NEWS: Where we were, where we are, and the possible dangers ahead
July 12, 2018
Hagåtña — Recently, senators said they were concerned about mixed messages.
In the last few months we have discussed the Fiscal Year 2017 surplus, the crisis we faced in January with the federal tax cuts, the public hearings, special sessions, the passage of the compromise bill, and now there’s concern with Fiscal Year 2019 budget because of the Legislative vote to repeal the sales tax.
To clear up confusion on the Government’s financial situation, we wanted to provide the following points.
In Fiscal Year 2017, we were able to manage our finances and accomplish a surplus. We were doing pretty good. In Fiscal Year 2011 GovGuam faced about $350 million deficit and we’ve reduced it to $73 million.
The fiscal management and economic growth that allowed us to achieve a surplus provided solid foundation for a great Fiscal Year 2018. However, in December 2017 the federal government passed a tax policy that reduced the amount of taxes paid by individuals and corporations. This meant less money for government by $67 million — and required we cut costs but also find revenue to balance the equation.
Governor Calvo sent Senators several possible solutions in legislative form, even calling Senators into special session late into the night to find a solution. Eventually, Sen. Joe San Agustin, introduced compromise legislation and Public Law 34-87 was passed. It required we reduce expenses and allowed for increased revenue – a portion of which would go to our only public hospital and our public schools.
The agencies and the three branches are living within the new reduced budget levels – equating to a $30 million in reduced General Fund spending. If all things remain the same, we will likely end FY 2018 (which is September 2018) breaking even.
Fiscal 2019 begins in October. If the sales tax remains law, then the Legislature should be able to pass a balanced budget bill by next month. However, there were 11 senators who voted to repeal Public Law 34-87. If this law is repealed and no alternate funding source is found, then budget levels for all branches and all agencies will have be restricted to levels that many agencies said would make impossible to meet their mission.
What does all of this boil down to?
Right now, we’re doing OK financially. We are living within the budgets as noted by the fiscal realignment plan sent to Senators. We’re paying our obligations and the government continues to provide public services.
If Public Law 34-87 is repealed, they must replace the funding source – otherwise they’re manufacturing a new fiscal crisis and we’re right back in the middle of the chaos we faced earlier this year.
