Marianas Business Journal HAGÅTÑA, Guam (April 11, 2011) –The administration is seeking anew to raise Guam’s debt ceiling to enable the government to borrow more money to settle its outstanding debts including tax refunds, which is expected to reach US$184 million by the end of the tax filing season.

All in all, the government’s structural deficit is pegged at US$278.5 million.

Gov. Eddie B. Calvo, in his weekly address, blamed the previous administration for the government’s fiscal mess, the same way the previous administration blamed its predecessor for the same reason. But apparently, no lesson is learned.

Borrowing its way out of mess seems to be an inveterate habit of every administration of the government of Guam. By accumulating debts to pay debts, the government only perpetuates rather than breaks a vicious cycle.

The previous administration engaged in bond borrowing in 2008 to retire a fraction of its deficit including unpaid tax refunds, unremitted retirement contributions and the expenses related to the solid waste consent decree.

According to the Office of Finance and Budget 2011 report, the government sets aside US$43.6 million a year for debt service alone.

The administration has yet to determine the amount it will seek to borrow. Regardless of the amount, it will definitely add more to GovGuam’s enormous debt burden and make the long-term fiscal problem worse. Borrowed funds will be spent, leaving behind hundreds of millions in additional annual interest payments.

Borrowing is a quick-fix that will not solve the core of the government’s recurring fiscal problem, which has been identified by different entities repeatedly.

The OFB report, for instance, pointed to the systematic breakdown of controls resulting from lack of a clear vision and plan and prioritize spending. Its evaluation of GovGuam’s fiscal condition reveals a pattern of declining government collections, increased expenditures and lack of strategic planning for the management of limited resources.

These are clues that could guide the government toward better fiscal management.

Despite a possible decline in income tax collection as result of the Obama administration’s tax cuts, the government can look to the golden opportunity that will be generated by the military buildup to increase tax revenue.

But improved tax collection and expenditure cuts are key to reducing the perennial structural deficit.

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