Wednesday, April 20, 2011

Chamber of Commerce opposes education tax credit program

IT will create additional burden.

This is the opinion of the Saipan Chamber of Commerce as it issued its objection to the Senate Bill 17-68 that proposes to suspend the educational tax credit, or ETC, program.

In a letter to Speaker Eliceo D. Cabrera, R-Saipan, Saipan Chamber Commerce president Douglas T. Brennan said “SCC believes the suspension of the ETC will create additional burden on both public and private schools and the students attending those schools. Private schools receive benefits from the ETC and they would lose those benefits.”

He said private schools derive benefits from the ETC as well and with the bill signed into law, would be forced to raise tuition rate levels to maintain courses, instructors, and curriculum.

The chamber sees the suspension resulting in private students forced into going to public schools, “thereby creating additional hardship on the public school system immediately following a reduction in their own ETC contribution.”

Brennan said, “Simply assuming the suspension of the ETC would result in more money being available in the general fund to withdraw from government austerity measures is not true. Also, although it may be true there would be a short term infusion from ETC levels into the general fund, schools which are already underfunded may not necessarily be beneficiary of the ETC level funding.”

The chamber argued that there’s no guarantee that what is lost in ETC contributions would be the equivalent of what the public school system would receive. It, however, said there’s guarantee that private schools would be hard pressed to maintain their levels of education as well as not have to increase tuition rates as much as 20 percent in some cases.

The chamber also acknowledged ETC as “a wonderful addition” to schools and students — private or public.

Brennan also said educational institutions would be seriously harmed by the loss of the ETC funding levels at a time when “we should be striving to better fund those schools,” With the loss of the ETC funding levels.”

Further, the chamber not only objects to the suspension of the ETC funding for schools but it also asks the Legislature to reconsider where ETC funding is directed under the current law.

“SCC believes the scope of institutions that can avail of the ETC program is too broad. It should be schools operating under K-12 and those post secondary institutions here in the CNMI,” Brennan said.

He also said the chamber is interested in discussing its position on the issue with Speaker Cabrera should the need for more information arises.

S.B. 17-68, which suspends educational tax credit during periods of government austerity, was transmitted to the House on April 7.

The bill, introduced by Sen. Juan M. Ayuyu, Ind.-Rota, was passed by the Senate on April 6. It states that in as much as they support fine education, a tax credit during difficult economic times diminishes the overall money received in tax revenues.

It also stated, “Those who can afford to give to schools or other charitable institutions, after all, are often better off than our less fortunate citizens.”

The bill proposes that the ETC be suspended during any period when government workers are receiving less than full 80-hour work week.
H.B. 17-165

The chamber at the same time expressed its opposition to H.B. 17-165 or the Governor’s Settlement Authority Act of 2011.

In an April 6 letter, SCC executive director Richard Pierce asked the governor not to sign the bill into law.

“Aside from the issue whether the CNMI government would receive ‘value for value’ in settlement agreements with those awarded judgments by the courts, we are aware of the CNMI government already offering offsetting payments of tax payments, utility obligations and other minor matters.

Therefore, we believe this law to be duplicative in some respects,” Pierce told Gov. Benigno R. Fitial.

Pierce also said the language on Section 3 of the bill concerning authority is open ended and may create problems should public lands be offered as consideration for outstanding judgments against the CNMI government.

The section of the bill in question states that the governor of the commonwealth is authorized to negotiate a settlement and payment of the judgments entered against the commonwealth government.

“This is much more authority over settlement agreements than should be allowed, and the CNMI government must abide by the court’s decisions and consequences of its actions. Although we empathize with monetary considerations, there should be no easy way out of legal ramifications,” Pierce added.

The governor has rejected the bill, but its author, Rep. Raymond D. Palacios, Covenant-Saipan, is asking his colleagues to override the veto.

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