'The State of Our Island is Promising'

Following is the full text of Gov. Lou Leon Guerrero's State of the Island Address on April 11, 2019 delivered before the 35th Guam Legislature at Congress Building in Hagatna.

To the First Gentleman and my gentleman, Jeff Cook; to Lieutenant Governor Josh Tenorio; Madame Speaker and members of the 35th Guam Legislature; Madame Chief Justice; Attorney General Camacho; Public Auditor Cruz; honored guests; Admiral Chatfield; members of the Diplomatic Corps; and my dear People of Guam … Hafa Ådai and Good Evening.

It is indeed my highest honor to come before you, as Guam’s first Maga’håga, to report on the present situation of our government - to speak plainly and truthfully - as we continue to deliver on our bold pledge to rebuild a government that is fair, safe, compassionate and prosperous for our people.

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. Our island needs to know that hope and opportunity for families and our future generations are always on our minds and that whatever conditions the Leon Guerrero-Tenorio Administration inherited, we are moving forward, charting a course with innovation, modernization, transparency, accountability and excellence in government service.

We can measure the current state of our island by how much trust people have in their leaders. We can measure the state of our island by how safe people feel - in their homes, on their streets, and in their daily activities. We can measure it by how many people have access to quality, affordable health care. And we can measure the state of our island by the opportunities we create to help people improve their lives.

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.

Lieutenant Governor Josh and I acknowledged that the first step to effective governance begins with placing the right people into the right positions and ensuring leadership that you can trust. Our Cabinet Members and Senior Staff are some of the most talented and diverse individuals committed to serving our government agencies. Beginning with our Chief of Staff, Tony Babauta, our Deputy Chief of Staff Jon Junior Calvo, our Cabinet Members and Senior Staff -

please stand and be recognized. -- Your work is critical to the services we provide as a government and Lieutenant Governor Josh and I are thankful you have chosen to be a part of our “Familian Gubetno.” Also, I have restored a fair increment process in order to recognize the often thankless but excellent jobs that many of our government employees perform for our people on a daily basis.

Since taking office nearly a hundred days ago, we have assembled an effective and highly experienced Fiscal Discipline Team to re-ignite fiscal responsibility and fairness with regard to the manner in which our government collects taxes. This team is led by our Chief Advisor on Fiscal Discipline, Bertha Duenas, and includes Department of Revenue and Taxation Director Dafne Shimizu, Bureau of Budget Management and Research Director Lester Carlson, Department of Administration Director Ed Birn, and Guam Economic Development Authority Director Melanie Mendiola. We began a full assessment of public assets, liabilities, revenues, and operational expenses, and focused on collecting current taxes owed to GovGuam.

Additionally, we are working closely with Attorney General Leevin Camacho in dedicating tax attorneys to pursue uncollected taxes to the fullest extent of the law. We are also committed to allocating the resources and technology needed at Rev and Tax to support this effort. I have said time and again that when everyone plays by the same set of rules and is held to the same set of standards, fairness is achieved.

I want to commend Senator Joe San Agustin, chair of the Legislature’s Office of Finance and Budget, and Speaker Tina Muna-Barnes, for honoring my request to refrain from new legislation that would negatively impact our current revenue sources and affect funding for health and education. I am grateful to all 15 senators of the 35th Guam Legislature for honoring this request.

As stated in my inaugural address, I have ordered a daily reporting of our government’s cash flow and I continue to monitor these reports regularly. These reports aren’t just numbers in front of me. They tell a story of where we are today and what we can expect in the days and weeks ahead. I am encouraged that recent reports signal a financial outlook that is promising. My fiscal discipline team reports that we are currently collecting within budgeted estimates. We continue to closely monitor fluctuations, especially in the area of income tax, which has been impacted by the changes brought on by the federal Tax Cuts Jobs Act of 2017.

Part of our cash flow process includes the timely issuance of tax refunds. Up to this point, we have already paid out nearly five million dollars in tax refunds. We will continue to issue your refunds in a timely manner, because these are your taxpayer dollars.

I also met with our bondholders from Standard and Poors and Moodys and laid out our vision for the government’s financial well-being. As a former banker, I spoke their language. I provided our investors with the assurances they need to continue placing their trust and their money in our

Guam investment bonds. I believe they have confidence in our commitment to fiscal discipline and I anticipate having a strong collaborative relationship with them over the coming years.

Because of our sound fiscal policies, Guam will continue to have a strong credit reputation in the Capital Market.

Fiscal discipline will be the hallmark of our Administration. In all that we do, we will always strive to be worthy stewards of the public trust people expect of their leaders. Toward this effort, in our FY 2020 budget proposal, we are committed to setting aside two 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. This change will allow us to set aside cash reserves through deposits into the long dormant Rainy Day Fund, building up to a reserve of 10% of our General Fund average spending over a three-year period. 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.

In order to fully address GovGuam’s financial situation, we must be strong in addressing the unfunded federal mandates that create a huge hole in our pockets - including the Compacts of Free Association Act, Earned Income Tax Credit and Medicaid benefits.

The people of the Micronesian islands have always been united through, and not separated by the Pacific Ocean. So we welcome our fellow brothers and sisters from our “Blue Continent” to our home. Yet the Compacts of Free Association Act has led to an increased demand on our local services and infrastructure, and Congress has refused to cover the costs of this burden on our government.

We have identified a total of $1.4 billion locally funded Compact Impact costs incurred from fiscal years 2004 through 2018. Our claims for the total annual amounts have been partially rejected because the federal government tells us our 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.

Earned Income Tax Credit is the second-largest unfunded federal mandate we face, second only to Compact Impact. 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. 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. 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.

Another unequal federally funded mandate for Guam is Medicaid. 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. We stand to lose $61 million dollars of these Medicaid funds that expire in September of this year. 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. 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.

The loss of federal funds due to procurement challenges has been an issue for our local government. My executive order reactivating the Procurement Policy Office will provide for a more efficient process by allowing GovGuam agencies to procure goods and services in a timely and productive manner. This office will recommend changes to procurement procedures and laws. Goods and services procured with federal grant money will now be assisted by the Bureau of Statistics and Plans, led by Tyrone Taitano. I also look forward to working with Senator Sabina Perez’ committee in order to streamline and modernize our procurement process. Issuing these executive orders is just one of the ways in which our administration is already making a difference for the people of our island.

Also, Lieutenant Governor Josh created a Governor’s Task Force to reform our cumbersome government permitting procedures. 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.

As we create a more efficient government, stabilize our finances and begin to experience savings, we are then able to dedicate these additional resources to our priorities. First among them is public safety. I recall just a day after the general election, a woman came up to me and said, “You know Lou, for the first time in a long time I feel safe and I can sleep better at night.” That encounter not only reminded me of the magnitude of this office, it said something bigger. It said that we have an awesome responsibility to ensure that our people can feel safe in their homes. They can find comfort knowing their children will be safe walking home from school.

They feel safe getting into their car after coming out of the grocery store. And like that woman, our people can sleep better at night.

In order to make our people feel safe, we must put more police officers on our streets and in our neighborhoods. The Guam Police Department, led by Chief Stephen Ignacio, is recruiting 30 additional police officer trainees for the next training cycle and we anticipate their hires at the

end of the month. During this same time, five police trainees will graduate and, as new officers, they will be assigned to neighborhood patrol, adding to the already increased police presence on our village streets. And our FY-2020 budget proposal provides an additional $3 million dollars to hire more police officers.

We will soon cut the ribbon to open the new Central Police Precinct in Sinajana, made possible by the partnership between GPD and the Guam Housing and Urban Renewal Authority. This

$3.2 million dollar precinct will replace the Hagatna Precinct with a modern, state-of-the-art facility. GPD, in partnership with the Guam Community College, is also on track to begin construction on a new DNA crime lab, which will assist the department in solving more crimes while providing for good paying local jobs.

Part of our public safety strategy includes addressing Guam’s catastrophic drug problem by stopping the importation of illegal narcotics at our ports of entry. After visiting with the Guam Customs and Quarantine Agency, under the direction of Ike Peredo, there was no mistaking that they need additional officers. I am pleased to report that there are 29 trainees in the 11th customs training cycle and soon those officers will be assigned to our ports, borders and operational areas. In the coming fiscal year, we have committed $1.2 million dollars to recruit and train an additional 50 new customs officers to tackle this scourge on our island.

Our Guam Fire Department, led by Chief Dan Stone and his team, stands ready to respond to local and national emergencies. GFD now has 45 newly commissioned firefighters and continues to leverage federal funding opportunities to maintain operational readiness. Shortly, we’ll also see the rollout of a long-awaited paramedic program that will upgrade the medical response aspect of our emergency responders.

In February, Typhoon Wutip tested our government’s response capabilities and I am proud to say that our agencies, led by Acting Gov. Josh Tenorio, came through with flying colors.

Guam Police Department officers were out in COR 1 making sure everyone and everything stayed safe, and our Department of Public Works, led by Jesse Garcia, helped to eliminate much of the flooding that usually occurs in low-lying areas of the island. Another contributing factor to the successful handling of the typhoon was that all heads of agencies involved had attended the Office of Homeland Security’s training on Guam's emergency preparedness system, under the leadership of Tim Aguon.

At the Department of Corrections, director Samantha Brennan is working to hire 30 additional officers budgeted for in Fiscal Year 2019 - this will greatly cut down DOC’s overtime expenses and provide for a safer prison environment. DOC also budgeted for a prisoners’ commissary to cut down instances of smuggling contraband into the prison, and has implemented a Residential Substance Abuse Treatment Program.

At the Department of Youth Affairs, director Melanie Brennan has taken a proactive approach to prevention measures, where DYA staff work with at-risk youth in our communities to channel them into productive activities and keep them out of DYA.

As I mentioned, public safety is a top priority of our administration and I want to acknowledge Senator Pedo Terlaje, who chairs the Legislature’s efforts on public safety. Your support and unwavering commitment to our law enforcement personnel and public safety agencies is welcome, but more importantly, promising.

As many of you know, I began my career as a nurse and it’s no surprise that providing quality healthcare to our people is personal to me, and quite frankly, to our administration. Some of you might know this, but I’ve actually maintained my certification as a Registered Nurse.

Access to healthcare is a fundamental right of every individual. 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. I also welcome the leadership of Senator Therese Terlaje, who chairs the Committee on Health, on these efforts.

With regard to the use of marijuana for medical purposes, Public Health has established the Medical Cannabis Regulation Commission and appointed eight of its eleven 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.

My decision to sign Senator 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.

My 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.

When our only public hospital lost its accreditation, it lit a fire in me to regain what we worked so hard to attain when I was serving as a trustee of the Guam Memorial Hospital Board. I want to reassure all of you that there are hardworking medical personnel and employees who show up day-in and day-out at GMH, now under the direction of Lillian Posadas, because they understand that their mission is a matter of life or death for many of our loved ones. In fact, these everyday heroes like Dr. Joleen Aguon just saved the life of Vince Arriola, our director of Public Works.

We need to recognize the thankless efforts of these men and women and ensure that they have the resources necessary to do their jobs.

In the early days of our administration, the Centers for Medicare and Medicaid Services granted the hospital’s request for a rebase adjustment. What this means is that Medicare reimbursements to GMH will almost double, infusing over $6 million more dollars annually into GMH. This will allow our hospital to receive close to what it should receive for the costs of its services. This really is historic for our island, because it is something we have been working for decades to get adjusted.

As we look at the broader healthcare spectrum, the Guam Behavioral Health and Wellness Center has made significant progress, under the leadership of Therese Arriola. We continue to see that trend with the reopening of an intensive inpatient detoxification unit for the island as well as the strengthening of evidence-based drug and alcohol treatment programs that service hundreds of clients each year. Additionally, I look forward to seeing the full implementation of the center’s fee schedule as a way of generating additional revenue to further support its operational needs.

As a community, we are measured in part by our successful economy and our prosperity, and also, by how we help those with special challenges. The Guam Developmental Disabilities Council, under the leadership of Jermaine Alerta, and Director Phyliss Leon Guerrero of the Department of Integrated Services for Individuals with Disabilities, are highlighting the societal contributions of individuals with developmental disabilities.

One example is Nik Claros, a 22-year-old young man hired recently at the Guam Police Department as a clerk. Nik, who is autistic, was hired under a 2002 public law which seeks to provide opportunities for persons with disabilities. GovGuam has not hired anyone under this program in years. Nik is now a productive member of the GPD staff. Evelyn, Nik’s mom, is here with us tonight. Evelyn, you must be so proud of your son. I know I am.

While we are working to provide employment opportunities to more residents and diversify our economy, tourism remains vital to our continued economic prosperity. Since 2016, Guam has welcomed over 1.5 million visitors each year with an average annual growth of nearly four percent. These growing arrivals support over 21,000 jobs for our island and generate nearly two billion dollars in sales and $260 million in government revenue. I am confident that through the leadership of Guam Visitors Bureau President and CEO Pilar Laguana, Guam will continue to have unprecedented growth in the tourism industry and be the choice destination for tourists in the Asia Pacific Region.

As the first and last portal through which over one million visitors and travelers enter and leave our beautiful island each year, the Antonio B. Won Pat Guam International Airport gives our visitors their first and final impression of Guam. To enhance that impression, the Airport is working toward full completion of its International Arrivals Corridor, as well as building a separate air terminal for inter-island air service to enhance our connectivity to our neighboring islands. I have complete confidence that under the leadership of former senator Tom Ada, the airport team will get the job done. And I know that as chair of the committee overseeing air transportation, Vice Speaker Telena Nelson will support the airport’s efforts.

Our economic prosperity requires a modernized commercial port that is a first-class facility providing cargo handling services in a safe, efficient and sustainable manner. In order to serve as the Hub of Micronesia, the Port, through the leadership of General Manager Rory Respicio, 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.

For too long the mission of the Guam Economic Development Authority has been overshadowed by its off-island efforts. Under the leadership of Melanie Mendiola, GEDA is renewing its mission to develop a sound and sustainable local economy through innovative programs that preserve and promote local culture, economic opportunities, and quality of life. GEDA is working to diversify our island’s economy through expansion of the agricultural industry by providing support and coordination with many of our farming organizations. GEDA will also soon launch the Agriculture Accelerator Program, a program to get local produce in our public schools by 2020.