Torres: $133M CNMI government deficit

MEDIA BRIEFING: Commonwealth of the Northern Mariana Islands Gov. Ralph Torres, COVID-19 Task Force Chairman Warren Villagomez, Dr. John Doyle and Dr. Alan Zevallos discuss COVID-19 updates on KKMP radio with Gary Sword in March 2020. K-Andrea Evarose S. Limol/For The Guam Daily Post

SAIPAN – Gov. Ralph Torres last week informed the Legislature that the CNMI government overspent by $133.1 million in fiscal year 2020, which ended on Sept. 30, 2020.

Of this amount, he said $85 million "was a direct result of the COVID-19 threat and mitigation efforts applied to keep the Commonwealth as safe as possible from the spread of the virus."

But 75% to 90% of the $85 million is expected to be reimbursed by the Federal Emergency Management Agency, the governor said.

The governor said $29 million of the deficit "was attributed to expenses and obligations incurred prior to the implementation of across-the-board budget reduction": $10 million was the cost of medical referrals during the fiscal year; and $9 million "was expended to supplement Group Health and Life Insurance coverage for retirees."

The CNMI government budget for fiscal year 2020 was $233.2 million originally, but because of declining revenue amid an economic downturn the budget amount was reduced to $184.8 million on Feb. 6, 2020, and cut further to $150.4 million on March 11.

The governor said the actual collection for fiscal 2020 was $169.9 million, and this did not include amusement, casino revenues and other licenses and fees that are also known as earmarked resources as stipulated in Public Law 21-8 or the FY 2020 Budget Act.

"Subsequent debt service payments, the earmarked funds, and critical budget reductions made due to the COVID-19 pandemic's significant effects on our economy, the remaining available General Fund resources for appropriation ultimately stood at only $77.1 million," the governor said.

He added that COVID-19-related expenditures increased throughout the fiscal year in order to continue the implementation of mitigation efforts to protect the health of the community.

Tourism takes a hit

In his report to the governor, Finance Secretary David Atalig said the lingering effects of Supertyphoon Yutu on the economy persisted through the start of fiscal 2020 as tourist arrivals from China and Korea "fell below anticipated figures."

The Korean tourism market, he said, showed a dramatic recovery at the end of the first quarter of FY2020, but arrivals from China "lagged at 30% below average."

Citing Marianas Visitors Authority statistics, Atalig said visitor arrivals for the months of October, November and December 2019 and January 2020 were up compared to the same months in fiscal 2019. The gains of the first quarter of fiscal 2020, however, were eliminated by the outbreak of COVID-19, he said.

He noted that by March 2020, visitor arrivals from China – the CNMI's second largest tourism market – dropped near zero, and by April, all remaining markets had ceased flights to Saipan.

In the subsequent months, Atalig said the CNMI experienced business closures, layoffs and contracted commercial activity as tourism spending was eliminated and restrictions on business activity were necessitated to contain the spread of COVID-19.

He said "the commercial impacts were compounded by the unfortunate requirement to furlough government employees in order to meet the constrained resources available under the reduced budget."

Be proud, NMI

According to the governor, although the same economic uncertainties exist during this current fiscal year, "my administration is proud of the great strides we have made across our branches of government to prioritize, above all, the health and well-being of our community members."

He said he and Lt. Gov. Arnold Palacios are hopeful that with the strict COVID-19 screening process in place, the NMI community-wide vaccination plan, and the proposed travel bubble, "we will experience a successful partial resumption of our tourism industry and the expansion of the travel bubble program to our other foreign partners."

"We join the Department of Finance in encouraging future legislation geared towards generating revenue and encouraging business development that can aid in meeting our FY2021 revenue projections," the governor said.

The FY2021 budget signed into law on Oct. 1, 2020 is $101 million.