Gov’t plans cuts •Agencies are told to make ways to absorb revenue drop

Gov. Pedro P. Tenorio said he has ordered cabinet members to prepare a plan that would either layoff, cut salaries or reduce work hours of government workers because of the anticipated sharp drop in revenues that would come from the garment sector.

In a cabinet meeting Friday that focused on the financial condition of the CNMI, Tenorio told department and activity heads to review the personnel and come up with recommendations how further cuts in expenditures will be carried out to deal with the continuing financial difficulties.

Should the plan pushes through, this would be the most serious belt-tightening steps the administration would implement since it took over last year to address depleting resources and ballooning deficit.

A $1 billion class suit against local apparel manufacturers and US retailers has scared garment buyers that led them to slash orders.

Industry leaders estimate the reduction in purchase orders would easily translate to 25 percent cut in user fees they contribute to the government, which has been battling declining revenues since the administration took office last year.

“I told the members of the cabinet that in the event this will continue to reduce the resources of the government we have to come up with some recommendations as to what shall we implement: salary cut , layoff or reduce working hours,” the governor said in an interview.

Tenorio underscored the need for deeper cuts in government expenditures as acknowledged that the package of austerity measures he has put in place to trim down expenses are not sufficient to deal with shrinking cash resources.

He explained while cost-cutting steps has helped pare down expenses, savings were diverted to settle obligations he inherited from the previous administration as well as meet funding requirements for government operations.

According to Tenorio, the anticipated decline in user fee would push down CNMI’s spending level for Fiscal 1999 to approximately $200 million level, which is a little less than the 1996 appropriation package.

In November the governor lowered the current fiscal year’s budget package to $216 million, chopping off 13.4 percent from original projections of $246 million in anticipation of further decline in revenue collections.

Under the revised resource projections, local garment manufacturers, whose combined total gross income topped $1.2 billion last year, are expected to pitch in $41.1 million, or almost a quarter of the total local funds.

The 25 percent reduction in user fee, an amount levied on apparel shipped to the mainland which is equivalent to 3.7 percent of the total gross value of finished garment products, will pull down collections by $5.1 million to $36 million.

User fee collected from garment firms has climbed steadily since 1995, and last year alone contributed $36.1 million to the government coffers. During the first quarter of FY 1999 actual user fee collections soared 30.6 percent to $9.9 million from the same period last year, making it a consistent provider of revenues to the cash-strapped government in light of the downturn in the tourism industry, once the backbone of the island economy.

Finance officials are preparing an analysis of the impact of the garment sector’s projected decline in the sector’s activities as well as related taxes to determine whether to adjust or not the revised resource projections.