How do you tackle a fiscal crisis?

March 30, 2018

 

 

(Updated Aprll 7, 2018 with response from Leon Guerrero-Tenorio Team)

 

Invoking a supposed fiscal crisis created by President Trump’s federal tax cuts, Gov. Eddie Calvo wrestled with the reluctant Legislature into passing a tax bill to rescue the government’s finances as well as the Guam Memorial Hospital.

 

   The eventual passage of Sen. Joe San Agustin’s Bill 248 that would bump up BPT by 25 percent instead of 50 percent and levy a 2 percent sales tax on all goods and services by Oct. 1 has paved the way for the governor to sign the compromise legislation. But whether or not the additional burden on the taxpayers would solve the government of Guam’s perennial funding shortfall is yet to be seen.

 

 GovGuam is a veteran of financial meltdown. Every administration oftentimes picks up the short-cut solutions: bond borrowing or tax hikes, both typically frowned upon by voters and taxpayers.

 

  For the first in our series of questions toward the general elections, we asked gubernatorial candidates how they would solve – or would have sought to solve — the financial crisis if they were running the government from Adelup.

 

      The Democratic camp has four candidates seeking the party’s nomination in the Aug. 25 primary: Sen. Frank Aguon, Sen. Dennis Rodriguez, former governor, Carl Gutierrez; and Bank of Guam president and former senator, Lourdes Leon Guerrero  On the Republican side, Lt. Gov. Ray Tenorio is running unopposed.

 

 “If you were the governor now, how would you address the current “fiscal crisis” caused by federal tax cuts?” Their responses are as follow.

 

FRANK AGUON (D)

Running mate: Alicia Limtiaco (former U.S. attorney)

 

 

We are facing very fiscally challenged times, but more importantly we must recognize that this situation cannot be fixed overnight by means of a quick cash infusion or band-aid solution, only for the same dilemma to recur again in a few short months. The root of the problem lies in a government that is operating beyond its means and a government that is in dire need of a complete overhaul.   Only three months into the new year and we have already seen significant increases in the cost of living on Guam. They have come in the form of a rise in gas prices at the pump, liquid fuel taxes, and utility rates. We must consider the quality of life of our people; and asking them to bear the burden of any tax increase at this point in time is unjustified.

 

Several weeks ago, in an effort to stabilizing our government, I introduced Bill 247-34 – The Government Priorities Act of 2018. The bill prioritizes, education, health, and public safety and gives the Governor the means necessary to prioritize, reorganize, and stabilize the government without raising taxes. A myriad of rules and regulations have made the government reorganization process difficult for any governor. Bill 247-34, cuts through the red tape and authorizes the Governor to implement necessary measures by means of an executive order.

 

Through Bill 247-34, education, health, and public safety will be the government’s top priorities listed in Group I: education health, and public safety. Group II is composed of entities that provide services which are involved in support, enforcement, regulations, adjudication or administration; and Group III is composed of other entities of the Executive Branch. This measure would continue to recognize the employees’ rights to representation under Public Employee-Management Relations Act. The measure would give the governor the authority to outsource, privatize, eliminate redundancies, and combine the functions of agencies. It is through these measures that will see the government through in transitioning from its present state of finances.

 

I’m advocating for streamlining our government. I am advocating for the reprioritization of the Government of Guam so that that our Education Superintendent does not need to make a millions of dollars in cuts to education. I’m advocating for the reorganization of our government, so that the Guam Fire Department does not need to shut down fire stations in Astumbo, Piti, or Talofofo. I’m advocating for a restructuring of our government so that our police officers can work out of the Hagatña Precinct and protect our streets. These are critical services that should never be first on the chopping block.

 

 

 

CARL GUTIERREZ (D)

Running mate: Fred Bordallo (former police chief)

 

 “Gutierrez Bordallo 2018” has watched with disappointment as the current administration and legislature have struggled to come to a consensus on a course of action for the proper management, collection, and allocation of public revenues throughout this fiscal crisis.

 

Meanwhile, our people face payless paydays, furloughs, and unaffordable tax hikes. The Gutierrez Bordallo team believes it is imperative to operate with fiscal and fiduciary responsibility, ensuring residents and tourists have safe streets, adequate emergency services, and public parks and playgrounds, rather than closing places that provide such necessary safeguards and healthy activity.

 

Our team believes elected officials must make the hard choices and cut salaries and suspend operations of departments that do not provide essential services related to health, public safety and education. That means dropping the false pride and remembering that through respectful negotiation, politics is the art of the possible. Faced with the current financial shortfall, team Gutierrez Bordallo would identify all non-essential political hires under our administrative umbrella and cut up to one third of these employees. This would help free up the funds necessary to alleviate critical shortfalls.

 

We would designate such funds to keeping our hospital fully operational, our streets safe, and all emergency services and police operations fully functional. We would also fund the advancement of educational needs to afford our rising generation the unimpeded opportunity to learn and grow in ways that keep pace with today’s high-tech jobs market. We are in no way suggesting that non-essential employees do not do their jobs, nor even that they do not do their jobs well. But we are saying we’re acutely aware of the critical importance of making the tough calls to provide the highest quality of life possible when resources are strained, by providing adequate services, needed support, and essential government operations.

 

If the seated administration were to restructure or eliminate non-essential offices and positions in order to streamline funds and save money, the situation could improve without affecting the operations of key agencies and public services. By reconsidering approximately $8 million in salaries and benefits provided to non-essential hires annually, even if the current administration cut back by a third of their spending, we would be able to pay the shortfalls at GMH without concern.

 

 

DENNIS RODRIGUEZ (D)

Running mate: Dave Cruz (educator)  

 

First, we would determine what, if any, needs were immediate, and if any reductions needed to be made in order to stay within our budget and those reductions would be done according to priority. 

 

Foremost, I would ensure that public health, public safety, and education services are safeguarded and insulated. These critical services cannot be jeopardized even if it means other government agencies are consolidated or abolished.  We can no longer allow our people to go to sleep at night worrying about their safety, or our kids wondering if their school would be open tomorrow, or if our hospital will be open to treat the sick.

 

I would be meeting with senators daily and remain in a respectable and honest dialogue with them until a solution is reached. My administration will not employ any pressure or bully tactics on them or anyone for that matter.

 

My administration would be working with the private business sector in a private-public partnership to fast track development and other business opportunities by ensuring agencies within the executive branch process applications and permits within three business days of filing. Bureaucratic regulations will be administratively waived, if authorized by law and when the safety, health, and welfare of the public are not jeopardized.

 

I firmly believe that we need to foster, support, and promote our private sector, especially our small businesses so that private sector jobs are protected, more job opportunities created and additional tax revenues realized to offset the effects of the federal tax cuts.

 

 

RAY TENORIO (R)

Running mate: Tony Ada (former senator)

 

Our administration and private sector partners have placed Guam on a track for a new golden age. We see the fruits of our labors in record visitor arrivals, the military buildup under way, our gross domestic product growth, and increases in employment plus decreases in crime and homelessness.

 

But the immediate impact of a $67 million revenue loss, that started in January and will finish in October 2018, is the first of the two challenges that requires an immediate but short term financial bridge. We have consistently been cautious with government finances through BBMR’s expert staff ensuring we scaled back expenditures as soon as we assessed the tax cuts. This initial impact is what is causing the biggest concern, one which Governor Calvo, myself and our administration have been working to resolve with our cabinet and the Legislature.

 

The second challenge is the long-term implications of these cuts on government operations. The reality of these cuts provides leaders with the opportunity to make meaningful assessments of what services we can and should provide.

 

It’s more than just catch words like “reorganizing government.” We need to re-engineer it by rethinking the way we deliver services so it’s more efficient, and takes advantage of technology and organizational models. These mean we do more with less by pushing more tasks online that reduces personnel tasks and creates new opportunities for employees. We should question what services we want our government to provide and those that could be complemented by the private sector. This requires thorough discussion that takes more time than we have before we resolve the immediate financial dilemma. It is overly-simplistic to say that the government should immediately cut certain services instead of others. There are due process laws in place that do not allow such immediate action against employees conducting services across our government.

 

  Governor Calvo, myself, and our administration have taken the responsible approach by repeatedly engaging senators to pass a bill to fill the $67 million shortfall. This one action would stop the legislatively-mandated harmful policies that our revenue shortfalls are triggering. Once the legislature acts to achieve this need, we will continue to pursue the long-term goals required for GovGuam efficiency. Calls by some for immediate cuts and “pain” in government not only threatens the livelihood of thousands of hardworking and committed government employees, it would also cause a negative economic impact.

 

LOURDES LEON GUERRERO (D) 

Running mate: Josh Tenorio (former administrator of courts)

 

 

 

Rising debt, higher taxes, and closed police and fire stations are signs of a system that is failing our people.  No business could survive like this and no government should be allowed to operate this way.  It’s time to do something different instead of choosing to cut vital services, raise taxes, and reform nothing.

 

The government has left nearly $200 million in uncollected taxes on the table. It’s time to collect.  We will beef up Revenue and Taxation’s collection efforts with more auditors, investigators, and upgrade its computer systems.  

 

We will also establish the TRU (Tax Recovery Unit) within Rev and Tax. This dedicated group, under the leadership of a tax attorney, will catch tax cheats and collect the revenues rightfully due the people of Guam.

 

The current level of government debt is unsustainable. The practice of borrowing to pay for operations must end. Every man, woman, and child residing in Guam is now on the hook for $15,323 in order to pay off this debt.  This simply cannot be sustained.  We are committed to get our government’s financial house in order.

 

Waste, fraud, abuse, inefficiency, and cronyism will end. Our fiscal recovery plan begins with a full review of public finances to get at the truth about the government’s financial situation before imposing any new taxes on our people.  

 

The government workers who collect your tax dollars can’t reconcile basic financial records with their counterparts at DOA who cut the checks. It is the year 2018 and your government operates on manual entries, paper records and in-person filing.  

 

We will invest in technology.  Under our leadership the government of Guam will adopt a 21stCentury financial management system. It will aggressively reduce costs, increase transparency, and improve accountability. Operations will be made efficient and everyone will have the ability to see how their tax dollars are spent, including who gets the money.

 

We must also focus on fast tracking economic growth. This begins by reforming government to finally drawdown on the nearly $150 million available to Guam in Medicaid and federal funds.

 

It means we must expedite our permitting and licensing processes so the world knows we are open for responsible business.  It requires retooling our procurement system to increase opportunity for local entrepreneurs and businesses that create jobs.

We can collect, leverage, and invest our way out of this crisis.  We need to start now.

 

 

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