American Samoa Governor's Address To Fono Points To Significant Challenges

Lolo calls on lawmakers to seriously consider new revenue measures

By Fili Sagapolutele

PAGO PAGO, American Samoa (The Samoa News, July 11, 2017) – Gov. Lolo Matalasi Moliga has called on lawmakers to give serious consideration on several revenue measures, which will generate new money for the government, that will be submitted to the Fono for review and hopefully approved.

He told the lawmakers at yesterday’s joint session of the Fono, “We have done all that we could possibly do from the local level and we now look to our Delegate to Congress for the removal of these impediments so we can stop taxing our people by expanding our economy.”

The governor shared with lawmakers challenges faced by the territory that threaten American Samoa’s future.

He had requested a chance to address a joint session so he could discuss the government’s financial status and the need to approve new revenue measures, as well as repeal some current tax laws to ensure a solid financial future for American Samoa.

CHALLENGES

The governor shared with lawmakers reasons why the government is facing financial difficulties. For example, the closure last December of Samoa Tuna Processors Inc., cannery laying off 700 workers and delays in receiving federal funds, he said, has created cash flow problems for the government.

Furthermore, significant reduction in excise tax collection in the first five months of fiscal year 2017 — particularly on cigarettes — has created additional cash flow challenges.

In response to these financial difficulties, Lolo said the government took several actions, including reduction of working hours — from 80 to 70 hours per pay period — for certain employees whose salaries are funded by local revenues.

He said grant funded salaries are exempted, “to reduce the harmful financial impact on our businesses and our economy.”

The governor said that the government reduced spending in other object classes; and the Customs and Tax Divisions were compelled to aggressively collect revenues owed to the government.

These efforts, along with actions taken by departments to collect outstanding revenues, helped recoup revenues, which minimized the impact of our economic challenges, Lolo continued.

Based on actual revenues and spending for the 9 months of fiscal year 2017, he said it is projected that total revenue collections at year-end will be 17% lower than revenue projections, thus expenses will be restricted to ensure that ASG will not incur a deficit.

With the success of these efforts in cutting costs, Lolo told lawmakers all government employees making $30,000 and below have been returned to a full 80-hours per pay period.

Lolo expressed appreciation to locally funded government employees for the sacrifice they are making and will continue to make for the remaining months of this fiscal year.

REVENUE PROPOSALS

The governor shared with lawmakers the administration's plans, which he hopes will be supported by the Fono, that aim to stabilize the current and future financial condition of government. Lolo reminded lawmakers that American Samoa has very few options at its disposal to ensure that the government is sustained in coming years.

Lolo said the administration is proposing a package of revenue measures which will generate $18.3 million in FY 2018; $25 million in FY 2019; $23 million in FY 2020; $20.3 million in FY 2021; and $17.8 million in FY 2022 in new revenues.

In making sure that local residents are not overly burdened by these new revenue measures, and to reduce the harmful impact on the local economy, Lolo said the administration is also proposing the repeal of some existing revenue generating laws to put money back in the hands of the people.

Therefore, the reduction in revenue generation shown yearly from fiscal year 2019 to 2022 reflects savings or money given back to the people.

A presentation by the ASG Revenue Task Force made last Thursday to Fono leaders and several lawmakers gave details of new revenue measures, current tax law to be upgraded as well as tax laws subject to repeal, which are done over a period of five years. 

Lolo went on to share with the Fono why lawmakers must give serious consideration to the revenue measures, “since we have control over their implementation.”

He said the five-year revenue generating plan assumes that StarKist cannery “might leave the territory in five years”, however, if the cannery leaves sooner, a financial crisis will occur and he explained the reasons why.

For example, the US Congress has taken away the federal 30(A) Tax Credit after the termination of the IRC Section 936 Tax Incentive. The territories of Puerto Rico and Virgin Islands are facing the financial effects of this Congressional action, the governor said.

Additionally, Congress has set the automatic minimum wage increase every three years. Tri Marine terminated its canning operation because of this and no investor wants to come to American Samoa, according to the governor.

Lolo noted that fishing grounds available to the fishing fleet serving the canneries have been taken away by Presidential Decree, Federal Agency Sanctuary Programs, and NOAA prohibiting High Seas fishing; the cost of fish is high, and a steady supply of fish is not guaranteed.

According to Lolo, the government had no choice but to grant tax exemptions to StarKist and Tri Marine all these years to keep them in the territory; forfeiting revenues to finance ASG.

Furthermore, the government has provided preferential treatment to StarKist and Tri Marine on land leases, utilities, and other matters to maintain their competitive advantage.

For tourism, Lolo said American Samoa has been struggling to diversify the local economy by developing  tourism but Congress has prohibited foreign owned airlines to carry passengers or cargo between American Samoa and Hawai’i or any state in the US. (Lolo is referring to federal cabotage law.)

For health care, Lolo said American Samoa “has and continues to suffer from the lack of funds to improve our healthcare delivery system but Congress has placed limitations on the amount of Medicaid funds we can draw because they fail to recognize our unique needs as compared to the 50 states.”

He also noted that the US Interior Department has recommended the reduction in ASG Grant In Aid for Fiscal Year 2018. He said the $23 million in Grant in Aid has not increased since 1986 — 31 years ago and now, cuts are being proposed.

When DOI submitted its proposed FY 2018 budget to Congress earlier this year in May, it showed that — under Assistance to the Territories — the FY 2018 budget request for American Samoa Operations (or grant-in-aid)  is $21.5 million, a decrease of $1.2 million from FY 2017 funding level of $22.70 million, according to the budget justification documents, which also showed that the actual FY 2016 funding totaled $22.75 million.

In spite of the difficult times the territory is facing today and the future, Lolo noted several achievements made so far with the Administration and the Legislature working together.

Those achievements include paving almost all public roads; improving surface transportation to the Manu’a islands; and maintaining a sound financial government in the black in three of the last four years since the Lolo Administration took office.

Furthermore, more classrooms have been built to reduce class size, to improve the effectiveness of instruction in the classroom; and for healthcare —  all the patient wards have been upgraded, state of the art diagnostic equipment purchased, the main laboratory improved, as well as the Emergency Room, and recruitment of more qualified doctors at LBJ Hospital.

“We have done all these and many more on our own in spite of the significant barriers set by the US Congress,” Governor Lolo said.

Samoa News will report later in the week on other details from the governor’s lengthy address, which was delivered in Samoan.

The Samoa News
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