American Samoa Faces Over $42 Million Revenue Shortfall for Fiscal Year 2025

Projected Revenue Shortfall for FY2025

American Samoa is bracing for a significant financial challenge in Fiscal Year 2025, with an audit by the Territorial Audit Office (TAO) projecting a shortfall in local revenues exceeding $42 million. The TAO conducted an audit of American Samoa's FY2025 Local Budget to assess whether local revenues and expenditures would meet budgeted projections.

Governor's Dire Financial Outlook

Further underscoring the territory's fiscal difficulties, Governor Pulaalii Nikolao Pula delivered a 'grim picture' of the American Samoa Government's financial status in his State of the Territory address on January 13, 2025. The Governor announced a projected $55 million shortfall in local revenues for the current fiscal year. This projection is based on first-quarter collections of $28 million, indicating total revenues for the year would reach approximately $111 million, significantly less than the $166 million projected in the approved FY2025 budget. Governor Pulaalii also noted the government's struggle to meet bi-weekly payroll obligations.

Contributing Factors to the Shortfall

Several factors are contributing to American Samoa's revenue challenges. Local tax collections have begun to normalize following several years of substantial federal aid, which had temporarily inflated revenues. In FY2024, corporate and individual tax receipts saw a steep decline compared to the previous year's peak, largely due to the tapering off of pandemic relief and disaster recovery funds received between 2020 and 2023. While current tax revenues stand at approximately $97 million, they are below recent highs, though still above pre-2020 trends. Additionally, cuts in federal funding and the impact of an ongoing 'tariff war' are triggering a sharp rise in the prices of goods and services, reducing the purchasing power of both federal and local dollars. The territory's economy also faces inherent risks, including its continued reliance on a single tuna cannery.

Government Response and Future Outlook

In response to the anticipated deficit, the American Samoa Government (ASG) is implementing various measures. Governor Pulaalii has initiated cost containment efforts, including a freeze on expenditures for most of the 44 projects under the Special Programs budget. The government is legally mandated to maintain a balanced budget and is prepared to tighten spending through mid-year adjustments and enhanced fiscal oversight, such such as moving from quarterly to monthly financial monitoring. Leaders are also leveraging the remaining American Rescue Plan Act (ARPA) stimulus money, approximately $494 million, which must be utilized by December 2026, by deploying these funds into critical infrastructure projects to stimulate economic activity. For FY2026, the Executive Branch is absorbing a $30 million reduction in its proposed budget, with a request for $15 million in ARPA funding to help offset this decrease. The core philosophy behind the FY2026 budget preparation is to preserve jobs.