NEWS: Taking $40M from GMH and DOE; before repealing sales tax Senators must find solution
June 5, 2018
Hagåtña — Guam Memorial Hospital officials pleaded their case, again, for a dedicated funding source to help fill the perennial shortfall that leaves them unable to upgrade machines, purchase medicines and maintain facilities.
The sales tax, which was approved when senators passed Bill 248, now Public Law 34-87, goes into effect in October. It is expected to help fill the General Fund shortfall created by the federal tax policy, provide $10 million to help the Department of Education with school improvements, and $30 million to help the Guam Memorial Hospital.
Sen. Mike San Nicolas wants to repeal the sales tax. But doesn’t provide a solution to address the shortfall or help our public schools or island’s public hospital.
Without a solution, there is the danger of GovGuam’s credit ratings being reduced. The credit ratings agency Standard & Poors placed GovGuam on credit watch with negative implications for its general obligation and lease bond ratings as lawmakers scrambled to pass legislation to address the $67 million financial hole brought on by the federal tax cuts.
Moody’s also changed its outlook for GovGuam’s Ba1 issuer rating from stable to negative. It noted that the change reflects “the possibility that its financial and liquidity positions could weaken further if timely, sufficient action isn’t taken to address the general fund revenue shortfall and restore long-term financial stability or if that revenue shortfall is greater than projected.”
Businesses pay less tax
A few months ago, the governor submitted a bill to address the shortfall in General Fund revenues caused by the new federal tax policy, and help GMH and DOE. It would have increased the BPT by 2 percentage points; 1 percentage point would have sunset in two years and one point would remain to help GMH and DOE.
The federal tax cuts reduced the amount of taxes paid by businesses and individuals. This means 40% decrease in corporate tax and 18% decrease in withholding taxes for the General Fund.
During discussion on the federally induced shortfall in funds, people from the business community said they preferred a sales tax over the BPT. The compromise was Bill 248.
This evening several residents said the Government has to do more.
Department of Administration noted that this fiscal year, we’ve reduced GovGuam’s overall budget by a little more than $30 million. Budget discussions for Fiscal Year 2019 are ongoing.
Tonight a resident said that the government added $6 million to its personnel costs, which is false. In fact, the government has reduced personnel numbers over the years. And within this fiscal year, personnel costs have decreased from $4.2 million to $3.9 million.
Additionally, it was noted that DRT is not collecting taxes, to the tune of $200 million. This is false.
The Department of Revenue and Taxation continues to pursue about $105 million in taxes through aggressive tax collection efforts and programs like the ongoing tax amnesty. Additionally, the Fiscal Strike Team is working to strengthen tax collections in those areas of weakness. The remaining $50 million or so is in some sort of litigation or payment arrangement.
