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Governor: CNMI faced half‑billion dollar deficit; administration says it balanced FY2024 budget
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Summary
Governor Arnold I. Palacios told a joint session the commonwealth entered office with a cumulative fiscal deficit of more than $500 million and significant questioned costs; administration steps included hiring, task forces and cost controls and the governor said the FY2024 budget was balanced.
Governor Arnold I. Palacios told the joint session that when his administration took office it found the government’s finances in disarray and a cumulative fiscal deficit that exceeded $500,000,000.
"Our finances were stripped bare, leaving behind nothing but a large deficit, a long list of questionable expenses and a long delayed audits with severe weaknesses and deficiencies," Palacios said. He told legislators that a single-audit review identified about $104,000,000 in questioned costs and that the commonwealth had not fully accounted for $36,300,000 in CARES Act funds, $93,000,000 in community disaster loan program funds, and $481,000,000 in ARPA funds as presented in his address.
Palacios described immediate steps his administration took: imposing strict budget controls, limiting travel, reducing overtime, ending more than 600 ARPA-funded temporary contracts initiated by the prior administration, and launching task forces. He said the administration created a collection task force to pursue approximately $120,000,000 in unpaid taxes and a fiscal response team to reconcile roughly $6,000,000 in federal funds (transcript figure). "We launched the collection task force to collect an estimated $120,000,000 in taxes owed to the people of the Commonwealth," he said.
Secretary Norita of the CNMI Department of Finance, who addressed the joint session after the governor, said the department has expanded training and implemented new internal controls and regular audits. "Through federal funding support, the Department of Finance was able to strengthen and build local staff capacity with over 30 unique professional training events amounting to over 4,000 training hours for our employees," she said.
Palacios said the administration retired $16,000,000 owed to the government health insurance provider, completed long-overdue audits, and collected over $14,000,000 in taxes. He said the government achieved a balanced budget by the end of fiscal year 2024 and restored employee working hours to 80 hours. The governor also warned of a projected FY2026 budget gap: agencies requested $243,000,000 while anticipated revenues total about $147,000,000 — a $95,000,000 shortfall if not closed.
The governor asked the legislature to help consider tax reforms, updated fees and better use of public assets to close gaps. He described the measures as difficult but necessary and asked lawmakers for cooperation.
