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Revenue from General Fund used for Enterprise shortfall

A surprising pattern emerged during the Fono's Joint Budget Committee for fiscal year 2015 budget hearings — one in which money from the ASG General Fund was “transferred-in” to cover shortfalls for some entities under the Enterprise Fund, which are supposed to be self-generating revenue operations of government.

 

For example, Department of Port Administration’s Airport Division is forecasting a revenue shortfall in fiscal year 2014, but a transfer-in from the general fund will keep them out of the red, according to testimonies during the Port Administration budget hearing, which also revealed that shortfalls for the airport division are nothing new and have occurred over the past two decades.

 

Airport Division is among the offices and entities listed under the Enterprise Fund —these are the self-revenue generating agencies. But several lawmakers learned during budget hearings that there has been a surprising long-standing practice, where the general fund will be used to cover overruns for some of these entities, especially the Airport Division.

 

During the hearing, Rep. Larry Sanitoa pointed out that based on ASG financial data, Airport Division is expecting a shortfall of around $1 million for FY 2014, which has a total budget of close to $3 million. He asked if Port Administration had over-projected its revenue collection, and if this was the reason for the forecasted shortfall.

 

Sanitoa said he is concerned that Airport Division is forecasting some $3 million to be collected in FY 2015, but they may not meet such revenue projections.

 

Port Administration director Taimalelagi Dr. Claire Tuia Poumele responded that Airport revenue shortfall is nothing new, as this has been the case for the past 20 years. She stressed that it costs around $3 million to operate the Airport Division, which is only able to collect $1.3 million annually, and for the current fiscal year 2014 the expected shortfall is close to $1 million.

 

However, she said that by the end of the current fiscal year “we will be ahead by at least $250,000 at the seaport. At the airport, we will be again, in the red by $900,000 if we’re going  according to what was budgeted.”

 

Taimalelagi said that the governor had asked her about the same thing — if there is a shortfall in airport revenues. “It’s just that the cost to operate the airport is always going to be at $3 million and the revenue that we’re going to get from the airport is always going to be at least $1.8 million,” she said.

 

According to the airport division’s profit and loss statement, $1.6 million is shown for “transfer-in” for operations in FY 2014; $1.54 million in FY2013’ and $1.76 million in FY 2012. For FY 2015, it shows $1.77 million as a “transfer-in”.

 

Samoa News should point out that the “transfer-in” funds do not include the annual ASG subsidy of about $200,000.

 

During the hearing, Rep. Taotasi Archie Soliai requested Taimalelagi to make the necessary changes to the Airport Division’s budget to ensure there is no overrun. “You’re at the helm now, and you cannot allow the airport to continue to operate with a shortfall,” he said.

 

Taotasi asked ASG Budget Office director Catherine Saelua for an explanation on the "transfer-in". Saelua responded that it’s her “assumption” that this money comes from the General Fund, adding that this transaction does not come through her office, but instead is handled by the Treasury Department.

 

A Port Administration finance official who attended the hearing told lawmakers that the transfer-in is, in fact, from the general fund. The official explained that at the end of the fiscal year, if the airport division is in the red, the “transfer-in” is then made from the general fund by Treasury.

 

Saelua pointed out that this has been the ASG practice since the time when Sen. Magalei Logovi’i was the government Treasurer.

 

Because his name was mentioned, Magalei confirmed that it's true that projections for Airport Division amount to more than $3 million, while only about $1 million plus is collected annually in revenue.

 

However, he says the airport must continue to operate and it costs $3 million for such operations. The senator also says revenues raised at the airport such as landing fees will never cover operational costs, adding that the airport is under Federal Aviation Administration jurisdiction.

 

Magalei recalled one time that he moved to halt airport payroll due to the lack of sufficient funds, but the FAA threatened to close down the airport, if employees were not paid. “We just don’t have enough revenue collected at the airport to cover expenditures,” he added. ‘

 

Sen. Laolagi F.S. Vaeao, chairman of the Senate Budget and Appropriations Committee, said the use of “transfer-in” to cover shortfall of Enterprise Fund entities is a serious issue for the Fono and that the administration needs to make sure that this is explained in the annual budget submission to the Fono.

 

He pointed out that the “transfer-in” issue also surfaced with the Tafuna Industrial Park account — which is also listed as an Enterprise Fund — with a transfer-in that was not made clear in the budget until the Fono questioned it.

 

Between 2012 and 2017, the average transfer-in amount to the Industrial Park was about $140,000, according to the park’s profit and loss statement.