Pago Pago, AMERICAN SAMOA — Gov. Lemanu P.S. Mauga has unveiled a local budget of $165,907,000 for the American Samoa Government (ASG) for the fiscal year 2025. This proposed budget reflects a significant increase from the FY2024 local budget, which was set at $143,000,000. However, the pressing question is whether ASG can achieve the necessary revenue to meet this budget.

In his cover letter of the FY2025 budget, the governor acknowledges the “volatile nature of ASG’s cash flow” but is “glad to confidently present the current financial position for the government is strong and vibrant.”

Lemanu points to several priorities in this year’s budget, which will receive additional funding in local funding (if budget is passed).

The departments include Department of Education, to offset grant shared cost that is ending now that ARPA funding is expiring and grant money that can no longer be used to fund private school instructors; the Department of Agriculture to develop its program to raise livestock, and Medicaid’s matching funds for an additional $2 million, raising it to $6 million.

Additional funding for the ASG employee retirement share to reduce the unfunded liability is also included, as well as the 2% increase to the employer contribution to the fund.

The governor further points to Special Program funding increases that are for additional projects “to address a specific need and or a purpose”. It identified $10.7 million (42%) in the Special Program (category), and then said it is necessary “to address unmet specific needs that are not in the general budget for government operation.” (Samoa News will publish next week what the Special Program items are, in terms of funding and description.)

A LOOK AT ASG REVENUE COLLECTION TRENDS

A closer look at ASG's third-quarter revenue collections for FY2023 and FY2024 reveals some concerning trends.

In FY2023, total actual collections for the third quarter amounted to $113,348,048. By FY2024, this figure had dropped to $104,796,447— a decrease of $8,551,601 or 8%. This downward trajectory poses a significant challenge for the administration as it aims to meet the elevated budget targets for FY2025.

In FY2024, several key revenue sources saw notable decreases. Corporate tax collections fell dramatically, dropping 36% from $29,542,469 in FY2023 to $18,945,408. General excise taxes also declined, albeit by a smaller margin of 5%, from $17,900,618 to $16,945,661. The revenue from soda excise taxes saw a sharper decline, falling 24% from $1,955,161 to $1,486,762. Another critical revenue source, military cover over taxes, disappeared entirely in FY2024, resulting in a 100% decrease from $1,224,812 in FY2023.

Revenue from licenses and permits experienced a slight decline of 3%, from $1,223,724 in FY2023 to $1,191,771 in FY2024. Similarly, fees and fines decreased by 9%, from $5,181,618 to $4,739,035. Charges for services saw a significant drop of 17%, with port administration charges particularly hard hit, plummeting 24% from $3,203,105 to $2,425,513.

Revenue from indirect costs also saw a steep decline of 45%, from $4,003,464 in FY2023 to $2,191,394 in FY2024. Transfers into the General Fund decreased as well, with JROTC reimbursements falling by 24% and the DOI Basic Operations General Fund transfer decreasing by 11%. Overall, the total annualized revenue for FY2023 was $151,130,731, while FY2024 saw a reduced projection of $139,728,596—a decrease of $11,402,135 or 8%.

Despite the overall decline, some revenue sources did see increases in FY2024. Individual taxes showed a positive uptick, with a 15% increase from $34,210,859 in FY2023 to $39,385,939. Additionally, school repair and maintenance funds increased by 19%, rising from $2,188,510 to $2,613,662.

Interest income showed a reported increase from $1,091 in FY2023 to $3,561,370 in FY2024. This significant diberence is primarily due to interest earned on the American Rescue Plan Act (ARPA) funds held at Zions Bank. In reality, $3,907,308 was reported in FY2024 Q3, highlighting an inconsistency in reporting. Had the reporting been consistent, the year-over-year comparison would reveal a decline of $347,029 in interest income. This anomaly suggests that while there was a notable influx of interest income due to ARPA funds, the overall interest income from regular sources is actually declining, which may impact future budget forecasts.

Port fees and excise taxes are crucial indicators of economic activity, especially in a geographically isolated region like American Samoa. The significant 24% decline in port administration charges from $3,203,105 in FY2023 to $2,425,513 in FY2024 suggests a reduction in the volume of goods imported.

This decrease could indicate a slowdown in inventory purchasing by businesses, possibly due to lower consumer demand or economic uncertainty.

Similarly, the 5% decrease in general excise taxes and the 24% drop in soda excise taxes point to reduced purchasing and consumption.

Excise taxes are levied on goods such as alcohol, tobacco, and sugary beverages, which are often considered discretionary spending. A decline in these taxes can signal reduced consumer spending power and confidence. These declines in port fees and excise taxes may reflect broader economic challenges, such as inflation, supply chain disruptions, or shifts in consumer behavior.

For the ASG, these trends highlight the importance of diversifying revenue streams and fostering a resilient economic environment to support sustained growth.

One of the most critical aspects of the FY2025 budget is the administration's decision not to introduce any new revenue measures.

This lack of new revenue-generating initiatives raises serious concerns in the community about the feasibility of achieving the revenue targets, given the downward trend in revenue collections observed in FY2024.

The administration's reliance on these declining revenue streams could result in significant budget shortfalls, impacting public services and the overall economic health of the territory.

Gov. Lemanu’s cover letter says that “when the budget spending is approved, actually spending will be based on actual collection of revenues.

“Simply, we can’t spend money we don’t have and will do whatever is necessary to balance our budget and avert deficit spending.

“In the event the local revenue increases or decreases during the fiscal year, a supplemental financial plan or supplemental appropriation will be prepared and transmitted to the Legislature for its consideration.”

Notably, Lemanu draws attention to what his Administration has been taken to task for and is the subject of an Independent Prosecutor’s investigation — the spending of $36 million in surplus funds without Fono approval in FY2024.

BACKGROUND

Samoa News should point out that the 2% increase to the employer contribution will continue each year until it hits 14%, while the employee contribution will continue until it hits 6%. Together they will total a 20% increase of contributions to the Retirement Fund to reduce its unfunded liability.

For FY 2025, the 2% end for ASG will be $2,106, 650, based on its Personnel Services total of $105,332,500, which is 63.5% of the total local budget, separate from Federal Grants, Enterprise Funds and Capital Improvement Projects.