Guam Lawmakers Consider Governor's Plan To Pay Tax Refunds With Loan

Timing repayment of tax refunds has challenged GovGuam in recent years

By Shawn Raymundo

HAGÅTÑA, Guam (Pacific Daily News, May 8, 2017) – Lawmakers Monday afternoon wrestled with the idea of passing Gov. Eddie Calvo’s borrowing bill, questioning whether its proposed benefits outweigh its potential ramifications.

The bill is aimed to expedite tax refunds by annually borrowing $75 million for the next few years.

While the governor’s fiscal team worked to allay senators’ concerns, uncertainties have raised doubts in the minds of some policymakers.

“I’m having very serious considerations in wanting to support the issuance of tax refunds immediately when all we’re yielding, under a best-case scenario, is under $50,000,” Republican Sen. Mary Torres said.

Department of Administration Director Christine Baleto said taxpayers struggling to pay medical bills don't care about the interest payments and other issues.

"They don’t care about the issues; they need their money," Baleto said. "Those risks are going to be there whether we do this or not."

[PIR editor's note: On May 5, 2017 PDN reported that 'More than a dozen people Friday morning testified in support of a bill that would give Gov. Eddie Calvo the authority to borrow money each year so his administration can speed up the payment of tax refunds.']

Adelup has urged the Legislature to pass the bill because the Calvo administration hopes to secure the loan through a Tax and Revenue Anticipation Note by the end of the month.

The fiscal team has maintained the note would be repaid by the end of each fiscal year, on Sept. 30, with funds the government would've used to pay refunds. Passing the note, Adelup said, would save the administration on interest owed on tax refund payments.

Speaker Benjamin Cruz, D-Tumon, has raised concerns regarding the bill’s lien and appropriation on Section 30 revenue. He’s said passing the measure could impact GovGuam’s spending availability and mean job losses.

Section 30 funds come from income tax payments withheld from federal employees and military personnel. GovGuam receives the Section 30 money near the end of the summer. Calvo’s measure would back the $75 million loans with the Section 30 money. Cruz said the problem with that is twofold:

  • If the governor is pledging such funds in statute, the Legislature, when setting the upcoming fiscal budget, can’t appropriate that money for spending next year; and
  • The federal government has pledged to use a portion of GovGuam’s Section 30 allotment this year to pay war claims to World War II survivors.

According to the law enacted last December, the difference in amounts between this year’s collections and the 2014 collections will go into a Claims Fund.

At the center of Monday's debate was the amount of money GovGuam got in Section 30 funds in 2014. Citing data from the public auditor, Cruz said the government received roughly $63 million in fiscal 2014. The Calvo administration said the amount received was $120 million.

During session, Cruz said he reached out to Guam Economic Development Authority's bond counsel for clarification on whether the Legislature can double appropriate Section 30 funds. Cruz said an answer wasn't provided.

Bureau of Budget and Management Research Deputy Director Lester Carlson said Cruz's question is an issue of policy and not  in the GEDA bond counsel's purview.

"It was outside his scope as bond counsel," Carlson said.

Sen. Louise Muña joined colleagues in being uncertain about Section 30 funds.

"We just need clarification on the numbers. .... A lot of issues with the Section 30 is because of the war claims," she said. "Until we get confirmation from (Delegate Madeleine Bordallo's) office, it’s difficult."

The Legislature tabled further discussion on the bill until Tuesday morning.

Pacific Daily News
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