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Governor nixes 'phantom appropriations' in GovGuam's 2024 budget bill

Updated: Sep 14, 2023





Republicans say governor could have done better than allowing the bill to lapse into law



By Pacific Island Times News Staff Rejected by Republicans, the government of Guam’s Democrat-endorsed $1.1 billion budget measure for fiscal 2024 didn’t sit well with the Democratic governor either. Substitute Bill 26-37, the general appropriations act, lapsed into law this week without the governor’s signature. It is now Public Law 37-42. While the budget was pegged at "realistic revenue projections," Gov. Lou Leon Guerrero said the bill contained provisions that tend to perpetuate “misguided practices” such as allocating funds that are either almost depleted or no longer exist. “The legislature is effectively deficit budgeting. If left unabated, this practice will land our government right back in a deficit position,” the governor said in a transmittal letter to Speaker Therese Terlaje.

Bill 26-37 passed the legislature along party lines.


In a statement., the Republican Party of Guam said the governor's decision to let the budget bill slide was "not an acceptable action."


"If there were issues that the governor had with Bill 26-37 to include appropriations that her own administration warned majority lawmakers throughout the budget process would not be realized over the next 12 months, she should have stepped forward and acted with a veto," the Republican Party said.


The party added that the burden imposed by the budget "will now sit with each tax-paying man and woman for the next year and well into the foreseeable future."


"With economic uncertainty and the lack of common sense facing the government of Guam budget process, we needed to chart a different course to protect our island society facing serious problems."


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The new budget law gives the governor $60 million in transfer authority over the next 12 months and mandates a 22 percent pay increase for all government employees.


Leon Guerrero, for her part, rejected the provision that authorizes the use of the Rainy Day Fund for expenses related to Typhoon Mawar. Such a provision amended a previous law that gave the governor transfer authority to cover post-storm expenditures using the general fund. “While such funds may be used following a natural disaster, they should not be tapped capriciously," the governor said.


She reminded the legislature that the Rainy Day Fund is reserved for response to extreme economic crises, such as a recession when revenues take an unexpected and rapid decline.


"Utilizing the Rainy Day Fund should be an option of last resort, when no other funding source is available, to avoid spending cuts that may adversely impact the delivery of critical services, or to avoid tax increases to offset critical revenue voids,” Leon Guerrero said.


In the first place, the governor said, the fund balance is not enough to meet the appropriation level under the budget measure.


By Oct. 1, it is estimated that the Rainy Day Fund will have approximately $40 million $10 million short of the amount authorized for typhoon recovery efforts, she said.


"The legislature was apprised of the balance of this fund during the budget session, and it is confounding that the legislature would still use the fund as a source for typhoon relief, essentially authorizing checks it knew full well could not be cashed," Leon Guerrero said.


"Even if the Rainy Day Fund could fully fund Typhoon Mawar expenses, it would be a serious breach of statutory intent to appropriate from the Rainy Day Fund for a lesser purpose than that for which it was created," the governor said.


She also noted that since the storm, government finances remain stable, allowing it to continue operating without touching the “precious” Rainy Day Fund reserves.


“Tapping unnecessarily on the Rainy Day Fund during a period of demonstrable growth imperils our improved standing in the financial market,” Leon Guerrero said.


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The governor also frowned on another provision mandating individual GovGuam agencies to cover the payment of outstanding merit bonuses owed to active and retired government employees since 2010.


The section does not come with a corresponding appropriation but rather directs payment of these bonuses from the FY24 executive branch

agency appropriations.


“The budget requests submitted by agencies for the FY2024 did not account for payment of these prior year obligations. Our executive branch agencies should not be expected to pay for the failed policies of past administrations, especially when doing so may impact current operations and, ultimately, the provision of critical services to the community,” the governor said.


“While the legislature is responsible for appropriations, it cannot interfere with the executive branch's power to allocate resources for the proper fulfillment of its duty to execute the law," Leon Guerrero said.


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Leon Guerrero also noted that the budget act contains over a dozen appropriations from the "audited excess general fund revenues" and "unassigned fund balances for fiscal 2022" with a combined total of $19 million.


The audit process for fiscal 2022 has yet to be completed. However, current tracking indicated that the appropriations of this source "exceed potentially available" fund balances from the fiscal year in question.


"In fact, FY22 excess revenues were over-appropriated even prior to these new appropriations from the combination of appropriations contained in the FY23 budget act and subsequent appropriations utilizing the same fund source passed throughout this fiscal year," the governor said.

"The legislature continues to attempt to appropriate from this depleted source, resulting in over $19 million of 'phantom' appropriations, which are effectively empty promises to the affected government entities and programs," she said.


"The legislature's practice of appropriating these "excess revenues" relies on a budgetary fund balance, instead of the generally accepted accounting principles fund balance, which accounts for the complex timing of the recognition of revenues and expenditures," the governor added.



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