GUAM FACING SHORTFALL, CUTS RETIREMENT PAYMENTS

HAGATNA, Guam (Pacific Daily News, Jan. 31) - The governor's budget director said he believes the government will have enough cash on hand to pay its employees through February, but said the government has stopped making some payments to the employee Retirement Fund.

"We're withholding payment for the defined benefit plan," Bureau of Budget and Management Research Director Paul Leon Guerrero told lawmakers during session yesterday. The defined benefit plan is the "old" retirement plan for GovGuam employees, which guarantees retirement checks based on salary and years of service.

Leon Guerrero said the administration considers health insurance coverage a priority for retirees, so payments for insurance premiums have not stopped.

Leon Guerrero painted a brief picture of the government's financial situation as senators discussed Bill 27, which would extend the current four-month GovGuam budget and allow employees to be paid through February.

Senators were in session late last night, and are scheduled to resume discussion at 9 a.m. today.

The purpose of the bill is to give the administration time to work with lawmakers on a more comprehensive budget bill that includes money-saving and revenue-generating proposals.

Lawmakers last year created a temporary budget, based on the $395 million the General Fund was projected to collect at the time.

The revenue forecast for the General Fund has dropped to $340 million, but the General Fund has about $512 million in bills to pay this fiscal year -- a shortfall of $172.5 million.

The General Fund still has $110.5 million in unpaid bills from last fiscal year, which means it will be about $283 million in debt unless something is done. Administration officials over the years have said the General Fund deficit must be $100 million or less in order to be manageable.

The island's public auditor yesterday released a financial audit of GovGuam for fiscal 2001 that states the government overspent its income by $34 million that year. It collected $447 million but spent $481 million.

GovGuam consistently spends more than it collects, according to the audit.

Administration officials have proposed salary cuts, an employee buyout program, tax increases, fee increases, employee transfers, borrowing money on the bond market and aggressive collection of taxes and federal money as possible budget solutions.

Leon Guerrero said the administration also hopes to get as much as $30 million during the next couple of weeks by borrowing money from banks.

A law passed last year allows the administration to borrow $24 million to pay income tax refunds and $6 million to pay for government operations. The money will be guaranteed by federal Section 30 tax money.

Sen. Mark Forbes, R-Sinajana, said the government faces two challenges -- paying its existing debts and creating a balanced budget that does not add to the government's debt.

He said government reorganization and cuts in personnel costs must be considered because personnel is the largest government expense.

Forbes said one of the benefits of bad times is they can force politicians to make decisions they would not have made in the past.

Lawmakers spent much of the session debating whether the personnel budget for February was calculated correctly.

The amount for that month is based on the annual budget, split into months, but senators said the money should instead be split according to pay periods, otherwise agencies will be given too much money for payroll in February.

Sen. Joanne Brown, R-Chalan Pago/Ordot, questioned why payroll cuts are being postponed for the executive branch while the Legislature and the island's courts already have trimmed their budgets.

The Legislature cut its budget from $7.6 million to $7.3 million, the Supreme Court of Guam cut its budget by 5 percent and the Superior Court of Guam cut its budget by 8 percent.

"Are we prolonging this artificial existence?" Brown said. "For some reason, the administration has not addressed these cuts with regard to personnel."

Bill 27 also requires the governor to submit a detailed spending plan for the rest of the fiscal year by Feb. 10 -- something governor's spokesman John Dela Rosa said the administration plans to do.

January 31, 2003

Pacific Daily News, www.guampdn.com/

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