Revised budget: $116.19M

Gov. Arnold I. Palacios and Lt. Gov. David M. Apatang announce the submission of their request to the Legislature to revise the CNMI 2023 budget during a press briefing in the governor’s conference room on Capital Hill yesterday afternoon. Also in the photo are members of the Senate and House of Representatives majority. (FERDIE DE LA TORRE)

Gov. Arnold I. Palacios transmitted yesterday morning to the Legislature his request to revise the 2023 CNMI budget with estimated total of net gross revenue and resources of $116.19 million to ensure the continuity of essential government functions, programs, and services.

Palacios and Lt. Gov. David M. Apatang announced the transmission of the proposed revision of the budget in a news briefing in the governor’s conference room yesterday afternoon, shortly after meeting with the Senate and House of Representatives majority bloc.

The governor also requested additional and temporary reprogramming flexibility of up to 50% of the funds appropriated to the operations and activities of the departments, agencies, and offices of the executive branch, cumulative and in total.

The approved budget for the CNMI’s government’s operations in fiscal year 2023 is just $109.7 million, but with additional funding from the American Rescue Plan Act and from the Community Disaster Loan. Combining the $109,782,265 million from the general fund and the $32,624,344 allocated to the CNMI from ARPA, the CNMI government had at its disposal a total of $142,406,609 million for government operations in this fiscal year.

That ARPA and CDL funds that were embedded in the approved budget are now gone, Palacios said.

“Those funds are pretty much depleted. And we need to make those adjustments,” said the governor.

The CDL funds were supposed to cover the CNMI’s local match for Medicaid and the 25% portion of retiree pensions.

Palacios said both ARPA and CDL funds were overspent and overcommitted by the previous Torres administration and are no longer available this fiscal year.

He said they also needed to revise the budget because the present 2023 budget did not include much operational funds to run the government.

He said they made some painful proposals in the revised budget. “We will have to cut costs, and one of the costs that is going to cut is downward departure of 80 hours to 72 hours,” Palacios said.

He said ARPA funds were intended to cover approximately 20% of the government’s personnel costs, and its removal from the budget would have resulted in a corresponding reduction in personnel hours from 80 hours to 64 hours per pay period. However, because of a slight upstick in projected local revenues, together with savings from cost-containment measures, he said they are proposing that the reduction in hours will only be from 80 to 72 hours.

“When we’re making adjustments, we wanted to see whether we can at least minimize the pain to our employees, so rather than going 64, we’re proposing to go 72 and use the additional revenue that we believe would be realized in the last six months of the fiscal year,” Palacios said.

The governor said the CNMI had at one point nearly $600 million from ARPA and CDL that would have been sufficient to help the CNMI cover expenditures through 2026.

“We depleted that pretty much in 18 months,” he said, referring to over $481 million in ARPA allocation.

Palacios said he is hoping that the Legislature will consider his proposed budget revision and act expeditiously. He said to adjust the general fund resources requires amendment to the concurrent resolution for the resources available and include the additional funds.

“And this is not the only cuts that we will be making. This is necessary to make sure that we are also basically legal and lawful in expenditure of public funds,” he said.

Palacios said if they are not successful to come to a resolution on this, he is authorized as governor to make the necessary adjustments. He said part of that adjustments is to make proportionate cuts across all branches of all programs of government.

“We don’t want really to do that at this point,” the governor said.

Apatang noted that there are some positive developments from economic activities that have also led them to propose this revised budget.

Apatang said that, based on the collections posted in the first and second quarters of the current fiscal year, and their analysis of the trends in the previous three fiscal years, they are projecting a modest 11% increase in revenue collections, or about $11.8 million.

He said these $11.8 million will be reallocated to government’s operations and priority obligations for the remainder of the fiscal year.