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Government continues to shortchange trust fund

By Brett Kelman HAGÅTÑA, Guam (Pacific Daily News, Dec. 20, 2011) - Overdue tax refunds may have dominated the first week of December, but GovGuam's tax refund liability still is US$127 million and it continues to grow.

This debt to local taxpayers exists because the local government always spends more money than it collects, and a bank account that was created to preserve refund money often goes ignored, according to a government audit.

"As stated in previous audits, overestimated anticipated revenues and expending beyond appropriations continue to fuel GovGuam's penchant to live beyond its means," states the Office of Public Accountability Audit, which was released yesterday.

According to the audit, GovGuam created a trust fund to ensure tax refunds were paid efficiently in 2002. During last fiscal year, about US$93 million should have gone into that fund, but a large chunk of that money didn't go where it was supposed to.

About US$52 million went into the fund and was used to pay refunds. Another US$41 million, which should have gone into the fund, was instead used to fund the government's operations, "contrary to the law's intent," the audit states.

The trust fund was "shortchanged" by its own government, the audit states.

In the end, the new administration of Gov. Eddie Calvo was able to pay US$198 million of tax refunds during the first week of this month, but GovGuam had to borrow this money, creating decades of debt.

Ideally, a balanced government would be able to find this money within itself. GovGuam, unfortunately, continues to overestimate how much money it will collect, which leaves it unable to pay for its own expenditures.

"So long as GovGuam continues to spend more than it makes and overestimate what it thinks it will collect, operations will continue to need subsidiaries and tax refund liabilities will continue to grow," the audit sates.

Calvo released a statement yesterday thanking the audit for confirming what the government downsizing his administration has touted since taking office.

"It doesn't take rocket science to realize that the problem is the government is more expensive to operate than the cash that's coming in," Calvo said in a statement. "A budget plan means nothing if its revenue projections are wrong."

Calvo said a combination of unrealistic budgeting and overspending has existed for years. In Fiscal 2010, the practice left GovGuam with shortfall of about US$40 million which amounts to about 800 employees. That is more than his administration is willing to lay off at one time.

"In a nutshell, the Public Auditor's recommendations are right: For years, the government should have reduced its spending by reducing its size," Calvo said in his statement. "If this had been done incrementally, then the tax refunds debt wouldn't be this large, and there would not be a need to lay off as many people as we have to today."

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