February 25, 2018
Hagåtña — Tomorrow, session resumes on federal tax cuts and a dedicated funding source addressing 40 years of under funding for the Guam Memorial Hospital.
Senators will continue to ask questions of the Governor’s fiscal team on the most important measure before them during this current legislative term.
The Governor’s proposed bill is a global solution that addresses these issues with a brief, 24-month increase in the Business Privilege Tax of 2 percentage points. After 24 months, the bill would leave .75% in place as a dedicated funding source, fully funding GMH every year moving forward.
“The revenue issues before us are not of our doing; it was created by leaders half way around the world, whom we had no voice in electing. Our elected senators must rise to the call of the imminent threat before us — the impact has already begun to take effect,” Governor Eddie Calvo said.
The Administration has been warning senators about the consequences of inaction or watering down the bill. We are facing the real possibility of a payless payday sometime in March. We also are looking at cuts to critical government services, which could include closing fire stations, government busing to private schools, shortened workweeks, furloughs and layoffs.
“As with our previous warning on GMH last year, these are not threats. This is the reality of our cash position,” the Governor said.
The Legislature has been in dialogue with the Administration since December. The Legislature has held several SES meetings, and engaged in a committee of the whole. Additionally, the Governor has met with senators. Yet, it appears some senators have not fully grasped the imminent consequences of delayed or partial action, or inaction.
Without an invitation, the Governor appeared at session on Friday and implored senators to act, or to present another solution if they had one.
The Governor instructed his fiscal team to work with senators and assist them with any additional information they need to fully grasp and address this issue. The fiscal team, last week, asked senators to submit any specific questions they might have on this issue so that they can have the information prepared for senators by 2 p.m. tomorrow.
FREQUENTLY ASKED QUESTIONS (FAQs)
- What are the issues before us?
- There are two urgent issues facing our community addressing federal tax cuts and our people’s healthcare via funding at the Guam Memorial Hospital:
- The recently passed federal tax cut policy has created an immediate government cash shortfall of $67.9 million this fiscal year. While the federal tax cuts will eventually stimulate the economy,all three branches of government need a temporary revenue bridge to address the immediate cash shortfall. Failing to do so would result in painful cuts to government services, including furloughs, and layoffs.
- For the past 40 years, the hospital has been underfunded by as much as $30M a year. This has diminished the healthcare for Guamanian families on Guam and services provided there. GMH currently has approximately $10M in accounts payables— this is growing. If we want to improve healthcare for working families and fix GMH once and for all, we need to fully fund it every year moving forward with a dedicated funding source.
- What does the Governor’s bill do?
- The bill is a global solution that addresses both issues, incorporating recommendations from the business community. The bill would temporarily increase the Business Privilege Tax (BPT) for 24 months. One percent would help stabilize government finances, .25% would help the Department of Education with needed capital improvement projects, and .75% would go to GMH. After 24 months, the increase would sunset out, leaving .75% in place to fund GMH every year moving forward — ending 40 years of failed funding and improving healthcare.
- What is the impact of the Governor’s bill on businesses, government, and consumers?
- A.After listening to the concerns of the private sector on the impact of lifting exemptions, the new bill was introduced. Bill 245 would temporarily raise BPT and would lessen the impact of the previous proposal on businesses and consumer goods. For businesses, the bill would have a limited impact, as they have the option of passing this on to consumers. For consumers, it would increase the cost of a $1 cup of coffee by 2 pennies for 24 months.
- Why not 1% as opposed to 2%?
- A 1% increase, would only address federal tax cuts, leaving GMH to continue its downward spiral and throw your only public hospital into the intensive care unit. The GMH issue is just as urgent, if not more, as addressing the federal tax cuts because it literally is a life and death issue.
- Why not a period shorter than 24 months?
- The legislature must pass a solution that is logical and gets our community through the period of lost revenue. 24 months is both a reasonable and logical timeframe that will address the funding shortage as the economic benefits of the tax cuts set in.
- Why not lift exemptions as previously proposed?
- A.The business community has made it clear that lifting exemptions in areas such as wholesale would increase the cost of consumer goods substantially. The BPT proposal before the legislature now, endorsed by several business leaders, would reduce the impact on businesses and consumer goods in comparison to lifting exemptions.
- What if they only pass the bill with a 1 percentage point increase?
- The 1 percentage point increase abandons GMH and affects the healthcare of working families. It would keep GMH underfunded by approximately $30M a year, leave Doctors, Nurses and employees with limited resources, and ultimately diminish the quality of patient care our families receive there.
- What are the consequences of amending the bill down to 1 percentage point for 60 days as the Speaker had attempted?
- It is not a solution. It does nothing for GMH, and leaves all three branches of government in a crisis mode. In the meantime, Senators would have to find additional taxes to raise within 60 daysor allow for government services to shut down and employee furloughs and layoffs to take place. It would put senators under incredible pressure the next few months.
- What is the consequence of voting the bill up or down as Sen. Regina Lee has suggested?
- Her proposal reflects either an unwillingness to compromise or a lack of policy experience. Voting a bill up or down means no compromise. The Governor is open to compromise, and the urgent issues before us require a legislative solution.
- What is the consequence of sending the bill back to committee as Sen. Joe San Agustin has suggested?
- This would be a failure of leadership. The urgent issues before our island requires action by senators.
- Sen. Frank Aguon has suggested looking at autonomous agency funding to address the financial shortfalls. What are the implications of this?
- If funding were pulled from autonomous agencies such as GPA, GWA, UOG, the Port Authority etc., the consequences are unknown, but are likely to increase costs on consumers. However, questions on this issue can be answered by individual agencies.
- What are the consequences if the Legislature does not pass a bill addressing GMH and the fiscal shortfalls brought on by federal tax cuts?
- It would be a failure of leadership on their part, as it may very well lead to payless paydays, furloughs and/or reduction in hours — all of which will effect government services, government employees, private sector sales, and the overall health of Guam’s economy.