Pago Pago, AMERICAN SAMOA — The American Samoa Government (ASG) Fiscal Year 2024 — Preliminary and Unaudited report reveals a shortfall in the millions, and combined with discrepancies across various revenue streams, highlights the challenges of accurate fiscal forecasting, underscoring the ongoing debate over the realism of revenue projections in future budgets.

The ASG General Fund Revenue Report for the period FY2024 10/01/23- 09/30/24, Budget vs. Actual Revenues shows revenues totaling $139.2 million, falling short of its $143 million budget by $3.8 million. This performance reflects a significant downturn compared to FY2023’s extraordinary $188.4 million in actual revenue.

Tax revenue, the backbone of ASG’s funding, saw mixed results. The largest discrepancies in FY2024 revenue came from tax collections.

Corporate tax revenue was nearly halved compared to FY2023, contributing significantly to the overall shortfall. Actual collections amounted to $23.5 million, $6.97 million below the budgeted $30.5 million. This sharp decline from FY2023’s $46.3 million suggests a slowdown in corporate earnings or changes in tax collection efforts.

Meanwhile, individual taxes outperformed the budget but failed to match the prior year’s exceptional figures. Despite exceeding the budget of $42.5 million by $5.8 million, individual tax collections fell from FY2023’s exceptional $67.8 million to $48.3 million in FY2024. This decline is said to indicate a normalization after FY2023’s unusually high revenue, possibly due to one-time economic conditions.

Excise taxes continued their downward trend, reflecting either decreased consumption or challenges in enforcement. Both general and soda excise taxes fell below expectations.

General excise taxes totaled $23 million, short of the $26 million budget, while soda excise taxes reached $2.1 million, below the $2.5 million target. These shortfalls continued a downward trend from FY2023’s collections of $22.7 million and $2.87 million, respectively.

One of the year’s few bright spots was interest income, which soared to $7.6 million, far exceeding its modest $10,000 budget and doubling FY2023’s $3.9 million. This unexpected windfall comes from the interest earned on ASG’s remaining ARPA funds, itself a temporary and diminishing source.

Transfers from other funds, including federal reimbursements and Department of the Interior (DOI) Basic Operations funding, totaled $15.88 million, slightly below the budgeted $16 million. This was also lower than FY2023’s $18.17 million, reflecting a slight decrease in external support.

The decline in FY2024 revenue compared to FY2023 while suggesting a return to more typical economic conditions, also underscores the importance of caution when using extraordinary revenue years as the basis for future budgets.

And, while FY2023’s results may have inspired optimism, FY2024’s performance reveals the risks of overestimating revenue potential. Something that was discussed during the joint budget hearings this year for FY2025.

At the beginning of these hearings, there was strong disagreement between Fono members and the two top government officials, ASG Treasurer Malemo Tausaga and Budget Director Catherine Saelua, concerning the Local Revenues projected amount of $165,907,000 which is one of the proposed budget's four funding sources.

The other three funding sources are Federal Grants which total $282,683,500 million, Enterprise Funds amounting to $274,463,000 million and CIP Funds totaling  $10,629,667 million. Added together, the four make up the FY 2025 proposed budget total of $733,683,167 million.

Senator Magalei Logovii, a former treasurer, said collection figures for the nine months previous indicated that there is no way the government can collect $165.9 million as it is projected for FY 2025. He said the more realistic amount is $139,728,596 million — possibly $140 million — but no way could they collect $165.9 million. He and other lawmakers pointed to nine months of FY2024 data showing collections far below the proposed FY2025 figure.

Committee co-chair Senator Utu Sila Poasa commented that the difference in the government's projected local revenue amount of $165.9 million and the Fono's projected $139.73 million. He pointed out that based on actual FY2023 third quarter collections, he estimated FY2024’s projected collections to be $139.2 million. He further argued that the proposed figure does not align with historical trends or the government’s ability to collect revenues consistently.

The House Speaker and Senate President reminded the witnesses that the reason why local revenues reached $165 million in the FY 2024 budget, was due to the $22 million supplemental appropriations.

Speaker Savali Talavou Ale said it was necessary to come up with a realistic budget and they needed to resolve the local revenue portion, otherwise, they would approve an amount that could not be achieved and government operations would be affected.

Savali emphasized that overestimating local revenue could result in mid-year budget crises, forcing the government to cut essential services or delay payments. He urged the administration to revise its projections to reflect more realistic figures.

Lawmakers noted that FY2024’s local revenue was inflated by $22 million in supplemental appropriations, a one-time increase that cannot be relied upon in FY2025. This further undermines confidence in the proposed $165.9 million target.

Lawmakers also questioned how the government could claim a surplus while withholding tax refunds. Treasurer Malemo stated that payroll is prioritized, a stance criticized for its lack of fairness and transparency.

(In October this year, further tax refunds were announced, however, ASG still has more to release, as the Christmas season begins.)

Lawmakers noted that FY2024’s local revenue was inflated by $22 million in supplemental appropriations, a one-time increase that cannot be relied upon in FY2025. This further undermines confidence in the proposed $165.9 million target.

However, Treasurer Malemo and Budget Director Saelua defended the government’s budget projection.

Saelua stated that local revenue collection often accelerates in the third and fourth quarters, and cited her experience over the past five years to support her claim that ASG will end FY2024 with a surplus of $4 million, despite falling short of its budgeted revenue target.

Malemo simply said, "I have no further words to say. The American Samoa Government's proposed budget for FY 2025 is before you. With due respect."

The FY2025 budget was eventually passed by the Fono, letting stand the proposed amount of $733,683,167 million.

With FY2024 collections falling $3.8 million short of budget and significantly below FY2023’s record-breaking total, the Fono’s skepticism over the administration’s FY2025 revenue forecast appears justified.

It should also be noted that the report is “Preliminary and Unaudited” and a larger  or lesser shortfall could be marked.

The debate over FY2025’s budget reflects broader concerns about fiscal sustainability. As FY2024 revenue results show, over-reliance on unpredictable revenue streams like corporate and individual taxes can create significant budgetary risks.

Moving forward, the ASG must prioritize realistic forecasting, diversify revenue sources, and strengthen collaboration between the executive and legislative branches to ensure financial stability.