OPA: Despite the deficit cut, GovGuam still has $2.4 billion debts to worry about
Deficit cut attributed to tax withholdings from PUA
The government of Guam general fund ended fiscal 2020 with a $46.3 million surplus, enabling the government to cut the deficit down to $1.5 million from $47.8 million in the previous year, according to the Office of Public Accountability's newly released audit report.
OPA said the tax withholding for the Pandemic Unemployment Assistance (PUA) from the federal CARES Act and a significant corporate income tax payment substantially contributed to reducing this deficit.
The Guam Department of Labor distributed more than half a billion in PUA payments last year.
Despite the improved net position, OPA said a cumulative $2.4 billion deficit still exists for the whole government--but improving.
"GovGuam’s total deficit net position decreased by $9.8 million from negative $2.4 billion in FY 2019," OPA said.
"Within the past five years, GovGuam reported an improvement in the overall deficit for the second time. However, the pension and OPEB liabilities of $1.1 billion and $1.7 billion, respectively, still present a long-term effect on the government’s deficit," the audit report said.
GovGuam collected $18.4 million less revenue from the business privilege tax or BPT $315 million in FY 2019 to $296.5 million in FY 2020.
Although the BPT rate increased to 5 percent to ease the effects of the Tax Cuts and Jobs Act 2018, the severe disruption in the economy by the Covid-19 pandemic virtually closed the private sector.
This affected BPT revenue with a 6 percent decrease in collection compared to the previous year’s increase of 17 percent. GovGuam projected $314.9 million in GRT revenue but was short by $18.4 million.
On the upside, GovGuam reported $324.9 million in income tax, $44.2 million more than in FY 2019 of $280.8 million.
This increase is the bulk of GovGuam’s $707.7 million general fund tax revenues. The withholding taxes for the PUA and a significant corporate income tax payment helped GovGuam surpass its FY 2020 projected collection of $277 million from income taxes by $48 million. Other tax revenues that increased were Section 30 and excise tax by $5.7 million, collectively.
Read related story
General Fund total expenditures (inclusive of transfers out) of $736 million increased by $33.6 million from $702.4 million in FY 2019.
The top three expenditures were for public education of $197.6 million; protection of life and property of $97 million; and the collective payments of $79.2 million to the University of Guam, $31.7 million, Guam Memorial Hospital, $25.2 million; Guam Community College, $18.1 million; and GovGuam Retirement Fund $4.2 million,
Among these, only the public education expenditure decreased by 11 percent from FY 2019. Transfer out to other funds totaled $35.5 million. The Organic Act set a debt ceiling limitation that GovGuam must not exceed 10 percent of the aggregate tax value of property in Guam or $1.4 billion as of Oct. 31, 2019.
GovGuam’s total debt outstanding as of FY 2020, subject to this limitation, stood at $1 billion. This billion-dollar debt consists of the following:
$27.1 million general obligation bonds, backed by full faith and credit of GovGuam, to fund the construction of a new cell for the Layon landfill;
$1 billion limited obligation bonds, payable from different tax revenues;
$6.8M million refinanced loan, pledge and assignment of Judicial Building Fund revenues; and
$3.7 million bank loan, pledge and assignment of Capitol District Fund revenues.
Overall, GovGuam’s total long-term debt decreased marginally by $30.1 million . The refunding of $229 million in general obligation bonds 2009 Series A and $182.6 million in limited obligation bonds 2009 Series A bonds were considered defeased and removed from the government’s overall financial statements. Subsequent to FY 2020, GovGuam took advantage of the low-interest rates to refinance bonds with debt payment savings of $63.4 million. Part of this refinancing was to fund John F. Kennedy High School’s energy improvements.