President Surangel Whipps Jr.’s administration submitted its first annual budget proposal of a little over $100 million this week to Olbiil Era Kelulau, capping expenditures at 2019 level.

He said that the budget had to be set at 2019 level because there’s no money to fund the same level as FY 2020. “But I want to assure that no one will be out of a job. Even though we capped our expenditures at 2019 level, this did not stop any of the programs but it means we will have to make the most of what we have,” said President Whipps of

the proposed FY 2021 budget.

45% of the budget is funded by loans and COFA drawdown. The remaining 55% of the budget or about $55 million dollars is funded through local revenue.  All the ministries under the Executive Branch are funded by these loans and COFA drawdowns while all others, Judiciary, Legislative, States, Boards & Commissions, are funded by local

revenue.

President Whipps urged swift action on legislations needed to generate new revenue and reforms to agencies such as the Civil Service Pension Plan, Social Security Administration and Palau Public Utilities Corporation.

FY 2021 proposed budget appropriated $2 million to subsidize the Pension Plan. Whipps said that the program is essentially bankrupt and that “it is time” to look at the proposal to change it from a “defined benefit” to a “defined contribution” plan.

Nearly $5 million was allocated to Social Security to pay for Supplemental Benefit.

Whipps also urged that it was time to look into raising the retirement age to ensure long term sustainability of Social Security Administration.

The practice of restricting PPUC rates and subsidizing PPUC also needs to stop, according to Whipps. PPUC, he said, must be allowed to collect the actual cost of service it produces. Subsidies must be targeted to those that truly need it such as the Lifeline Subsidy.  $1 million was allocated under this budget for Lifeline subsidy.

New revenue-generating ideas such as the Corporate Registry and Arbitration bill must be addressed quickly to help generate new revenue.

President Whipps, however, was skeptical of the bill introduced in the House to establish online gaming in Palau. He said the current licenses on online gaming are not bringing in any new revenue besides license fees and he did not see how additional licenses will make a difference.

He expects that FY 2021 and 2022 will be difficult economically but once the tax reform bill, Corporate registry and Arbitration bills are adopted, Palau will be in a much better financial position after FY 2022.

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