With major challenges impacting American Samoa Government’s revenue collection, ASG cabinet directors have been informed that their new fiscal year 2018 budget threshold is set at 90% of the FY 2017 budget, according to the Office of Program Planning and Budget director Catherine D. Saelua’s June 5 FY 2018 budget call letter.

ASG’s approved FY 2017 budget totaled $380.48 million, but the current fiscal year, which ends Sept. 30 has been tough and challenging for the government with the closure of Samoa Tuna Processors (STP) Inc. last December, and reduction of working hours for the majority of ASG employees from 80 to 70 hours per pay period since Apr. 10.

ECONOMY & REVENUE

In her budget call letter, which was approved by the Governor, Saelua notes that despite “our best efforts to minimize adverse impacts” of STP’s closure and “other external factors beyond our control on our economy, major challenges will persist, exacerbated by proposed reduction” of the US Interior Department’s Grant-In-Aid and “other non-defense federal grants.”

“Moreover, detractions in our economy will directly impact our local revenue base and further undermine our attempts to address the growing needs of our people,” Saelua pointed out.

She reminded directors that for many years local needs have grown while the government’s revenue base has been eroding.

As a consequence, the Governor established the ASG Revenue Task Force to comprehensively assess and recommend new revenue strategies that would “forge the generation of sustainable new revenue streams, thus minimizing the grave impact on the growth of our economy,” she said.

In an effort to stabilize and improve the government’s current financial position, given that approximately 61% of the local budget is absorbed by personnel costs, Saelua said the Governor implemented the 10-hour furlough per pay period for all employees with the exemption of grant funded employees, instructors, doctors, nurses and contract employees.

“While there is great sensitivity to the financial burden being borne by our people consequential to this decision, inaction would only create more serious financial consequences later,” she explained. “This action ensures that local funded employees will continue to receive 87.5% of their normal income.”

“It is equally important that the reciprocal factor - spending - in government’s operating equation must receive meticulous attention, recognizing that with the proposed new revenue initiatives, our capacity for revenue generation is at the point of ‘diminishing returns’,” she continued.

Directors were applauded for their leadership in providing better oversight on budget management controls to align with current revenue projects.

“The fundamental reality is our needs grow continuously, but we lack the revenues to keep in pace with them,” Saelua said, adding that after consultation with the Governor and the Revenue Task Force, she is issuing the FY 2018 budget call with “total budget threshold set at 90% of your FY 2017 approved annual budget.”

Saelua didn’t elaborate further on “proposed revenue initiatives” but the Governor has said that the Revenue Task Force, chaired by Attorney General Talauega Eleasalo Ale, is working on such proposals as well as changes to current law for presentation to the Fono.

LOCAL REVENUE

With the budgetary ceiling set at 90% of FY 2017, Saelua informed directors that agencies requiring additional funds for FY 2018 to supplant their operations are to submit a separate supplemental budget “not to exceed your [FY] 2017 approved budget.”

Additionally, the proposed budget plan should also be aligned with current organizational setup and functional statements.

Directors were also informed that fringe benefits rate on FICA and Workmen’s Compensation are 7.65% and 1.05% for both career and contract employees, with an additional 8% government contribution to the Retirement Fund, bringing total fringe benefit rates to 16.70% for career service and 8.70% for contract employees.

As in previous fiscal years, directors were reminded that all fixed costs - utilities, rents, leases and communication - should also be incorporated into the budget plan.

FEDERAL GRANTS

Saelua acknowledged that some federally funded programs would be affected by the Trump Administration's proposed cuts. Therefore, she said that proposed budgets for departments and agencies funded with federal grants must be consistent with the most recently approved federal grant award and not to exceed authorized amounts of current awards.

Directors were also requested to submit copies of their latest grant awards.

The Trump Administration’s FY 2018 budget proposal submitted to the US Congress last month includes elimination or cuts to many federally funded programs, but specific detailed impacts on American Samoa should be revealed in the coming months.

The federal administration has already hinted earlier this year on cuts and elimination of funding for programs administered by agencies such as the US Environmental Protection Agency, US Energy Department, and the US Labor Department.

As previously reported by Samoa News, funding for American Samoa operations under the US Interior Department’s Office of Insular Affairs FY 2018 budget proposal is being reduced.

Under Assistance to the Territories, the FY 2018 budget request for American Samoa Operations is $21.5 million, a decrease of $1.2 million from FY 2017 funding level of $22.70 million, according to the USDOI budget justification documents, which also show that the actual FY 2016 funding totaled $22.75 million. (See Samoa News edition May 24 for details.)

ENTERPRISE FUNDS

ASG offices and semi autonomous agencies whose budgets are considered “Enterprise Funds” - such as ASPA, ASTCA, Tafuna Industrial Park - are asked to prepare their budget requests based on “generated revenues”

They are also required to submit a profit and loss statement for the most recent three years.

“It is imperative that proposed expenses must be tied to actual revenue collections,” Saelua said. She recommended that, “Closer monitoring of Enterprise activities is necessary to ensure that expenses are controlled and in line with actual revenue collections.”

Prior to Fono budget hearings in past years, lawmakers specifically request that Enterprise Fund entities must submit a profit and loss statement, or their budget proposal would not be reviewed.

DUE DATE

Budget plans are due no later than 4p.m. on June 16, according to Saelua, who noted that budget negotiations will be scheduled upon receipt of the agency/department’s budget submission prior to being finalized.

The Fono convenes on July 10 for the Second Regular Session of the 35th Legislature, and many lawmakers are hopeful that the proposed FY 2018 budget would be sent to the Fono in late July or early August - which is the time frame that the Lolo Administration has submitted the budget plan in the past four years.