Guam-A Different Perspective

Guam Public Auditor Doris Brooks remarked this week that, " With the implementation of the GASB 54, GovGuam now includes the main operating fund plus many other funds created by legislation, DOE, and the two other branches of government...because of the continuing impact of GASB 54, DOE, the other branches of government, and other funds also contributed to the surplus. GovGuam is cautioned to be diligent in its spending as it may have a deficit in FY 2013." 

These words come several days after the Calvo Administration rolled out what many are touting as the Administration's signature policy triumph of this-his first term in office. 

“First, I thank my fiscal team. They executed our fiscal policies with courage and precision. They knew exactly what to do, and they navigated our government from near-collapse, said Guam Governor Eddie Baza Calvo.  "Government of Guam employees deserve praise for what they’ve been through the past two decades. Every time there was a fiscal crisis they were asked to sacrifice. Either their pay was cut, or their increments were frozen. To this day they are waiting for their pay to be adjusted to market standards so they can be paid for what they are earning. For two decades they remained patient as government leaders told them they couldn’t help them much because of the deficit. Well, now the deficit is gone. It’s time to reward our employees.”

But is the deficit really gone? What does surplus really mean?  Doris Brooks was very firm in her assessment of the way forward for GovGuam.  We all should be very concerned with the way this report is being characterized and fact check if possible.  This blogger sought out a number of different sources for this post in the administration, the other branches of GovGuam, discussions with business leaders and input from government finance professionals both here and abroad.  I would contribute the following, but know this is but a small portion analyzing this issue of GovGuam finances and know it will cause you to take other portions of this matter to discuss at the water cooler or the kitchen table.

This blogger learned that GovGuam collections beyond their estimates in Fiscal Year (FY) 2012 are not due to more aggressive efforts as the Administration is claiming on their website and in the local media.  It can be directly attributed to the economic stimulus brought on by over $300 million floating in the economy which were not previously factored into the FY 2012 forecast-media outlets reporting record tourism numbers is just one area that contributed to this. 

We all expected the deficit to be conceivably eliminated or even result in a surplus fund balance after the two bond deals proffered by GovGuam and not because of any stellar performance on the part of the Administration.  Furthermore, this massive conversion to long-term debt has at a price tag of nearly a half a billion dollars in interest payments over time for our people. Did I mention that the bonds leverage Guam's business privilege taxes? As a small business of this great U.S. Territory, this is very disconcerting to me.

The frequent pronouncements of expenditure reductions since taking office is also getting pretty old-many of my former colleagues in the local media have given many a pass to Adelup in that time. Their first year in office, the FY 2011 Audit showed that, despite record collections over 14 years in which $56 million more was collected than the previous fiscal year, FY 2011 still ended with a $47 million deficit!  How does this depict a good year? No PR here?   

 A new Cash Flow Model?  Nope.  New Revenue Model?  The same over the past 10 years.

They say that without increments and Hay suspension,  the government would've gone bankrupt.  Really?  The government experiences better days than others with cash flow. There's a constant stream of cash flowing through its coffers daily and spending is constantly prioritized to keep the government operating. 

I would say the government of Guam did have the funds to support both increments and the Hay Study.  The Administration simply decided it was not going to be a priority.  If we now a have surplus as spun by the Office of the Governor of Guam, it proves both should NOT have been suspended to begin with. 

The surplus of $30 million could have covered the Hay implementation over two fiscal years and the $5.2 million in merit bonuses paid recently they said came from this surplus could've covered the increments over the same 2 years.


Don't be fooled by the revelations that one year of a positive balance sheet  would equal a lifetime of prosperity and wealth!  Not when we've added millions more in annual debt service to get to this so-called "surplus".