NORTHERN MARIANAS GOVERNMENT PLANS CUT IN GOVERNMENT EXPENDITURES

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By Cookie B. Micaller

SAIPAN, Northern Mariana Islands (February 15, 1999 - Saipan Tribune)---Gov. Pedro P. Tenorio said he has ordered cabinet members to prepare a plan that would either lay off, cut salaries or reduce work hours of government workers because of the anticipated sharp drop in revenues from the garment sector.

In a cabinet meeting Friday that focused on the financial condition of the CNMI, Tenorio told department and activity heads to review the personnel employed and come up with recommendations how further cuts in expenditures will be carried out to deal with the continuing financial difficulties.

Should the plan pushes through, this would be the most serious belt-tightening step the administration has taken since it began addressing reduced resources and a ballooning deficit.

A $1 billion class suit against local apparel manufacturers and U.S. retailers has scared garment buyers, leading them to slash orders.

Industry leaders estimate the reduction in purchase orders could easily translate into a 25 percent cut in user fees contributed to the government, which has been battling declining revenues since the administration took office last year.

"I told the members of the cabinet that in the event this will continue to reduce the resources of the government we have to come up with some recommendations as to what shall we implement: salary cut , lay off or reduce working hours," the Governor said in an interview.

Tenorio underscored the need for deeper cuts in government expenditures, acknowledging that the package of austerity measures he has put in place to trim down expenses are not sufficient to deal with shrinking cash resources.

He explained that while cost-cutting steps have helped pare down expenses, savings were diverted to settle obligations he inherited from the previous administration as well as meet funding requirements for government operations.

According to Tenorio, the anticipated decline in user fees would push down CNMI's spending level for Fiscal 1999 to approximately the $200 million level, which is a little less than the 1996 appropriation package.

In November, the Governor lowered the current fiscal year's budget package to $216 million, chopping off 13.4 percent from original projections of $246 million, in anticipation of a further decline in revenue collections.

Under the revised resource projections, local garment manufacturers, whose combined total gross income topped $1.2 billion last year, are expected to pitch in $41.1 million, or almost a quarter of the total local funds.

The 25 percent reduction in user fee, an amount levied on apparel shipped to the mainland which is equivalent to 3.7 percent of the total gross value of finished garment products, will pull down collections by $5.1 million to $36 million.

User fee collected from garment firms has climbed steadily since 1995, and last year alone contributed $36.1 million to the government coffers. During the first quarter of FY 1999, actual user fee collections soared 30.6 percent to $9.9 million from the same period last year, making it a consistent provider of revenue to the cash-strapped government in light of the downturn in the tourism industry, once the backbone of the island economy.

Finance officials are preparing an analysis of the impact of the garment sector's projected decline in activities as well as related taxes to determine whether to adjust again the revised resource projections.

For additional reports from The Saipan Tribune, go to PACIFIC ISLANDS REPORT News/Information Links: Newspapers/The Saipan Tribune.

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