Gov’t warns of layoffs •Young says he doesn’t see the need to eliminate garment sector

Commonwealth officials yesterday warned of a 45 percent drop in the revised resource projections for FY 1999 that is threatening to set off massive government job cuts and disruption in critical services provided to the community.

The $1 billion dollar lawsuit against local garment manufacturers and US retailers and a further 10 percent reduction in tourism revenues would slash close to $100 million from the general funds previously projected at $216 million by the local goverment.

Michael S. Sablan, special advisor on budget and finance to Gov. Pedro P. Tenorio, told visiting members of the US House Resources Committee the combined fiscal impact of the decrease in anticipated revenue collections would push the island economy into a potential financial nightmare.

“Without question, the loss of the garment industry today would be devastating to our economy, particularly at a time when tourism is still declining,” Sablan said.

“In the absence of substitute industries and revenue resources to replace these revenue losses, there would be massive layoffs of government employees which could result in major disruptions in the delivery of government services and programs,” he warned.

Despite attacks levelled against the industry and the CNMI for alleged abuses of garment workers, US Rep. Don Young (R-Alaska), chairman of the House Resources Committee, gave its backing to manufacturers as he noted their contribution to the local economy.

“If this is the industry that is generating money for the economy, why eliminate it?” Young said, apparently referring to new attempts of the White House to apply US laws on immigration and minimum wage to CNMI which local officials fear would cripple the garment industry.

Rep. Dana Rohrabacher (R-California), considered an ally of the commonwealth in the US Congress, threw its support to the sector whose contributions to the island economy he said has spared US taxpayers from putting in more money to assist the local economy.

Anticipated loses

Garment manufacturers, whose gross income topped more than $1 billion last year, say production will slow down 25 percent after mainland retailers, worried over the lawsuit stemming from alleged abuses against garment workers, scaled back orders.

According to Sablan, this would translate to losses of up to $55 million in direct taxes from the garment industry and an additional $30 million in taxes from the money pumped into the local economy by the industry.

In user fees alone, the amount equivalent to 3.7 percent of total gross value of finished apparel products exported to the US, the fiscal impact of the lawsuit would trim down to $36 million the money pitched in by the sector to the local coffers from revised projections of $41.1 million.

With the continues plunge in tourism revenues, garment manufacturers have been the constant provider of funds to the commonwealth. In Fiscal 1998 direct garment taxes represented a record-high of 23.5 percent of the total operational budget of the government.

Apparel makers also provide 53 percent of the seaport revenues of the Commonwealth Ports Authority. The Commonwealth Utilities Corporation receives 20 percent of its revenues from the sector.

Sablan said a further 10 percent reduction in tourism, once the backbone of the island’s economy, on top of the loss from the garment industry would bring down resource projections to $118 million, which is slightly above the 1990 level.

Sablan told committee members the administration will continue with its austerity measures put in place last year to deal with declining revenues and explore alternatives to diversify the economy.