A litany of problems

U.S. Deputy Assistant Interior Secretary David B. Cohen and Washington Rep. Pete A. Tenorio provided a U.S. Senate committee Wednesday with an overview of the Commonwealth’s fiscal and economic woes.

Tenorio represented the CNMI in the oversight hearing held by the Senate Energy and Natural Resources Committee on the economic and fiscal state of U.S. territories in the Pacific. Cohen testified on behalf of U.S. insular areas, including the Northern Marianas.

In his oral statement before the U.S. Senate committee, Tenorio highlighted the decline of the CNMI’s tourism and garment manufacturing industries. The two industries, combined, provide about 80 percent of all employment, 96 percent of all exports, and 85 percent of all economic activity in the CNMI.

Specifically, Tenorio cited the impact of U.S. and international trade agreements on the competitiveness of the local garment industry, as well as the declining tourist arrivals to the islands.

The 34-percent drop in garment sales to the United States, the 25-percent decrease in visitor arrivals, and the 23-percent decline in gross business revenues have generated a negative multiplier effect, he added.

Because of reduced tax collections and an estimated $100 million deficit, the CNMI government has had to defer maintenance of public facilities, payments of the government’s share of retirement contributions, and payment of utility bills, private vendors and government contractors.

“These austerity measures have left our public schools and hospital in deplorable and unsafe conditions. The CNMI government owes $85 million to the retirement system, which repeatedly faces shortages and the possibility that it cannot meet monthly annuity payments.

“The CNMI government’s debt to the Commonwealth Utilities Corp. has left it with a shortage of operating capital. This has contributed to the lack of power plant maintenance, unscheduled outages, and brownouts. These, coupled with the record high fuel oil prices, have left this government-owned agency near bankrupt, and requiring a minimum of $24 million bail out, just to keep the lights on until the end of this fiscal year,” Tenorio told the U.S. senators.

Also imminent, he said, is a reduction in government personnel, work hours, salaries and office operations, and service contracts.

These adverse actions, he added, were expected to further increase unemployment and reliance on food stamps and Medicaid, and to further erode the tax base.

“In short, our once prosperous economy is sick. Although being cared for intensively, the prospects for recovery are weak, and the toll on the people of the CNMI is increasing,” Tenorio said.

The CNMI official seized the opportunity to lobby the Senate committee for support on the amendment of Headnote 3(a) and on the CNMI’s efforts to get reimbursed for the $71 million that the United States had overtaxed island residents.

Tenorio also asked the Senate committee to revisit the standing authorization for Covenant funds, which may include funding for government operations, and provide direct assistance to meet public health needs.

Furthermore, he urged the Senate panel to help the CNMI with transportation issues that would remove constraints on foreign airlines landing in the CNMI and passenger thresholds that prevent the installation of instrument landing systems at the Tinian and Rota airports.

Cohen’s testimony

Cohen, the head of the U.S. Department of the Interior’s Office of Insular Affairs, corroborated Tenorio’s testimony. He cited facts and figures to show the negative effects of the lifting of import quotas for textiles and clothing on the CNMI’s economy.

“Of all four territories, the CNMI has so far been the most self-sufficient in terms of local tax revenues. The decline of the garment industry could change that,” Cohen said.

“Between April 2004 and February 2006, nine of the 27 garment factories on Saipan have closed, leaving 18 still operating. An estimated total of 3,842 jobs have been lost,” he noted.

The decline of the tourism industry makes the Commonwealth’s challenges more compelling, he told the Senate committee. He cited the pullout by Japan Airlines, which has cut about 29 percent of tourists to the islands.

Furthermore, Cohen noted that CNMI has a per capita gross domestic product that is lower than that of any state.

According to Cohen, the U.S. Census Bureau’s preliminary estimate of the CNMI’s GDP in 2005 was $1 billion. With a total population of 75,066, the CNMI’s per capita GDP was an estimated $13,350. This represents 50.9 percent of the lowest state per capita GDP, and 33.7 percent of the national per capita GDP.

Overall, Cohen said that all four territories—CNMI, Guam, American Samoa, and the U.S. Virgin Islands—are facing fiscal difficulties, while three of them are facing economic challenges.

He maintained that it is in the interest of the rest of the United States to help improve the economy of the territories.

“It should be noted that three of the territories are on the United Nations’ Committee on Decolonization’s list of only 16 non-self-governing entities in the world. Although the United States rightly rejects this characterization, America’s critics would not hesitate to use any deterioration in living standards in the territories to buttress their attempts to de-legitimize United States sovereignty in the territories,” he said.

He also cited the contributions made by men and women from the territories to the U.S. war on Iraq.

“Mr. Chairman, I made the sad calculation a couple of months ago that a resident of American Samoa was over 15 times more likely to have been killed in action in Iraq than a resident of the nation as a whole. This, our smallest territory, has lost seven men and women in the conflict, approximately one for every 9,000 people who live in the territory. The Governor’s own daughter recently returned from a one-year tour of duty in Iraq. Throughout the islands, families are making tremendous sacrifices to defend freedom. The U.S. Virgin Islands has lost four servicemen in Iraq. Guam has lost four. The Northern Mariana Islands has lost three soldiers, and I attended the funeral for each one,” he told U.S. Sen. Pete V. Domenici, chairman of the Senate Committee on Energy and Natural Resources.

“Mr. Chairman, this Administration is committed to working with you to ensure that the federal policy toward the territories contributes positively to communities that have contributed so much to our nation,” he added.