Disaster-impaired collections show $19M shortfall
Government expenses in fiscal year 2019 exceeded the projected revenue by $63.8 million, according to the Department of Finance, with disaster expenditures comprising more than half of the deficit.
In a letter to Gov. Ralph DLG Torres dated Sept. 3, 2019, Finance Secretary David Atalig said that total expenditures and obligations of the CNMI government, not including earmarks and transfers to autonomous agencies, stood at over $220.58 million as of July 31, 2019.
“This amount exceeds budget allotments by $63.8 million,” Atalig told Torres. “Disaster expenditures account for 66% of the deficit.”
In total, Atalig noted $42.38 million in disaster expenditures, $14.23 million for the Medical Referral Program, and $4.93 million for the Department of Public Safety.
Atalig further noted that general government expenditures for the current fiscal year exceeded budget allotments by $20.9 million.
For the CNMI’s fiscal position, Atalig noted that it is currently experiencing fiscal constraints caused by several factors.
“In fiscal year 2018, the CNMI incurred deficit spending from the general fund of approximately $19 million. The natural disasters experienced in September [Typhoon Mangkhut] and October [Super Typhoon Yutu] required the government to undertake extraordinary expenditures with $42.4 million yet to be reimbursed by our Federal Emergency Management Agency partners,” Atalig wrote Torres.
“Current obligations of transfers-out [NMI Settlement Fund and autonomous agencies] and tax refunds are approximately $36.7 million and $11 million respectively,” he added.
Atalig projects a possible shortfall of $19 million in total by the end of fiscal year 2019.
“We began fiscal year 2019 with a strong economy and an improved financial position. However, due to natural disasters and labor conditions affecting business activity in the first half of the year, the CNMI is experiencing a slight economic contraction when compared to the same period last year,” he noted.
“Forecasted collections for the remaining periods are not as robust, and we anticipate a revenue shortfall totaling $19 million by the end of the fiscal year from earlier reports and analysis,” he added.
From October 2018 through July 2019, Finance reported a total revenue collection of over $174.36 million in fiscal year 2019, which accounts for 76% of collections projected for the year.
“This is still markedly short of targeted collection rate of 84%,” Atalig noted.
Business gross revenue tax collections are at $65.6 million, which falls short compared to fiscal year 2018 collections of $69.1 million in the same period.
“If this trend continues, we can expect a shortfall of $1.9 million at the end of the year,” he said, emphasizing that the projection does not include BGRT collections from the casino.
Wage and salary tax collections total $32.8 million and is a decrease of 9% for the same period during the previous fiscal year. Atalig predicts a shortfall of $1.9 million from this resource.
NMI income tax collections for personal and corporate income are at $1.9 million and $3.2 million, respectively. “This category of tax was reduced from the original budget by $6.5 million; however, a shortfall of $5.9 million is predicted by the end of the year if the trend continues,” he noted.
He sees a silver lining, though. Atalig reported that there is a $5-million increase in excise tax collections compared to the previous fiscal year, with a total collection of $33.6 million. This comes with a catch, though.
“Projections remain on target in categories of cigarettes and beer and malt beverages. However, miscellaneous commodities are exhibiting unfavorable trends, with projected losses of $7.7 million from previous estimates,” he said.
The hotel occupancy tax’s steady rate of collection averaging $1.2 million monthly is lower than the projected monthly collections of $1.4 million and is likely to reduce CNMI resources by about $2 million by the end of the fiscal year, he noted.
Poker and e-gaming licensing collection of over $5.6 million is better than previous indicators by about $1.8 million according to Atalig. “Conversely, miscellaneous fees, charges for services, and other revenue sources are lower than expected by $1.2 million,” he added.
“…General collections are not as robust as previous years, with an expected shortfall of $19 million. Our current outstanding obligations stand at just under $84 million and are likely to grow in the foreseeable future. With your leadership, we can alleviate the financial pressures of the government and relieve some of the hardships experienced by residents and businesses of the CNMI,” Atalig said.