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".