The state of the island is “promising,” Guam Gov. Lou Leon Guerrero said, vowing to eliminate deficit and maintain a financially stable government in her first state of the island address delivered Thursday before the 35th Guam Legislature.
“In all that we do, we will always strive to be worthy stewards of the public trust people expect of their leaders,” Leon Guerrero said.
“Toward this effort, in our FY 2020 budget proposal, we are committed to setting aside 2 percent of general fund revenues, placing us on a responsible path toward eliminating our deficit and addressing the long-standing problems that have led to our cash flow challenges,” the governor said, addressing the Democratic legislature.
The 2 percent set-aside will enable the government to build cash reserves through deposits into the long dormant Rainy Day Fund, Leon Guerrero said. In three years, she said, the government will be able to build up to a reserve of 10 percent of general fund average spending.
“It will provide, for the first time, the building of a cash reserve for unplanned and unforeseen events. This reserve will also improve our government’s credit and bond ratings for future financing of capital and infrastructure improvements,” said the governor.
The administration is proposing a $966 million budget for 2020, which is $10 million above the current level.
Leon Guerrero said she has assembled “an effective and highly experienced fiscal discipline team,” whose tasks began with “full assessment of public assets, liabilities, revenues, and operational expenses, and focused on collecting current taxes owed to GovGuam.”
Leon Guerrero is Guam’s first female governor and first Democrat to hold the Adelup seat since former Gov. Carl Gutierrez left office in 2003.
“The state of our island is what I am able to affirm today and it is this: We are here now, and the State of Our Island is promising,” she said.
The first 100 years of the Leon Guerrero administration was marked by the enactment of recreational marijuana law— a polarizing measure that advocates say will be an economic salvation for Guam. Those opposed to recreational marijuana warned it would take Guam into the pit of public safety crisis.
“My decision to sign Sen. Clynt Ridgell’s bill to legalize the use of cannabis was based on the best interests of our island. I want to thank the eight senators who courageously voted to pass this legislation. I believe that we have to control cannabis use here, rather than having it control us,” Leon Guerrero said.
"Our island is in a period of transition - a time of change and a time of renewal. Our people need to be confident that their Governor is making decisions to keep our finances stable and to prepare for the future."
She said her administration “is dedicated to fulfilling all of the requirements needed to regulate the cannabis industry, and to ensuring that the laws surrounding the safe adult consumption of cannabis remains current and relevant for our island.”
As for medical marijuana, Leon Guerrero said the Department of Public Health and Social Services has established the Medical Cannabis Regulation Commission and appointed eight of 11 members. “Once full, the commission is tasked with ensuring the best and safest way to enable patients to use medical cannabis to provide relief from debilitating medical conditions,” she said.
As did her predecessors, Leon Guerrero partly attributed government shortfalls to unfunded federal mandates such as the Compacts of Free Association Act, Earned Income Tax Credit and Medicaid benefits.
While Guam has identified a total of $1.4 billion locally funded Compact impact costs incurred from fiscal years 2004 through 2018, Leon Guerrero noted that the federal government rejected the territory’s claims, saying local calculations “do not meet the standards set by the U.S. General Accountability Office.”
“In order to meet these standards, my administration is working with Governor Ige of Hawaii to be sure that the formula we utilize to report our costs is accurate and universal to both our jurisdictions. The bottom line is that we need to be smarter when working with the federal government and that begins under my watch,” she said.
Next to Compact impact, Leon Guerrero said the EITC is the second largest unfunded federal mandate imposed on Guam. “While the 50 individual states are reimbursed by the federal government for their EITC payments, GovGuam is forced to pay out these tax reimbursements locally, from our general fund,” she said.
While Guam taxpayers do not pay federal taxes, the EITC has long been a contentious issue between the federal and local governments.
“In the last 16 years, our EITC payments have increased from 11 percent of total tax refunds paid to 43 percent of all tax reimbursements,” Leon Guerrero said. “I spoke with Trump administration officials about this unfunded mandate while I was in Washington D.C. and I continue to make our case with them on this issue. I also look forward to working with our Congressional Delegate Mike San Nicolas to resolve this inequity.”
Medicaid is another sticking point. “In the states, Medicaid has an open-ended financing structure. In Guam and the other U.S. territories, Medicaid is essentially a block grant with an annual ceiling,” Leon Guerrero said.
Guam stands to forfeit $61 million in Medicaid funds, which are set to expire in September of this year, because the local government has been unable to meet the local matching requirement.
“I am working closely with House Speaker Nancy Pelosi and acting Secretary of the Interior David Bernhardt to not only extend this deadline, but also to have Guam be treated equitably with regard to its calculation,” Leon Guerrero said. “As I have said before, we need to be stronger and louder in our arguments to Congress for fair and equitable treatment with regard to these unfunded federal mandates.”
Other highlights of the SOTI:
- The Bureau of Statistics and Plans is leading this charge, and will be working with other government agencies to streamline government permitting processes that everyone from developers to homeowners tells us is too cumbersome.
- FY-2020 budget proposal provides an additional $3 million to hire more police officers. In fiscal year, $1.2 million is earmarked for recruitment and training additional 50 new customs officers to tackle drug problems on Guam.
-The Department of Public Health and Social Services is the gatekeeper of the health needs of our island. Under the leadership of Linda DeNorcey, our administration is providing the necessary resources to ensure that our people have access to a quality public health system - from preventative measures like immunizations to access to regional health centers and long-term care.
- The Port is pursuing incentives to develop a fuel facility, identify a recycling enterprise zone location, build a cruise ship facility, and reprogram $7 million to address much-needed repairs.
-The Guam Economic Development Authority to diversify our island’s economy through expansion of the agricultural industry by providing support and coordination with many of farming organizations. GEDA will also soon launch the Agriculture Accelerator Program, a program to get local produce in our public schools by 2020.