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By Nazario Rodriguez Jr.

SAIPAN, CNMI (Mariana Variety, Aug. 9) – Palau President Remengesau has submitted on Friday August 3 the proposed Fiscal Year 2008 Annual National Budget Authorization and Appropriation Bill, which he said presents a number of very important issues that must be resolved in order to achieve on-going sustainability.

The new bill is to authorize US$67,943,075 and appropriate US$57,461,046 from the National Treasury for the annual operating, special revenue and debt service budget. It showed a huge revenue shortfall of approximately US$10.5 million.

The President said that the budget Bill provides appropriations based on last year’s level of expenditure. The budget last year was US$57.7 million, which was delayed for over two months due to disagreements on policy issues before it was finally approved. This excluded the US$2 million supplemental budget signed by the President a just a few months ago.

In the new budget Bill, the President said that additional and necessary expenditures have only been authorized but not appropriated. One of the important issues raised by the President is that the government’s revenue stream, as defined by the current tax laws and structure, do not meet the expanding needs of the national government and the people.

"It is therefore necessary that we carefully review the Report of the Tax Task Force and implement the recommendations that would allow us to balance our budget at an appropriate level," Remengesau noted in his transmittal letter to the OEK.

He said that this is the only way the government would be able to provide the essential services that the people demand.

The major budget items the President authorized but not appropriated include US$1.7 million for New Capital Complez Maintenance, US$300,000 for New Capital/Melekeok Sewer Plant Maintenance, US$1 million Pension Plan Contribution, US$1.5 million for Health Insurance, US$1,28 million for Road Maintenance Fund, US$200 for Employer Social Security Contribution payment and US$1.3 million Debt Service on Outstanding Loans.

The President said that local revenues are projected to increase by four percent in FY2008 noting the favorable 2.5 percent increase in collections in 2007 over 2006.

However, he said that such increase is still insufficient to meet the current and anticipated needs of the government.

The President directed the Minister of Finance and Bureau of Budget and Planning to provide a more detailed breakdown and explanation of authorized versus authorized and appropriated line items to assist the OEK members in analyzing the 2008 Budget Bill.

A new section in the budget reorganizes the Executive Branch by eliminating the current Ministry of Commerce and Trace, creating a new Ministry of Environment, Tourism and Natural Resources and renaming the current Ministry of Resources and Development as the Ministry of Infrastructure, Industry and Commerce.

The President explained that this reorganization recognizes the need to create a new capacity to support the private sector, especially Tourism, to provide greater protection to the natural environment, to strengthen the ability to exploit Palau’s natural resources and to more efficiently and effectively maintain the growing infrastructure base, especially the new Capital and the new Compact Road.

Another new section is the creation of a Landfill Operations Fund, a revolving fund that recognizes the need to charge and use an appropriate level of fees to support the solid waste management efforts throughout Palau.

The President told the lawmakers it is time to face the very real crisis in funding the basic governmental programs to the people of Palau.

He said that the Tax Task Force was created because "we realized that we needed a careful and realistic analysis of our revenue needs and opportunities foe expanded revenues."

The report has been submitted to the OEK by Tax Task Force 2007 chairman Ken Uyehara on July 6.

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