Still $144.84M gross budget; full $512M ARPA allocations

Arnold Palacios

Acting governor Arnold I. Palacios has submitted a revised budget proposal for next year fiscal year that identifies the same gross budget of $144.84 million, with only over $98.89 million left for appropriation after deducting debt service payments and NMI Settlement Fund obligations—essentially similar to the numbers that the administration submitted last April.

Volume IV, however, of the revised budget fully allocates the $512,076,165 that is available to the CNMI from the American Rescue Plan Act, pursuant to what Finance Secretary David DLG Atalig presented last June 5 as the government’s spending plan for the ARPA money.

Under the ARPA funding, the administration will allocate $467,102,567 for the CNMI; $22,878,551 for Saipan; $11,402,113 for Tinian; $8,649,665 for Rota; and $2,043,269 for the Northern Islands.

Palacios submitted the revised budget proposal last Thursday to Senate President Jude U. Hofschneider (R-Tinian) and House Speaker Edmund S. Villagomez (Ind-Saipan). Under the Planning and Budget Act, the governor is allowed to revise the April budget proposal within 90 days.

Palacios said the “revision” to Volume IV reflects the full allocation of ARPA.

He said Section 602 of ARPA allows the recipients facing budget shortfalls to use payments from the Fiscal Recovery Funds to avoid cuts to government services and enable the CNMI to continue to provide valuable services and ensure that fiscal austerity measures do not hamper the broader economic recovery.

Under Section 602 ARPA funding, government branches/departments/agencies, $75 million is allocated in fiscal year 2021 and $175 million for fiscal year 2022, for a total number of 4,219 personnel.

In her updated fiscal year 2022 general revenue estimates report submitted last Thursday to the special assistant for Office of Management and Budget, acting Finance secretary Bertha C. Torres said the ARPA funding allows the government to restore the budget to where it was in fiscal year 2019. Torres said this has allowed the CNMI government to return to 80-hour work week and bring back furloughed employees.

She said the ARPA budget restoration will continue into fiscal year 2022.

She said the ARPA funds must be accounted for separately from the general fund.

Torres said due to the requirements of ARPA, the Department of Finance did not take into consideration this legislation for fiscal year 2022.

The revision in the budget request has also made changes from April 1 submission for Volume 1 (proposed budgetary resources from general fund) and for Volume II to add new grants received by the Commonwealth after April with an updated fund status as of May 31, 2021.

Palacios said no changes were made to Volume III for the various government corporations since their April 1 submission.

On changes to Volume I (general fund), Palacios pointed to the implementation of Executive Order 2021-009, transferring the Quarantine staff from the Department of Lands and Natural Resources, Division of Agriculture to the Department of Finance, Division of Customs CNMI-wide.

He also mentioned the reallocation of funds proposed for utilities from recipients and kept funding intact for their operations and activities, with the exception of the Judiciary and Legislature.

Palacios said the $144,848,801 total identified budgetary resources were from $55,361,345 in business gross revenue tax; $29,989,019 in income taxes; $35,407,705 in excise tax; $10,903,872 in other taxes; $9,897,991 in licenses and fees; $1,975,794 in charges for services; and $1,313,075 in other revenue.

The revision did not restore any proposed suspension of earmarks from Gov. Ralph DLG Torres’ April 1 proposed budget submission as recommended by the House Concurrent Resolution 22-1, House Draft 1.

Palacios said the net resources available for general appropriation remains unchanged from their April 1 submission at $98,897,301.

The budgetary gross adjustment reflects the inclusion of the allocation of $39 million in annual obligations to the NMI Settlement Fund agreement, and $6,951,500 for debt service payments for the 2017 series bonds.

The net resources available increased by 2.5% from the fiscal year 2021 budget, Public Law 21-35. The fiscal year 2021 budget was $96,476,054 for appropriation for government activities, and $4,556,165 from the Department of Public Lands, for a grand total of $101,032,218. The administration attributed such increase largely to the reduction in pension payments.

Palacios said the budget allocation for personnel in the general fund remained at 80% except for elected officials of the CNMI, which are allocated 100%.He said the 20% for all other employees are allocated under the provisions of government in ARPA.

Palacios said that, as the CNMI goes through the cycle of reopening and adjusting the environment to safely reopen the Commonwealth, the next steps is crucial to economic recovery.

He said the shape of the CNMI’s recovery will be defined by the success of the government’s proposed travel bubble to welcome visitors back to the islands.

“Hence, visitor arrivals will gradually drive an increase in export of goods and services,” he said.

Palacios said current trends in imports, construction, business, and consumer spending are the driving factors in the economy offsetting the decline in tourism and the output of the casino industry.

He said the infusion of capital to stimulate the economy in response to COVID-19 across all states and territories increased the CNMI’s local consumer spending but drove inflation upwards with the increase in supply and demand throughout the various sectors in consumer discretionary, consumer staples, industrials, technology, energy, and health.

“Tracking our government spending and watching for a return to normal levels is crucial to determine whether we remain in a crisis or whether our economy is headed in a slow steady growth towards recovery,” Palacios said.