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Adelup moves to pare deficit
THE government of Guam for the first time is addressing a long-term debt amounting to about $1.2 billion.
John Rios, director of the Bureau of Budget Management and Research, addressed the debt issue during yesterday’s second meeting of the governor’s Fiscal Responsibility and Tax Refund Commission.
The debt includes general obligation bonds totaling $485.8 million and limited obligation bonds totaling $539 million.
During the meeting, Rios brought to the table a 10-year revenue and expenditure forecast that Adelup hopes would support any potential debt service on new debt.
Rios said continuing spending cuts and operating cost reductions would make it feasible to reduce the deficit, and that an annual debt service payment would help reduce the principal amount of the government’s debt.
During the meeting, it was revealed there was an annual overstatement of revenues and understatement of expenditures that has resulted in using money earmarked for tax refunds to be redirected to pay for operations in years past.
This resulted in the government having a huge deficit and the administration making the decision to implement austerity measures, including the rollback of the Hay Study pay hikes.
Also presented was a full analysis of the government’s debt and the possibility that business privilege tax revenues could sustain the bond debt service 14 times over. This would place GovGuam in a better position to afford other types of debt service, administration officials said.
In addition, it was noted that the contribution rate for the Retirement Fund’s unfunded liability over the next 19 years is too high and that taxpayers are currently paying 30.76 percent of the payroll costs for the unfunded liability.
The commission agreed with the recommendation to prevent the increase of benefits, to conduct an experience study every three years, and to extend the amortization period by 10 years.
Vice Speaker B.J. Cruz also addressed the matter of the Compact Impact obligations to Guam. He suggested there should be a concerted effort between Adelup and the Legislature to force the issue with the U.S. so the feds can reimburse what is owed to the island.
“I implore you to really look at that before we start talking about laying off people. I cannot overemphasize that layoffs have to be the last thing we do,” Cruz told Gov. Eddie Calvo.