According to a recent U.S. Government Accountability Office report of public debt in the U.S. Territories, the CNMI’s total outstanding public debt declined from $166.3 million in fiscal year 2017 to $97.6 million in fiscal year 2019—a decrease of 16%.
GAO found that the decrease of 16% was mainly due to the repayment of outstanding debt. Total public debt outstanding is the sum of bonded debt outstanding and other debt held by the primary government and component units.
Total public debt outstanding as a share of GDP generally remained constant at about 8% between fiscal years 2017 and 2019. Total public debt outstanding per capita decreased from $2,308 in fiscal year 2017 to $1,958 in fiscal year 2019, the lowest among the U.S. territories.
“The decrease in our public debt is an indication of our commitment to fiscal sustainability, transparency, and accountability of funds for their intended purposes,” said Gov. Ralph DLG Torres. “It has always been a goal of our administration to take care of longstanding obligations to put our government in a better fiscal position than when we took office. We are committed to continuing this progress so that we can make sure our children and future leaders are in a better place.”
“Despite the fact the CNMI had two disasters, this GAO reports shows that we continued to improve on paying down our public debt. We will continue to put in all effort to rebuilding our economy and to provide opportunity for our people, despite the ongoing challenges of the global pandemic. We hope that we will continue to move in this trajectory and continue to lift up the lives of our people moving forward. Our financial goals are centered on addressing the needs of our people and at the same time reducing our obligations and liabilities,” said Lt. Gov. Arnold I. Palacios.
GAO is the supreme audit institution of the federal government and provides the U.S. Congress, the heads of executive agencies, and the American public with “timely, fact-based, non-partisan information that can be used to improve government and safe taxpayers billions of dollars.” The work of the GAO is “done at the request of congressional committees or subcommittees or is statutorily required by public laws or committee reports.”
GAO found that the CNMI’s total revenue fluctuated between 2017 and 2019 due to Super Typhoon Yutu and Typhoon Mangkhut. The CNMI’s total revenue was $516.6 million in fiscal year 2017, increased to $705.4 million in fiscal year 2018, and decreased to $656.5 million in fiscal year 2019.
The CNMI’s general revenue was $334.4 million in fiscal year 2017 and decreased to $266.0 million in fiscal year 2019, an overall decrease of 20%. In fiscal year 2017, the CNMI’s total expenses were $430.1 million, and increased to $689.8 million in fiscal year 2019, an increase of 60%. This significant increase in total expenses was mainly due to increases in expenses for health, public safety and law enforcement, community and social services, and CNMI’s Public School System component unit. Of total expenses in fiscal year 2019, $524.2 million were incurred by the primary government, while $165.6 million were incurred by component units. In fiscal year 2019, the CNMI had a deficit of $33.3 million due in large part to Super Typhoon Yutu. In fiscal year 2017, it had a surplus of $86.5 million.
“The fluctuation in revenue is [attributed] to our economic growth in 2017 and 2018 and the unfortunate decline in fiscal year 2019 was because of the typhoons that impacted our economy. This is why we had a deficit in 2019 after having a surplus in 2017, which was wiped out in order to address our immediate recovery needs following Super Typhoon Yutu,” said Torres.
GAO noted that the CNMI’s total public debt has continued to decline, however, worsening economic conditions and significant pension liabilities present fiscal risks.
“The Coronavirus Disease 2019 [COVID-19] pandemic had a significant negative impact on tourism, [the] CNMI’s primary industry. Territory officials told us tourism from Asia declined significantly beginning in January 2020 at the onset of the pandemic, leading to a sharp reduction in anticipated general revenue. Territory officials told us they are taking steps to diversify the economy in areas such as digital technology, cannabinoid products, and fishing,” the GAO stated in its report.
“Through our collaborative efforts with our Council of Economic Advisers, our business community, the Legislature, and people in our community who have shared their ideas with me, we have a policy plan in place to diversify our economy in order to recreate new revenue for our government and community so that new jobs can be created for our people,” said Torres.
The CNMI reported a net pension liability for the primary government of $529.3 million in fiscal year 2019, which was 44% of GDP in that year. The CNMI has already secured a pension obligation bond to ensure full retiree payments.
A copy of the June 2021 GAO report on the US Territories Public Debt Outlook is available online at https://www.gao.gov/products/gao-21-508. (PR)