Revenue collection for the second quarter of the current fiscal year saw a slight uptick of 3 percent, according to Finance Secretary David Atalig, who told Gov. Ralph DLG Torres that the information is based on the second quarter revenue report for fiscal year 2019.
Atalig said the administration remains optimistic about the CNMI economy’s prospects for the rest of the year, with the CNMI continuing to show signs of recovery based on improved overall collections from the first quarter of the same period last year.
Money from the CNMI’s federal partners like the Federal Emergency Management Agency reimbursements would also trickle in.
“Taking this into consideration, we anticipate increasing trends in gross revenue tax, corporate income tax, and excise taxes as the infusion of monetary aid from our federal partners in the form of private loans and subsistence programs will be realized in the coming months,” Atalig told Torres.
“Nevertheless, we conservatively forecast for the remainder of the year a collection rate of 50 percent rather than the 58 percent needed to maintain the budget. We recommend that further adjustments to our 2019 financial resources be reduced by an additional $17.9 million.”
Atalig’s report of an additional reduction increases the budget shortfall to $29.9 million—a total reduction of 11.6 percent. The administration’s original estimated revenues for fiscal year 2019 was $258 million but this would go down to $228 million after the $29 million total adjustment/reduction for the first two quarters of the fiscal year. The government’s revised budget authority is $141 million.
Atalig said the second quarter report showed $150 million in revenue collections for the current fiscal year, which ends on Sept. 30.
“The Commonwealth shows signs of recovery as there is a slight increase from the previous quarter of just over 3 percent or $2 million,” he added.
However, business gross revenue tax collections fell short of the second quarter projections. “If this trend continues, we can expect an $8.3 million reduction in resources.”
“It is critical to note that this projection does not include the BGRT collections from the exclusive gaming license. Wage and salary taxes shows no signs of variance from projections, with collections at $21 [million] for the first half of the year.”
Atalig said income tax (Northern Marianas Territorial Income Tax) remains on track of their projections with $1.26 million already collected, making it one of the positive signs in the government’s revenue collections but corporate income taxes are short.
“Corporate income taxes are showing signs of significant weakness, with only $2.2 [million] collected, leaving a shortfall of $4.6 million for the first six months of the year. If this trend continues, we can expect a $9 million reduction in resources.”
Excise taxes also remain a good source of revenues for the Commonwealth, with $20 million being collected as collections improved from the same period in the last fiscal year. Taxes on beer, beverages, and cigarette products helped the projections remain on target.
Hotel occupancy tax collections improved, which helped ease the decreasing trend in other miscellaneous commodities that could have a projected loss of $10.4 million if things don’t change in the coming months. HOT collections are at $7,767,498.
Atalig said they anticipate HOT collections to improve in the coming months where they need to adjust their earlier projections. Licenses and fees from poker and e-gaming also remain strong, but there are indicators that other fees would have slow growth where they are looking at a projected revenue reduction of $2.5 million.
“Conversely, other revenue sources such as business privilege fee and lottery commission revenues remain strong, and if this trend continues, we can expect $2 million above earlier projections,” said Atalig, who added that the CNMI continues to show signs of recovery .