‘CNMI’s deficit in FY’21 is $42.6M’

With the impact of the COVID-19 pandemic on the CNMI economy persisting through fiscal year 2021, the CNMI’s deficit that fiscal year is estimated at $42.6 million, according to Finance Secretary David DLG Atalig.

That is already a reduction of more than $22 million compared to the total deficit of $64.7 million. In his FY 2021 Annual Report, Atalig said the CNMI actually ended the fiscal year with $3.3 million in revenue surplus above projections.

With this $3.3 million surplus, plus the $18.8 million COVID-19 pandemic disaster expenses that is currently pending review for reimbursement by the Federal Emergency Management Agency, it is estimated that the total deficit of $64.7 million will be reduced to $42.6 million, according to the FY 2021 Annual Report that Atalig submitted Friday to legislative leaders.

Gov. Ralph DLG Torres is required by law to submit to the Legislature an itemized comparison of amounts appropriated, obligated and expended, and revenues identified and collected during the previous fiscal year. Finance submitted the FY 2021 Annual Report ending Sept. 30, 2021, to the 22nd Legislature, on behalf of the Office of the Governor.

Atalig

Atalig said that minus debt service payments and earmarked funds, the remaining resources available for general appropriation was $96.47 million at the beginning of fiscal year 2021.

Despite strong collection effort, he said the extent of the required pandemic response necessitated large and continued expenses from the general fund.

Consequently, Atalig said, total spending and obligations to the fiscal year exceeded the appropriated resources by 54%.

Atalig said of the total approximated $64.7 million deficit, $37.9 million or 59% was derived from the COVID-19 threat prevention and mitigation efforts to safeguard the community from the spread of the disease, while $7.1 million or 11% was from medical referral costs.

He noted that $3.9 million was reimbursed for Super Typhoon Yutu expenditures, resulting in approximately $34 million in total Disaster and COVID-19 expenditures.

Atalig said law enforcement expenditures consisted primarily of overtime from personnel of the Department of Public Safety, Department of Fire and Emergency Medical Services, Department of Corrections, and Finance-Division of Customs Services, with an aggregate deficit of $13.35 million.

He said this law enforcement deficit was primarily related with response to the pandemic, and was covered by the general fund.

Atalig said medical referral expenditures exceeded the fiscal year 2021 allotment by $7 million as a result of the requirement to send patients to the U.S. mainland for medical care because of travel restrictions in Asia caused by the pandemic.

He said as of Sept. 30, 2021, the government’s unbudgeted expenses, in addition to those expenses attributable to disaster related activities, totaled $8.57 million included under “other programs.”

Atalig said the CNMI economy is continuing its efforts to recover from the pandemic that has affected the Commonwealth’s primary tourism markets of China, Korea, and Japan.

He said the suspension of international flights to the CNMI were in effect throughout much of fiscal year 2021.

With the CNMI receiving federal assistance, the CNMI’s tourism industry was able to successfully negotiate the signing of a travel bubble agreement with the South Korean government, allowing for the implementation of the Marianas Visitors Authority’s Tourism Resumption Investment Program at the start of the fourth quarter for fiscal year 2021, he said.

Atalig said federal programs, such as the American Rescue Plan Act, have provided economic stability and supported commercial activity while aiding in the fight against the spread and impacts of COVID-19.

Atalig said between fiscal years 2020 and 2021, total tourism arrivals decreased by 97.5%. He said this persistent decline in the overall tourism sector had significant impacts to local revenue generation, but the economic contraction was offset by the infusion of federal funding stemming from the American Rescue Plan Act in the amount of $481.87 million.

Atalig said the necessary response to the economic constraints caused by the pandemic was to mobilize federal resources in supporting continued income and expenditures through the economy.

“Through proactive cooperation with department heads, and through a range of stimulus programs aimed at offsetting the loss of external capital, actual collections surpassed the projected revenue budget for [fiscal year 2021],” he said.

The fiscal year 2021 budget was $144.41 million, while actual collections was $146.74 million.

Of the total tax collections made in fiscal year 2021, Atalig said 76% originated from income taxes. He said the primary source of local revenue came from Business Gross Revenue Taxes which represented 36% of total tax collections, but fell below budgetary estimates due to the impacts of the pandemic on business and commercial activity.

He said income taxes derived from personal income tax in a form of Wage and Salary Tax and the collection of Personal Income Tax under the Northern Marianas Territorial Income Tax nearly surpassed the total BGRT collections, with Wage and Salary collecting $24.26 million and the NMTIT taxes in personal income collecting $23.99 million.

Atalig said personal NMTIT taxes in particular far exceeded previous budgetary projections, collecting $22.59 million more than forecasted.

Meanwhile, he said, Excise Tax collections fell short of projections, with total receipts amounting to $26.56 million or 20% of collected resources.