Inos vetoes bill suspending ETC

Acting governor Eloy S. Inos vetoed yesterday a controversial bill suspending the educational tax credit program during periods of government austerity, but made it clear that the administration wants to see the program reformed to require accountability from public and private institutions receiving ETC money, among other things.

Inos, in his two-page veto message to the Legislature, said the overwhelming pleas by students and educational institutions to disapprove Senate Bill 17-68 “cannot be ignored.”

He said the administration did not receive a single letter of support for the bill.

Inos’ veto of SB 17-68 comes as good news to the Coalition of CNMI Private Schools that, along with the Public School System, had opposed the bill’s passage.

Coalition president Scott Norman said he’s “absolutely thrilled” to learn of the bill’s veto, adding that the administration has taken a pro-education approach.

“The administration has made the right decision in vetoing the bill,” Norman told Saipan Tribune in a brief phone interview. Norman is also the principal of Calvary Christian Academy.

Yesterday was the last day for the governor to act on the bill; otherwise the bill automatically becomes law.

Inos said the administration acknowledges the need to reform the ETC law as the program in its current state is not implemented as originally intended.

He said the current system “allows taxpayers to take the power of the purse from the Legislature, does not require the qualified educational institutions to account for and report on the expenditure of the contributions, and does not set a limit on the amount of contributions one institution may receive during each year.”

“However, SB 17-68 also will not carry out its intent as stated in the findings as the language to amend the ETC program generates very minimal revenues for the general fund,” he said.

House minority leader Diego Benavente (R-Saipan), one of the strongest critics of the bill, said he’s grateful that the administration saw the importance of the ETC program to schools.

Benavente said he has spoken to fellow lawmakers to work on reforming the ETC program, “remove the loopholes in the law” and improve it, as the administration also wanted.

‘Gross inequity’

The acting governor said there is gross inequity of distribution of funds among qualified educational institutions in allowing taxpayers to pick and choose which institutions they will donate to.

“In essence, taxpayers become appropriators of public funds, which by law is the purview of the Legislature. Undoubtedly, if it were the Legislature directing ETC funds to qualified educational institutions, the distribution would be fair and equitable based on the number of enrollees each institution has,” Inos said.

He also said it would not be arbitrary and disparate as the current system allows.

Based on Department of Finance reports, there are educational institutions with 100 to 200 students that receive over $100,000 annually while others with thousands of students receive less than 1 percent of that amount.

“Clearly, such disparity neither serves the interest of the Commonwealth students, nor can be categorized as the intent of the ETC program as originally legislated,” he said.

‘No accountability’

Inos pointed to the lack of accountability to the public for fund expenditures, which are essentially tax dollars for public purposes.

Besides removing appropriation authority from the Legislature, the ETC law also allows individuals and businesses to contribute up to $5,000 each year to qualified institutions “but requires no reporting,” Inos said.

He reiterated that expenditure of ETC funds should be used only for limited purposes to augment expenses related to actual education expenses required for each institution’s approved curriculum.

“It should not be considered or used as slush funds for activities such as off-island field trips, banquets and other extra-curricular activities. Strict parameters should be set for the allowable usage of ETC funds,” he said.

‘Minimal revenue’

Inos said he disapproves the bill as this reform as written will realize minimal revenue for the general fund.

SB 17-68, introduced by Sen. Juan Ayuyu (Ind-Rota), simply suspends the ETC program during periods of government austerity.

It also only addresses contributions through wages and salaries but not gross revenue taxes, which accounts for some $1.2 million in ETC contributions compared to some $40,000 from wage and salary contributions.

“Simply put, $1.2 million in ETC contributions will continue to be made to qualified educational institutions and not affected by this measure,” Inos said.

Support for another ETC reform bill

With the flaws of SB 17-68, Inos recommends that the Legislature instead deliberate on HB 17-188 and incorporate the suggestions detailed in his veto message.

HB 17-188, recently introduced by Rep. Frederick Deleon Guerrero (Ind-Saipan), proposes to keep the ETC program intact while requiring accountability from all institutions and providing measures for fairness.

“The administration further recommends that the reform legislation for ETC include a cap for a combined total amount allowable for contributions annually to be received by qualified institutions,” he said.

Inos and Gov. Benigno R. Fitial earlier said suspending the ETC program during austerity periods is a good idea, but a thorough review of the bill showed that the proposal won’t achieve its intended purpose.

Private and public school administrators, teachers, students and parents have been making their opposition to the bill known to the members of the House of Representatives and the Senate in recent weeks, especially when the House was deliberating on the measure.