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Commonwealth of Northern Mariana Islands in ‘very dire’ condition: officials

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Commonwealth of Northern Mariana Islands in 'very dire' condition: officials

The Commonwealth of the Northern Mariana Islands Gov. Arnold Palacios reportedly said in February he was optimistic about federal aid.

The Commonwealth of the Northern Mariana Islands is in “very dire” fiscal condition, its government told the U.S. Government Accountability Office.

The central government had $94 million of debt and its component units had $27 million debt as of Sept. 30, 2021, the end of fiscal year 2021, the latest numbers available.

Real gross domestic product in fiscal 2022, the most recent available, was down about 35% percent from fiscal 2017, according to GAO analysis of U.S. Bureau of Economic Analysis data. However, fiscal 2022 real GDP was up 14% from fiscal 2021.

The economy is heavily dependent on tourism, GAO said in a report released last week. While the number of visitors in calendar year 2024 increased sharply from 2021, it was still down about 55% from 2019 levels. The 210,000 visitors in 2024 falls short of the 500,000 officials say are needed to prevent hotel closings.

Public debt was 13% of GDP and net pension liabilities were about 49% of GDP as of Sept. 30, 2021. The fiscal 2021 audited comprehensive financial report is the most recent available, an issue the GAO says needs to be addressed.

In recent years the territory has been taking loans to make payments to its pension system. The pension plan fell into bankruptcy in 2012. As part of the settlement, the territory agreed to make minimum annual contributions to the fund.

CNMI officials hope to issue bonds by September but told GAO that issuance in January 2026 is more likely, after it releases its fiscal 2022 and 2023 ACFRs, so it may get a bond rating. The island’s bonds are currently unrated.

With the tourism industry struggling to recover, federal assistance slowing or expiring and weak financial management practices persisting, CNMI is at risk of a severe fiscal crisis,” the GAO said.

Gov. Arnold Palacios said he was optimistic about federal aid for the territory from his fellow Republican Donald Trump, in an interview he conducted in February.

The federal government questioned costs associated with its awards to the commonwealth in fiscal 2021. If the government disallow the costs, the territory will have to return the money, leading to more financial strain, the GAO said.

Asked about the report, the CNMI government shared a statement made to the GAO by Department of Finance secretary Tracy Norita. “We are enhancing our internal control mechanisms to ensure accurate and reliable financial reporting.”

“Efforts are underway to improve coordination and communication between federal program agencies and component units,” Norita said.

“We are committed to improving our timeliness in completing single audits and refining our financial reporting processes to ensure they meet the highest standards of accuracy and transparency,” she said.

“Recognizing the importance of long-term fiscal sustainability, we are implementing strategies to manage and reduce costs effectively,” Norita said.

CNMI is a U.S. territory consisting of 14 islands in the western Pacific Ocean that extend from 20 miles to 400 miles north of Guam and 3,300 miles west of Hawaii. The islands are at about the same latitude as northern Vietnam. It had a population of 47,000 in 2020, according to the U.S. Census.