 2002, it reached $30.44 million.

Authorities said user fee collection forms a third of the government’s annual revenues.

Meantime, the Babauta administration has formed a fact-finding mission to assess the impact of the downsizing within the garment industry as a result of the lifting of quotas, which became effective Jan. 1, 2005.

The team, headed by Lt. Gov. Diego T. Benavente, will begin visiting the major factory owners this week.

“We want to get a real assessment about the factories’ outlook. The lieutenant governor will be meeting with them face to face to find out how they are affected by the new rules that have been in effect for two months,” said governor’s press secretary Peter A. Callaghan.

This way, he said, the government would be able to have a better grasp of its budget projections in view of the anticipated decline in garment user fee collection during the fiscal year.