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Military buildup, ‘stimulus’ funds add to budget plans

By Brett Kelman HAGÅTÑA, Guam (Pacific Daily News, August 11, 2009) - Buildup construction and federal economic stimulus funding could generate up to US$65 million in new revenue for the government of Guam next fiscal year, Office of Finance and Budget Director Chris Budasi told senators yesterday.

Of that possible US$65 million, a "conservative" budget proposal being reviewed by lawmakers would result in spending only US$30 million, Budasi added.

The spillover will be used to shrink GovGuam’s deficit, he said.

For every new dollar injected into Guam next fiscal year, GovGuam expects to make a dime, Budasi said.

Senators met to begin discussions about how much money GovGuam expects to receive and spend next year. The revised budget bill would spend about US$540 million of General Fund money to run the government and US$101 million to pay tax refunds.

The General Fund spending allocated in this year’s budget was about US$20 million less than the proposed fiscal 2010 budget bill.

Budasi, who helped propose the budget bill with Democratic Sen. Ben Pangelinan’s finance committee, said new revenue streams will be created by the coming military buildup and President Obama’s plan to invigorate the economy by pouring money into local governments.

The coming military buildup will bring about 8,000 Marines, their 9,000 dependents and as many as 10,000 skilled laborers to Guam over the next few years. An unprecedented level of construction is needed to ready the island for its new residents -- and whoever does that construction must pay taxes.

Budasi cited the new Naval Hospital, which will be rebuilt over the next few years so it can accommodate Guam’s growing military population, as an example of a project that would generate revenue for GovGuam.

"It’s a US$450 million project that we believe is going to be broken up over the next four fiscal years. Some of the activity is going to hit in this fiscal year then in subsequent years," he said. "We cut that US$450 million number up, and we apply our adjustment to it for how much of that money we think is going to stay in the economy. ... And then that is the number that we believe is activity that will generate additional tax revenue."

Budasi said another source of new revenue are federal economic stimulus dollars Guam will receive shortly. Governor Felix Camacho submitted an application last week for more than US$108 million in economic stimulus projects.

Most of that money must be spent in the next few years, and a lot of the funding will be spent on repairs or construction at local schools or public projects. Whoever does that work must pay taxes too, generating revenue, Budasi said.

Republican Sen. Eddie Calvo, a former chairman of the legislative committee on finance, questioned the estimated revenue increases in the bill.

Calvo has announced he is running for governor in 2010 and, if he wins, he could inherit the budget the Legislature debated yesterday.

Calvo questioned if Pangelinan’s revenue estimate was too high or based on unverified numbers. Pangelinan said the revenue estimates were based on the government’s actual cash collection.

Republican Sen. Ray Tenorio, who’s running with Calvo, worried Pangelinan’s committee hadn’t considered that GovGuam may have less money this year than planned. According to an estimate from the Bureau of Budget and Management Research, GovGuam will generate about US$9 million less this fiscal year than had been projected.

Pangelinan said his committee had already factored that into the fiscal 2010 numbers.

Both Calvo and Tenorio asked Pangelinan to call some of Guam’s government finance experts to review and validate the revenue projections presented by Budasi. Democratic Sen. Rory Respicio objected to the experts being called.

Respicio said he felt that every time the senators called those experts to review a proposed budget, revenues "magically" matched whatever GovGuam needed to spend. Instead, Respicio felt the Legislature should move ahead with the revenues presented by Budasi.

Tenorio said it was "unfathomable" that any senator would object to financial experts being called to review a budget proposal. Tenorio and Respicio left the floor to argue about the issue.

Those experts didn’t take the floor yesterday, but may be brought in today. Session resumes at 9 a.m.

Tourism, which is traditionally one of Guam’s largest revenue sources, isn’t expected to change much next fiscal year, according to Budasi’s budget proposal presentation.

Budasi said the number of tourists next year will hopefully hold steady, but each tourist is expected to spend a little less while they are here, based on Guam Visitors Bureau estimates from June.

"We ran the numbers out and it looks like about a US$7 million decrease to the economy," he said.

A GVB report released last week showed a 37 percent drop in tourist arrivals in June, partially because of a rocky economy and fears about the H1N1 influenza pandemic, but GVB General Manager Gerry Perez said the worst was probably over.

Perez said Budasi’s estimate for the Legislature was a "fair representation" of what Guam’s tourism numbers for next year may be, and because the future is never certain, it helps to be a little conservative.

"Based on everything we know, we expect there to be a slight improvement for the next fiscal year," he said. "Now keep in mind that any catastrophic thing could happen as well. We never expected H1N1."

The proposed budget discussed by senators yesterday would appropriate less money to the Department of Education than last fiscal year, and far less than school system leaders requested.

The department, formerly the Guam Public School System, almost always gets the largest chunk of GovGuam’s budget, but rarely gets as much funding as requested.

If passed as is, the budget bill would appropriate about US$183 million to the department. A budget request approved by the Guam Education Policy Board in March asks for US$263 million.

Last year, the school system requested US$263 million, but received US$189 million. Guam Education Policy Board Chairman Joe San Agustin has said repeatedly that the lack of full funding is responsible for many of the school system’s shortcomings.

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