By Zaji "Persona Non Grata" Zajradhara: CNMIGA.ORG
What Happened?
The Commonwealth of the Northern Mariana Islands (CNMI) is a US territory, but it's not a typical one. For decades, the CNMI has been the recipient of generous federal assistance through the Covenant to Establish a Commonwealth of the Northern Mariana Islands in Political Union with the United States of America, also known as the “Covenant.” However, despite these generous federal contributions, the CNMI’s record is marred by fraud, waste, and abuse of these funds. It’s time for American taxpayers to have a say at where and how much of their hard-earned tax dollars they want to send to an American territory where they, as Americans, cannot own land, yet are paying to take care of imported foreign workers and their “anchor babies.”
The Covenant was signed in 1976, and its Section 702 promised to provide the CNMI with a set amount of annual direct grant assistance for a seven-year period. The agreement was specifically structured to ensure that the CNMI would become financially self-sufficient by the end of the seven-year period. It included a provision for the appointment of special representatives for both the federal and the CNMI governments to meet at seven-year intervals to discuss financial arrangements. This third agreement, signed in 1992, was intended to be the final seven-year funding agreement, after which the CNMI would be expected to fund its own operations through local tax revenue.
But this agreement has not met the spirit of the Covenant. Here’s why:
The CNMI’s Failure to Meet the 50/50 Match Requirement
The agreement requires a 50/50 match between the CNMI and the federal government for infrastructure projects. However, the CNMI has repeatedly fallen short of this requirement. The CNMI Legislature has not even been asked to approve the agreement, let alone commit to providing its matching share of funds.
The CNMI’s Violations of the Audit Provisions
The agreement requires both the CNMI and the federal government to enter into a Subsidiary Agreement on Audit Resolution, which outlines the procedures for resolving and following up on all audit recommendations related to financial assistance. However, the CNMI has yet to show that it has met this requirement.
The CNMI’s Failure to Meet the Self-Determination Provision
The agreement was specifically structured to ensure the CNMI would be able to determine the precise projects for which the funds would be used. However, the agreement also requires that the federal government be notified if its performance standards are not being met. The federal government has a right to propose a deferral of funding if those standards are not being met. Despite this, the CNMI continues to ignore the provisions of the agreement and repeatedly fails to comply with the federal government’s standards and requests for information.
**Despite these ongoing violations, the CNMI continues to request and receive millions of dollars in federal funds for capital improvements. These funds are being used to support an ever-increasing population of non-U.S. citizens, primarily foreign workers and their families, many of whom are being brought into the CNMI to take jobs that would otherwise go to U.S. citizens. These foreign workers are often paid less than the minimum wage, and they have created an economy in the CNMI that is heavily reliant on their labor.
The Cost of Imported Labor
The influx of foreign workers is a significant burden on the CNMI’s economy. These workers often require housing, healthcare, education, and social services, which are funded through the CNMI’s general fund. This has resulted in a significant increase in the CNMI’s operating expenses, which ultimately impacts the local taxpayers.
The CNMI’s Lack of Transparency
The CNMI government has been remarkably opaque in its financial dealings, often ignoring the federal government’s concerns about its fiscal practices. The CNMI has been reluctant to provide adequate information about its expenditures and the sources of those expenditures, as well as the
exact number of non-U.S. citizens living in the CNMI.
The CNMI’s Inability to Raise Local Taxes
The CNMI’s tax system has been designed to attract foreign investors and businesses by offering lower tax rates than those found in the mainland U.S. This system, however, has not been effective at generating the necessary local revenue to fund the CNMI’s operations.
This is because the CNMI has a significant reliance on a 95% rebate of the excess of the mirrored U.S. Internal Revenue Code (IRC) income tax over the CNMI's own wage and salary tax. This has resulted in a significant revenue shortfall, forcing the CNMI to rely on federal funds to meet its financial obligations.
The CNMI’s tax system, along with its heavy reliance on imported labor, has not created a sustainable economy, and it has resulted in a situation where the CNMI is perpetually dependent on the federal government for assistance.
The CNMI’s Conflict of Interest
Another concern is the conflict of interest that exists within the CNMI’s government. The CNMI's development authority, the Commonwealth Development Authority (CDA), is responsible for managing the CNMI’s capital development funds. However, the CDA has been repeatedly criticized for its lack of transparency and for its failure to manage these funds effectively.
The CDA has used these funds for purposes other than those stipulated in the Covenant and has failed to collect on loans that it has made, resulting in millions of dollars of lost revenue. The CDA has also been accused of awarding contracts to its own officials and to their relatives.
It’s Time for American Taxpayers to Have a Say
The CNMI’s failure to meet its financial obligations, its repeated violations of the
agreement, and its continued reliance on foreign labor, combined with its lack of transparency and its conflict of interest, have created an unsustainable situation. The CNMI has become a financial drain on the American taxpayers.
It is time for American taxpayers to have a say in how their hard-earned tax dollars are being spent. The federal government has a responsibility to ensure that the CNMI is a responsible member of the U.S. family, but it cannot continue to be the sole provider of financial assistance to a territory that is clearly not meeting its obligations.
The CNMI’s citizens are living in a substandard housing, healthcare, and infrastructure. The CNMI’s leadership has repeatedly ignored the needs of its
residents in favor of boosting its economy by importing foreign workers. This is not a sustainable situation.
The federal government needs to implement stricter oversight of the CNMI’s use of
federal funds and to develop a plan for the CNMI to become fiscally self-sufficient. This
includes requiring the CNMI to increase its local taxes to a level that is comparable to
the mainland U.S. and to adopt a tax system that is fair and equitable to all taxpayers.
The current situation is not sustainable. It is time for the federal government to
take a firm stand and to hold the CNMI accountable for its actions. If the federal
government does not take action, it will continue to be taken for a ride by a territory
that is not meeting its obligations. The federal government should not be forced to
continue to subsidize the CNMI’s irresponsible behavior.
American taxpayers deserve better.
It’s Time for the CNMI to Be Held Accountable
The CNMI’s irresponsible behavior and its reliance on federal funds to support its
economic development and operations have had serious consequences. The territory
has failed to achieve the goals of the Covenant. It has failed to provide its citizens
with a decent standard of living. It has failed to demonstrate that it can be a
responsible member of the United States family.
The federal government must take immediate action to correct this situation. It’s time
to hold the CNMI accountable for its actions and to insist on significant changes to
the current agreement. The American taxpayers deserve better.
What Should American Taxpayers Do?
American taxpayers should contact their elected officials and demand that they take
action to hold the CNMI accountable for its actions. They should demand that the
federal government:
Implement stricter oversight of the CNMI’s use of federal funds.
Develop a plan for the CNMI to become fiscally self-sufficient.
Require the CNMI to increase its local taxes to a level that is comparable to
the mainland U.S.
Require the CNMI to adopt a tax system that is fair and equitable to all taxpayers.
It’s time to stop the CNMI from being a federal funding black hole. The American
taxpayers deserve better.
CNMIGA.ORG is a non-profit organization dedicated to promoting transparency and
accountability in the CNMI. We believe that the CNMI has a responsibility to its
citizens and to the United States to manage its finances responsibly and to create a
sustainable economy. We urge American taxpayers to support our efforts to hold the CNMI accountable for its actions.
