Public deficit down 50%, governor pats self on the back 'for great achievement'
The government of Guam of Guam has decreased its general fund deficit by more than 50 percent, Gov. Lou Leon Guerrero said, citing an independent audit by Deloitte & Touche recently released by the Office of Public Accountability.
"How amazing is that for our government,” said Leon Guerrero. “I think out people of Guam should be very proud of that. This is our government and what that’s saying is the finances of government of Guam is stable and that the finances of Government of Guam is viable. It's strong. That speaks a lot to be able to provide them as a government the public services to our people."
The governor said public spending went down by $21 million. "What a great achievement in a period of 10 months. That's really saying a lot about the leadership of my administration,” the governor said as Monday's press conference.
The governor attributes the audit’s results to better spending and even hiring. “We reduced spending over time. Mainly personnel areas, because that’s the biggest bulk of our expenditures,” she said.
“We hired very wisely. We used our moneys very wisely. We were able to decrease overtime personnel expenditure. We were able to decrease our expenses for healthcare and also in areas of the Office of the Post Employee Benefits, we were able to decrease some of those expenditures. It's been primarily in human resources.”
Leon Guerrero also commented on the local budgeting on federal funds. “$444 million is being given, but also please remember in this crisis and pandemic, the federal government has stepped to even further help the American people to include U.S. territories,” she said.
She said Guam will be getting 1.5 billion in financial aid on top of the $650 million already received under the federal CARES Act.
"So, I don’t expect the federal government to even under pressure to at all back off in helping the American people. In fact, they’re talking about more. So, statement about federal pressures, I think, is not going to come to fruition," the governor said.
The Republican Party of Guam, however, said the governor "needs a reality check."
"First, she is touting financial success based on a budget plan adopted in 2018 even prior to her election as the island’s Maga’Haga Guahan," the party said in a press statement.
"The governor also fails to state that upon taking oath, she separated government entities that were previously consolidated, with the intent of filling additional director and deputy director positions. The staff at Adelup took starting salaries that were drastically higher than their predecessors in similar positions. She also requested for an unprecedented billion-dollar budget for FY 2020, the Republican Party said.
They also said the governor failed to note that the surplus was achieved due to the increase in privilege business tax, which she said would stay at 5 percent “forever.”
" She back pedaled in her campaign promise of reducing the tax, but upon taking over the seat, she realized that instead of helping small businesses, she needed to reward her family, friends, and supporters with jobs and contracts, thus the need to keep the BPT at the higher level.
While the governor was touting this evident “success,” the Republican Party said the governor failed to recognize that over 35,000 island residents have lost their jobs, and hundreds of businesses have been asked to close their doors.
The Office of the governor issued a statement hours later.
"Just a few hours ago, nearly every Republican senator voted to pass a budget funded in part by a business privilege tax at 5 percent. It takes a great deal of gall to criticize a tax increase and then vote to spend it," the statement read.
The governor's office said former governor Eddie Calvo’s Republican Party took a surplus and turned it into a deficit.
"He then worked to raise the BPT to 5 percent because the Trump Tax Cuts and Jobs Act reduced GovGuam’s revenue by more than $65 million—something that continues to hurt government services. Now, just months before an election, his GOP hopes you’ll blame Democrats for the stuff they did."
The governor's office said under the current administration, qualified small businesses pay 3 percent BPT—not 5 percent.
"General fund expenditures are down government wide, and gone are the days when people in power stole federally protected funds to make payroll. As a woman, Governor Leon Guerrero knows you don’t always get credit for cleaning up after others—you just hope they’d lend a helping hand."
Highlights from OPA report
*General Fund reported total revenues of $738.1M (inclusive of operating transfers in), which increased by $22.4M from the prior year. This was mainly due to the changes in the Gross Receipts Tax (GRT) rate which increased it by $45.3M from last year’s tax collection of $270M. GovGuam’s tax abatement program to stimulate economic growth, however, partially reduced GRT by $13.1M. Income taxes decreased by $37.3M due to the Tax Cuts and Jobs Act reducing income tax rates. The law likewise increased GovGuam’s payable to federal agencies due to expanded child tax credits.
*Total expenditures (inclusive of operating transfers out) of $702.4M decreased by $23.7M compared to FY 2018. The biggest decrease came from transfer out ($11.9M), protection of life and property ($9.7M), public health ($4M), and individual and collective rights ($2.3M).*
*GovGuam’s decline to a billion-dollar deficit in net position reached its peak at the end of FY 2018. FY 2017’s deficit of $889.5M fell further by $1.6 billion (B) to $2.5B in FY 2018. In FY 2019 GovGuam ended with a surplus of $40.1M, which decreased GovGuam’s prior year’s negative Net Position of $2.5B to its present negative Net Position of $2.4B.
*Overall, GovGuam’s surplus was attributed to revenues for governmental activities of $1.4B exceeding expenses activities by $48.7M. General revenues derived primarily from taxes, increased by $21M compared to the prior year. The three highest tax increases were from gross receipts tax ($45.3M), tobacco tax ($6.9M), and real property taxes ($3.4M). Section 30 federal income taxes, however, decreased by $749K.
*Expenses for governmental activities increased by $28.1M as well as contributions to permanent funds by $6M. The largest expenses were for public education and public health which comprised 56.8%, protection of life and property 9.8%, and general government 9.1%. GovGuam’s expenses for governmental activities were funded by federal supplements and taxes and other general revenues.
At Monday's press conference, the governor believes that the government finances will still be steady for the next audit despite the pandemic.
“I don’t want to diminish what happened in our fiscal year 2019 because that’s the most current. I'm expecting in fiscal year 2020 to be about the same,” she said. “We're already tracking it. If you look at our (Consolidated Revenue Report) report of July, you’re seeing an increase in revenues as a result of great collection, as a result of spending wisely, as a result of making sure that we manage out cash effectively and we’re paying down our debt. That's something to be said about our government. I except 2020 to be about the same. The reason I say that is because you’re seeing an increase of local and government spending. By 2021 and 2022, you’re seeing an increase in spending in military.”
Leon Guerrero also mentioned her meeting with the military over the weekend and how they hope to invest into Guam.
“I just spoke to the secretary of defense Saturday and he had informed me that there’s a consorted effort in the armed forces and military defense to put more resources, more investment into this part of the Pacific because of their whole initiative on Pacific deterrence,” said the governor.
Leon Guerrero said she expects more federal and military spending that will help Guam with cash flow.
"I expect my team to continue with their very disciplined cost savings and very sensitive in making sure cash is used effectively and productively. What I'm thinking in the future is we’ll have local and federal spending this year," she said. "We're looking at pumping in 1.5 billion from the federal government. We're looking at that for fiscal year 2020.”
The governor is also hopeful that tourism will soon make a return to the economy. “I'm very confident that our tourism will be given the opportunity to come back. I'm optimistic it’ll come back. I don’t know if it’ll come back from pre-Covid, but I'm optimistic,” she said.
Bu the challenge for the community in terms of economy is to "show to the world, international travelers, our tourists, is that Guam is a safe place. If we don’t show that, they won’t want to come."
Leon Guerrero promised that her administration will work at bringing tourism back to Guam. “There's a lot of things we need to do to continue on with the economy if we’re going to bring back our tourism. I'll work very closely with GVB,” she said.
“Our administrations, our people, our leaders will work very closely to get it back. Additionally we’ll diversify our economy. I' talked to Mark Esper about telecommunication now that Hong Kong is no longer with the U.S., they’re under China now, the military is looking at a secure place for their Tele-Communiations. They're looking at Guam.” Leon Guerrero also mentioned looking at aqua- and agriculture to build the economy and sustainability.
Leon Guerrero also hopes to better the finances by focusing on improving the government’s technology. “We're also looking at expanding our office of technology. We know technology automation and we see this as an example a truth testament of teleworking and how teleworking does work,” said the governor.
“You could do a lot of work teleworking. I myself during my isolation did a lot of virtual meetings, I was able to keep up with what’s happening in the government and was able to continue running the government from home. The importance of technology is there. Some places, some agencies had instituted some technology. I know DRT has instituted some technology. We're all working and the directive is we want to automate our government of Guam.”