Senators look to Tobacco Settlement to pay judgments
The close to $7 million the American Samoa Government received under one of the provisions in the territory’s share of the national Tobacco Master Settlement is included as one of the funding sources for ASG’s final budget of fiscal year 2013, which officially begins Oct. 1, 2012.
This information was revealed yesterday by ASG Office of Budget and Planning director Malemo Tausaga when he, along with Deputy Treasurer Ueligitone Tonumaipea, appeared before the Senate Budget and Appropriations Committee for a hearing on two bills appropriating more than $300,000 to pay two court judgments against the government.
The funding sources for the two bills are higher business license fees and the new corporate franchise tax, as well as an increase in import tax on beer, tobacco and alcohol. The bills remain tabled in committee since they were first submitted early last year, and as far as senators are concerned, they have been rejected.
At yesterday’s hearing, committee chairman Sen. Lemanu Peleti Mauga told the witnesses that the source of funding for the two bills is no longer appropriate given the fact that the Senate will not approve the proposed tax and fee hike legislation.
Lemanu said the committee would like to discuss another funding source for the two measures because ASG needs to pay these court judgments. He also said news reports indicate that close to $7 million is available to ASG under the Tobacco Master Settlement Agreement and this money is a solid funding source.
This ASG windfall was first revealed in a letter last December by Senate President Gaoteote Tofau Palaie to Gov. Togiola Tulafono dealing with available ASG money as a funding source to address the financial shortfall faced by LBJ Medical Center.
The source of funding is the money not yet pledged but held in the escrow account for ASG from the national Tobacco Master Settlement Agreement. Samoa News reported last month the un-pledged money should be around $6 million.
Malemo confirmed during the hearing that $6.8 million in the tobacco settlement interest is the total amount ASG will receive, and this money is included in the funding source — along with other local revenue — for the FY 2013 budget.
(When the budget call letter went out two months ago, Malemo stated ASG is expected to receive additional new revenue to fund the FY 2013 budget, but didn’t identify the source.)
Lemanu asked if part of the $6.8 million can be used to fund the two judgments, to which Malemo said, no, because this money is spread throughout ASG operations to fund the new fiscal year.
The Chairman responded that he believes this money — which is new revenue received before the fiscal year ended — should have been submitted to the Fono to be appropriated in accordance with local law, and should not be included as one of the funding sources for the FY 2013 budget.
He also said that the new money “inflates” the FY 2013 budget when it’s just a one time payment and ASG will face problems in fiscal year 201with only $1 million to be collected next year under the tobacco settlement interest.
According to the senator, he has serious concerns over the way this money is being handled and he wondered if it’s being used to cover payroll expenses for new ASG hirees.
Malemo agreed that only $1 million will be collected after FY 2013 to assist with the budget in FY 2014 unless ASG revenue collections improve. He then said there is no other funding source available for the two court judgments.
Tonumaipea suggested adding the two judgments into the FY 2013 budget under the small claims account which is overseen by the Attorney General’s Office. He said this claims account has a $175,000 budget ceiling for FY 2012 but he does not have any information on hand, on how much is left in this account for the remainder of the fiscal year.
Malemo on the other hand suggested the inclusion of the judgments under the “Special Program” category of the FY 2013 budget, or if the Fono prefers, to wait until the end of the current fiscal year and if there is any leftover money, to fund the two bills. “That’s if there will be any leftover funds,” he added.
Responding to a committee question on the status of the FY 2011 budget audit, Tonumaipea said the audit is expected to be completed this month. He said the preliminary audit numbers show that “we’re looking at a loss” in FY 2011 - which ended Sept. 30, 2011.
Lemanu told the ASG witnesses that the committee was banking on the tobacco settlement interest as the funding source for the judgments, because there is no other available money in the ASG coffer.
After the witnesses were excused, the committee held their own discussions, and Lemanu reminded his colleagues that the Senate last year had strongly opposed the hike in taxes and fees, adding that the public is now paying a new 2% wage tax.
Lemanu also said that the Senate — since 2010 — has been trying to get information and reports on how much the government has received or will receive in the tobacco settlement interest, to no avail.
Now the administration has testified that the total is $6.8 million on the interest, and this money is being included in the FY 2013 budget. “This will inflate the budget,” he reiterated, and then, in FY 2014, there will not be another $6.8 million for the government.
So what will ASG do then in FY 2014? he asked, noting the only other solution would be to hike taxes and fees.
In order to pay the judgments, he suggested amending the funding source to reflect interest from the tobacco settlement, something agreed upon by other committee members. The amendments are now being made before the bills are presented to the Senate floor for a second reading this week or early next week.
The first court judgement sent to the Fono in July last year appropriates $32,500 to settle a High Court judgment handed down in 2009 over a 2001 accident where a student was injured by a government vehicle around the Pago Pago Elementary School area.
The second judgement calls for $321,757 to settle a judgment against ASG for breach of contract by failing to pay for construction services provided by Pacific International Engineering, Ltd. (PIE).