Austerity options include retirees’ 25%

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THE CNMI government will have to implement austerity measures that may be more “severe” than those of last year.

Gov. Ralph DLG Torres speaks before the Saipan Chamber of Commerce during its monthly meeting at the Kanoa Resort Seaside Hall on Wednesday.  Photo by Emmanuel T. Erediano

Gov. Ralph DLG Torres met with the House leadership on Wednesday morning and presented several budget-cut options which, lawmakers said, include across-the-board work-hour cuts and the suspension of the 25 percent benefit payments to government retirees that are not required by the Settlement Agreement.

The governor told the lawmakers that he will indicate in his official communication either today, Thursday, or tomorrow, Friday, which of these options is the most reasonable in adjusting the fiscal year 2020 budget.

He said the budget amount will be 25.3 percent less due to the drastic and sudden decline in tourist arrivals following the novel coronavirus outbreak in China.

In his remarks during the Saipan Chamber of Commerce general membership meeting at Kanoa Resort on Wednesday, Torres said early projections show that “we are set to lose at least $40 million in revenue and, as a government, my administration is working with the Legislature to adapt and make adjustments now.”

He added, “I understand that there have been discussions around the community about us returning to austerity. I can tell you all right now that all options are on the table.”

Torres said the government is “reinforcing our cost-containment measures. We are looking at our current tax structure to seek ways in which we can generate revenue to keep essential public services going. And yes, we are looking at a reduction in work hours.”

In June 2019, the government implemented an eight-hour work-cut austerity measure due to a revenue shortfall following Super Typhoon Yutu. The austerity measure was lifted early in December.

The last time the government implemented a 16-hour work-cut was in 2011 amid a deepening economic crisis.

On Wednesday afternoon, Speaker Blas Jonathan Attao met with other House members to discuss the looming budget cuts the administration plans.

Attao told reporters after the meeting that the governor can only impose a work-hour cut on executive branch employees. For the Legislature, the speaker said, “we will have to handle it ourselves just like the last time when actually most House members of the legislature got affected drastically.”

House Floor Leader John Paul Sablan noted that the Saipan casino industry relies on the Chinese tourism market, which has been significantly affected by the novel coronavirus outbreak.

Sablan said revenue collected by the government from the Saipan casino industry helps pay for the CNMI’s obligations to its retirees.

He added that the expected drop in government revenue will affect the ability of the CNMI to appropriate the 25 percent benefit payments to retirees.

The settlement agreement mandates the payment of 75 percent of a retiree’s benefits. This requires a weekly payment of $1 million to the Settlement Fund.

Under the settlement agreement, moreover, the federally created Settlement Fund owns a consent judgment totaling $779 million which the Fund may enforce against the CNMI government if it fails to timely pay its obligations.

During the House meeting on Wednesday, the speaker urged his colleagues to introduce revenue-generating measures.

Rep. Tina Sablan, for her part, said the CNMI government is supposed to receive reimbursements from the Federal Emergency Management Administration, tax payments from the Saipan casino and its $37 million community benefit contribution.

These may be more than enough to cover for the anticipated revenue loss, she added.

The speaker said he and the other House members mentioned the same thing to the administration which, he added, will “get back to us.”

But he said the casino’s $18 million tax payment has been allotted for the retirees’ pension.

As for the casino’s community benefit contribution, the lawmakers were told that it “is outside [the administration’s] purview.”

Under the casino license agreement, “upon the first full year of operation of [its] first hotel in the Integrated Resort, [the] Licensee shall annually contribute twenty million dollars…for community benefit programs….”

But the “funds contributed by the Licensee…shall remain under the possession and control of the Licensee until distributed to selected programs or recipients.”

November 2020 pssnewsletter

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