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Lawmakers question budget witnesses on tobacco money, revenue forecast

They learn tobacco money is not yet in general fund
fili@samoanews.com

Lawmakers learned yesterday that the $6.8 million in tobacco settlement money included as one of the local revenue sources for the close to $500 million budget for fiscal year 2013 is not in the government’s general fund, but ASG witnesses expect it should be in the account at the start of the new fiscal year.

The ASG witnesses, Treasurer Magalei Logovi’i and Budget Office director Malemo Tausaga were the first directors before the Fono joint budget hearings that got underway yesterday and Malemo fielded a number of questions from lawmakers who targeted the government’s local revenue forecast including the $6.8 million under the Miscellaneous revenue category.

Rep. Taotasi Archie Soliai, led the main focus of the questions on the $10 million increase in local revenue for FY 2013, which is proposing $77 million compared to the current fiscal year’s approved local revenue projection of $66.85 million.

Taotasi pointed out hearings in the Senate Budget and Appropriations Committee last week in which testimony provided the possibility that projected revenue collection for FY 2013 may not materialize in the end. Taotasi didn’t elaborate on the testimony during the Senate hearings. (See yesterday’s story on budget hearings for more information)

Malemo explained that the source for the $10 million increase between FY 2013 and FY 2012 comes from the $6.8 million in the tobacco settlement and the estimate of about  $4 million collected for the new 2% wage tax.

Responding to follow-up questions from Taotasi on the tobacco money, Malemo said this money comes from the U.S. Interior Department and was included in the budget after receiving a memo from the governor about it. Malemo then pointed to the notice from the governor that was inside a binder in front of him.

Malemo said he is not sure if the $6.8 million is in the general fund — but that information should come from Magalei, who told lawmakers that nothing is in the account yet. Malemo added that maybe the governor, DOI and Magalei will work on transferring this money into the account. Both officials expect the money to be in the account by the start of the new fiscal year.

(As previously reported by Samoa News the $6.8 million is the unpledged interest in the tobacco settlement money for American Samoa.)

Taotasi said the Fono is debating the budget including the funding sources, which should be made clear to lawmakers but it appears from testimony that not all funding is solid at this point.

“Is this a realistic increase” on local revenue, asked Taotasi? Malemo answered “yes” based on the revenue forecast from this year. 

Rep. Larry Sanitoa followed up on a question pertaining to the individual income tax, which is forecasted to collect $25.10 million in FY 2013, and wanted to know more about the new 2% wage tax being included in this local revenue. Sanitoa pointed out that this new wage tax is to first pay off the $3 million loan for LBJ Medical Center and thereafter all revenue goes to LBJ.

Sanitoa said this wage tax is earmarked for LBJ and is also included in LBJ’s FY 2013 budget proposal. (LBJ estimates about $1.5 million will be collected from the wage tax.)

Malemo explained that like all other revenue sources for ASG, no matter if it’s earmarked for a specific purpose, it must be reported as ASG revenue in the annual budget.

Responding to questions on the individual income tax collection so far, Malemo said FY 2012 has budgeted $18 million but as of July around $21 million has been collected; therefore the government is doing well so far this fiscal year.

Based on Malemo’s testimony and his forecast, Sen. Fuata Dr. Tagiilima Iatala asked, “So you don’t expect a [revenue] shortfall in FY 2013?” Malemo replied, “We forecast what will happen in the future,” adding that it’s just like forecasting the weather.

Sen. Alo Dr. Paul Stevenson wanted an explanation on the reason for the 53% hike in the Enterprise Fund (for revenue making entities) between FY 2012 and the proposed FY 2013 budget.

Malemo said this is due to the American Samoa Power Authority, whose approved base budget by the Fono last year was around $30 million, but the FY 2013 budget is around $115.4 million.

Samoa News should point out that the $30 million for ASPA was to cover only the first four months of FY 2012 and then ASPA officials returned in January this year to discuss with the Fono the rest of its FY 2012 budget. However, the governor vetoed the new budget allocation for ASPA covering February to July saying that the ASPA board has authority over budget matters. This was the same testimony by ASPA management, that it’s the board that has the authority to approve the final budget — but lawmakers on the other hand disagree.

At yesterday’s hearing, Malemo was the target of many questions, pertaining to the issue of forecasting and whether the government will be able to meet its projections.

The issue of the tobacco settlement money was also raised several times with Malemo, who appeared frustrated trying to explain the same issues over and over again.

House Speaker Savali Talavou Ale told the ASG witnesses that when it comes to the budget review, it’s very important that the Fono has a full understanding of the all budgetary matters, but it appears that some issues are being answered with a guess, making it very difficult to pass the budget.

He said lawmakers must have a full understanding of the budget and Senate President Gaoteote Tofau Palaie, who also said that a clear understanding by lawmakers from testimony provided by Magalei and Malemo makes it easier for the Fono to review budgets for other ASG departments and agencies, echoed his statement.

Gaoteote recalled Malemo’s testimony about the memo from the governor about the $6.8 million tobacco settlement money but said it appears there is no solid evidence ASG is getting this money, because Magalei has testified that nothing is in the general fund yet.

He said it’s not useful in the budget review if only the witnesses understand but not lawmakers, who will have the final say in the budget process.

Whether lawmakers are convinced by Magalei’s and Malemo’s testimony on forecasted revenue will only be known later once the budget review is complete and the Joint Budget committee members meet to debate a final budget.



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