There's little dispute that Guam's government finances are barrelling toward a cliff, thanks in large part to President Trump's blandly named "Tax Cuts and Jobs Act of 2017." Local estimates of the impact of the loss to the island's treasury range from $47 to $67 million.
During his State of the Territory address, Gov. Eddie Baza Calvo warned of many likely consequences, including government job layoffs, pay cuts and reductions in government services.
Calvo's response, Bill No. 1 (2-S), was sent to the legislature following his speech, with a request for immediate action.
The governor proposes to raise the Business Privilege Tax--formerly known as the Gross Receipts Tax--from 4 to 6 percent to fund the Guam Memorial Hospital’s operations and modernization and the Guam Department of Education’s capital needs. It would also help to make up for Trump cut losses to the general fund.
The 6 percent tax will be assessed on the gross proceeds of retail sales, the gross income of any service business, the gross income of any contractor, the net income of banks, banking institutions, small lenders and building and loan associations, and the gross income of foreign money exchanges, insurers, and tour agencies. Wholesalers would keep their tax exemptions. The increase would be effective immediately but with a two-year sunset provision.
Taking a different approach to the same problem, Speaker Benjamin J.F. Cruz has introduced the “Fiscal Stabilization Act of 2018” If enacted, Cruz’s measure (Bill No. 244-34) would (1) roll back all salary increases under the Competitive Wage Act of 2014 for both classified and unclassified employees; (2) reduce the budgets of the Office of the Governor, the Legislature, and the Office of Finance and Budget; and (3) raise the Business Privilege Tax (BPT) by one percent (1%) beginning April 1, 2018 until January 2020.
“I know that people are angry, wondering how we got here in the first place, and worried about what might happen next," Cruz said in a news release. "This choice is painful medicine but without it, the patient may die on the table.”
According to Cruz, in addition to the initial round of cost reductions at each agency level totaling $17 million, the proposal would save an approximate $10 million for the government of Guam through rollbacks in Fiscal Year 2018. To do this, Bill No. 244-34 would cut back all salary increases resulting from the Competitive Wage Act of 2014 until March 1, 2019 for all positions within every branch of government, including all government of Guam departments, bureaus, agencies, sub entities, public corporations, and mayoral offices. The measure would further reduce the budgets of both the Guam Legislature, the Office of Finance and Budget, and the Office of the Governor by 10 percent and place a moratorium on re-classifications and above-step recruitment, with an exception for teachers and licensed and allied health care professionals.
“I’m asking government employees to understand that a temporary pay cut is better than no pay at all,” said Cruz.
Senators went into session Wednesday afternoon, Cruz announced that there will first be public hearings on the issue next Wednesday. The public hearing will be held in three parts, with the first at 9:30 a.m., the second at 2 p.m. and the third at 6 p.m. After an official motion was made to transmit the governor’s bill to the committee on appropriations for the public hearing the legislature adjourned.