March 15, 2018

Hagåtña — Concerned students turned the Legislature’s hearing room into a Civics 101 class yesterday. They asked how they would vote — and what they would do to help public schools — and let the senators know that the 2% sales tax isn’t as bad as senators may think.

Bill 248, introduced by Democratic Senator Joe San Agustin has been amended with recommendations from senators on both sides of the aisle. Approved amendments are being added to the original legislation and Senators are expected to return to the Legislature in two days — this Friday — to vote on the bill. Sen. Wil Castro noted that everyone, from the Governor to the Senators, all agreed that something needed to be done, the method by which to address the fiscal crisis was the question.

Sen. Regine Biscoe Lee and Vice Speaker Therese Terlaje made misleading comments either borne out of an intent to mislead, or simply a lack of understanding of what is actually going on or how government works.

Below are some comments from students and senators.

Students told senators:
• “It will be easier with the sales tax increase if it does go through. It’ll be easier to pick and choose a cheaper brand, than to budget 20% of a family’s income. A family will have to cut out so much. A lot of the student’s families here are at stake, their day-to-day lives. We can all buy cheaper brands and we can skip out on some of the luxury food that some of us are eating.”
• “Many people in this room, I’m going to say have a job. and what do jobs come with. taxes, yes? Now let’s say we get 20% of your salary cut. Which one is more expensive? The 20% cut or the 1.5% increase in sales tax or even a 2% in whatever you buy.”

One student asked: What is the plan right now?
Sen. San Agustin broke it down:
The government is facing a $67 million shortfall caused by federal tax cuts
The federal tax cuts reduced corporate taxes by 40%, and withholding by 18%
That’s money that would have gone to GovGuam coffers but no longer are and will need to be addressed somehow.
Bill 248 does two things, (which has been recommended by financial experts in the private and public sector) reduces government spending by $30M and increases revenue through a 1 percentage point increase in the BPT. (Both Sen. San Agustin and Castro noted that they don’t want to see Guam DOE funding reduced.)

One student asked: If you had to vote for the bill today, how would you vote?
Sen. Wil Castro: Yes
Sen. Regine Biscoe Lee: No
Vice Speaker Therese Terlaje: No
Sen. Joe San Agustin: Yes

Vice Speaker Therese Terlaje: “The Legislature has done nothing to cut DOE’s budget. The budget that passed continues to exist, and the cuts are being made by the executive branch. They’ve made a plan of how to cut, to reach $67 million, and in their plan they planned to cut DOE by $19 million.”

CLEARING THE RECORD: The Vice Speaker still doesn’t understand that we are facing a situation where there will be NO CASH to give DOE or any other agency. $19 million is the equal share of General Funds for Guam DOE that would have to be reduced if we don’t get additional money through some sort of revenue enhancement provision – which can only happen through legislation.

Vice Speaker Therese Terlaje: “This is what we are locked up about, to try to tell them that’s unreasonable and irrational to cut DOE by that much. Other agencies are not cutting areas, do harder work and determine the priorities of the government. We have dedicated a funding source to DOE because it’s a priority, those are requirements regardless of the cost.”

CLEARING THE RECORD: DOE’s budget request goes directly from the Guam Education Board to the Guam Legislature where the legislative body approves and passes their budget. To date, there has never been a 100% dedicated funding source for DOE that can charge expenses too. It’s clear that no one wants to cut any agency. But unless senators pass a bill that fully funds the $67 million in shortfall, then some cuts are going to have to be made.

Vice Speaker Therese Terlaje: “Last time I talked to the board, despite threats from the administration, they are still receiving allotments. We hope that’s still the case. If allotments are not being received by DOE, we will be up in arms. On the other side of the coin, it’s not as simple as passing one bill, if you are urging passage of this bill, you are urging an increase of a sales tax of everyone when you go buy Coca Cola, it increases that cost. That’s why there is a debate – not a debate of whether or not it would be funded. I need you to understand too and think about families, also proposing, and I think it’s a threat to force us into a decision. Otherwise, there is no other bill in DOE to cut DOE.”

CLEARING THE RECORD: Allotments are still released because we currently have enough revenues, but only for payroll, and that’s only for the next month and a half. If there is no cash because our revenue source has run dry, there won’t be much of a choice. This is why we need a two-sided bill that addresses revenue sources and also includes reduction in expenditures.

Sen. Regine Biscoe Lee: “I want to reiterate what the Vice Speaker told you. Currently, we’re in special session, we can only consider one measure. We need a balanced approach to solve this gigantic problem. Our priority in this government are the big three: education, safety and health. … the Vice Speaker is absolutely right this has been a chronic problem that has been building for years. These allotments have not been given to Department of Education, to Guam Memorial Hospital, to UOG/GCC, all of these things that we all say are priorities, we appropriate the funds, and unfortunately the executive branch has held some of that money.”

CLEARING THE RECORD: On Dec. 22, 2018, President Trump signed a bill into law that reduced the amount of taxes that corporations and individuals pay the government – these are funds the government uses to provide services. That reduction in what corporations and people are paying comes to about $67 million shortfall in government revenues.

Sen. Regine Biscoe Lee: “If we were to vote on this bill today? I was able to offer a number of amendments, but not enough to get me to say “Yes”. This bill does not represent a balanced approach, there have been a lot of threats, we’ve seen fire stations close, police precinct close, that’s not what any of us want.”

CLEARING THE RECORD: This bill cuts government expenditures, gives the administration additional authority to reorganize the government, and provides revenue enhancement. If Senators fail to pass this bill (or something similar to it) then government revenues dry up and no one will get a paycheck – including teachers, police officers, firefighters … etc.

Sen. Regine Biscoe Lee: “We’ve heard a lot from the executive branch on this, and only the Legislature to solve this problem. That is not true.”

CLEARING THE RECORD: The Governor is making cuts – that’s all he can do. The Legislature is the ONLY BRANCH of the three branches authorized to PASS BILLS to include those that enhance government revenues.

Sen. Regine Biscoe Lee: “The governor has the power, he has transfer authority, he can keep the fire stations open if he chooses. He can do that.”

CLEARING THE RECORD: If there is no cash, there’s nothing to transfer.

Sen. Regine Biscoe Lee: “The 20% is the superintendent’s Plan C. He started with Plan A, that would be the least amount of impact, we appreciate that feedback from him and Board of Education, Plan B, if we don’t come up with a solution, so Bill 248 is the solution they put forward. I cannot in good conscience support a tax increase on our people, this would drastically affect our working poor and people who hold multiple jobs and aren’t able to put food on their family’s table.”

CLEARING THE RECORD: Everyone who works is getting slightly more in their paychecks because of the federal Tax Cuts and Jobs Act of 2017. On the other side of that is the local government’s revenue shortfall and without an injection of revenue soon, GovGuam faces a payless payday for thousands of people who help keep the private sector afloat.

Sen. Regine Biscoe Lee: “In my mind, there are much better things we can do, that the Governor can do, TODAY … to be able to realize those tax revenues on taxes already owed. They’re saying there’s maybe $50, $100, maybe $80 million in taxes already owed to our people that can secure these jobs and keep these fire stations open. This body, all 15 senators earlier in our term, we took a $30K pay cut, and in my first bill, I took all of that money and we put it towards DOE, we gave it to the schools for school maintenance. If that’s not putting your money where your mouth is, then I really don’t know what is.”

CLEARING THE RECORD: Unpaid taxes reflect people who aren’t able to pay either because they simply don’t have the money, some of the large cases are in court. In addition to cost cutting measures, the Governor, Lt. Governor, their staff, and cabinet members have gone on a voluntary 32-hour workweek.

Sen. Regine Biscoe Lee: “ There are bills on the books for the last three years that can bring in over $22 million in revenue with hotel bed and breakfasts and it’s been sitting at the Department of Revenue and Taxation. The Calvo-Tenorio administration has failed to act on that … which could be used to pay for a big chunk of the DOE budget. There’s also a tax stamp bill that we passed this term that was passed six to seven months ago with an implementation date of 30 days and Revenue and Tax is still sitting on it.”

CLEARING THE RECORD: The Bed & Breakfast law is implemented, Dept. of Rev & Tax (DRT) is issuing licenses. The Senator is getting it confused with short-term vacation stay homes that did require Rules & Regulations and they’re working with Vice Speaker Terlaje on this issue. The source of the “$22 million figure” has not been substantiated by the Special Economic Service — which includes the Office of the Public Auditor, the Governor’s fiscal team, and the Legislature’s Office of Finance and Budget — and it is unclear where this number came from. Additionally, DRT is working with Air BnB to ensure taxes are levied on all people who open their homes for rent and are registered on Air BnB but are NOT licensed. DRT is working to find those businesses and require them to register.

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