Guam's public debt soars to $2.6 billion
By Mar-Vic Cagurangan
Guam’s public debt racked up to $2.6 billion in 2021, accounting for 43 percent of the island’s $6.1 billion economic output, according to the Government Accountability Office.
The territory's outstanding tabs overshot the debt ceiling, which according to the Organic Act must not exceed 10 percent of the aggregate tax value of property in Guam. As of October 2020, the debt cap was pegged at $1.4 billion based on an adjustment made to the aggregate tax valuation in 2015.
Of the $2.6 billion debt, GAO said $1.1 billion was incurred by the government of Guam, while the rest was obtained through bond borrowing by autonomous agencies and public corporations either to fund capital improvement projects or refinance previous debts.
GAO’s numbers indicated that outside of GovGuam, the Guam Power Authority had the largest bonded debt at $556.8 million, followed by the Guam International Airport Authority with $194.8 million.
The Guam Waterworks Authority issued revenue bonds worth $134 million to finance court-ordered projects and mandates as well as water loss control.
The Port Authority of Guam tapped the market with $69.8 million in revenue bonds.
Other components of Guam’s outstanding obligations included $46.2 million in bonds issued by the University of Guam, the Guam Housing and Urban Renewal Authority and smaller agencies.
“Our calculation of public debt outstanding includes the sum of bonds and other debt payable, which may be marketable notes issued by territorial governments, nonmarketable intragovernmental notes, notes and loans held by local banks, and federal and intragovernmental loans,” GAO said.
In last year's audit report covering the fiscal period that ended in September 2021, Guam's Office of Public Accountability said the total outstanding debt subject to the debt ceiling limitation was $989.3 million. "The legal debt margin as of Sept. 30, 2021 was $364.7 million," OPA said.
Generally, GAO said, debt in itself is not an indicator of financial or economic distress.
“In fact, the ability to issue bonds and access capital markets is often a sign of good fiscal and economic fundamentals,” the federal watchdog said. “In theory, borrowing to finance capital improvements, rebuilding efforts, and infrastructure projects would yield economic activity and growth, helping to offset the cost of borrowing.”
However, GAO said, resorting to borrowing to finance general government operations “may signal fiscal and economic distress.”
Despite a large stream of federal dollars from Covid-19 relief programs, GovGuam ran a deficit in fiscal 2021.
"In fiscal year 2021, Guam’s primary government revenue was a little more than $2 billion, an increase of 50 percent from fiscal year 2019. Expenses were almost $2.1 billion, a 58 percent increase from fiscal year 2019," GAO said.
The federal audit found that spending on public health activities was almost $488 million, about 24 percent of total GovGuam spending that year and a 35 percent increase from 2019.
"Officials told us that increased public health expenses were due to the Covid-19 response. Public welfare was the next largest category of spending, representing 21 percent of primary government spending. Component unit revenues and expenses," GAO said.
Autonomous agencies recorded total revenues of more than $1 billion and total expenses of $990.5 million during the audit period, resulting in a surplus of about $58.5 million.
"Total component unit revenues and expenses have remained relatively stable in recent years. Compared to fiscal year 2019, revenues and expenses both increased about 1 percent in fiscal year 2021," GAO said. "Guam’s Power Authority and Memorial Hospital Authority had the highest expenses in fiscal year 2021, representing 34 and 18 percent of total component unit expenses, respectively."
In terms of pensions and other retirement benefits including health care and life insurance, GovGuam reported a $2.8 billion liability in fiscal 2021, while autonomous agencies owed $1.4 billion during the same period.
"Together, these liabilities for both the primary government and component units represented 68 percent of GDP as of Sept. 30, 2021," GAO said. "Officials told us that annual contributions to the territory’s pension fund are based on actuarial recommendations."
GovGuam expects the pensions to be fully funded by 2034, while it pays other retirement benefits on their due dates, GAO said.