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Governor details credit rating meetings
Reducing government spending, increasing government revenues and borrowing money on the bond market to pay the Government of Guam's deficit - this is Governor Felix Camacho's plan after three months of being on a Credit Watch issued by Standard & Poor's. Since March the Administration has been working on ways to address the financial condition of the island's public sector in order to get a better rating from the financial ratings giant.
During a press conference this afternoon Guam's chief executive released few other specifics as to his plan, however he was optimistic about his meeting with the two analysts from S&P. "I believe that the talks were very positive and I believe that in the next few weeks two weeks or beyond we should be able to hear their opinion on whether or not we remain on Credit Watch with Negative Implications, the goal was to get off it, and I believe that we made as good a presentation as we could," Governor Camacho stated.
The governor's plan for dealing with the $524 million deficit includes something they've been pushing for years now: deficit financing through borrowing up to $300 million on the bond market. "We must transfer this operational deficit to a long-term liability that can be properly managed," the governor continued.
The Administration hopes to reduce the remaining $224 million in deficit through the governor's forthcoming Fiscal Recovery and Deficit Elimination Plan. This is a strategy that Executiev Branch staffer John Dela Rosa says hinges on setting aside a percentage of revenues each year to pay down the debt. He admits that this plan has yet to be completely ironed out, noting, "We haven't finalized the numbers yet, but obviously that percentage is going to be based on a term. If we're allowed ten years as an acceptable time to pay it down, then we would make a determination of for how much that would be on an annual basis and it would also depend on how much the governor gets to borrow."
The governor's plan also includes a structural reduction in the size and cost of government, permanent revenue increases including fees, repealing tax exemptions and imposing moratoriums on tax rebates. In order to borrow the $300 million needed the government will have to make adjustments to real property taxes, making for something Dela Rosa says doesn't necessarily mean tax increases. "An adjustment to the assessed values of the tax," he stated, "I don't know we have not discussed any increase to the tax rate at this point."
The Administration hopes to reduce the Executive Branch's operating budget by 10%. They plan to conduct zero base reviews of agency budgets, eliminate unfunded mandates, and eliminate the practice of using prior year lapses for appropriations. While the meetings with S&P were held behind closed doors, the governor contends other island leaders should have made the initiative to attend the meetings themselves. He commented on this point, "It's not about whether they were invited or not - this is the time when leaders have to take the initiative and take a step forward and engage not ask to be brought to the table."
While the Administration has yet to reveal their concrete plans to get government finances out of the red, te governor did hint at making some real tough decisions, saying, "We are at that moment in history that very defining moment where we have to make it happen it goes beyond positions or agendas that they may take we've got to look with vision to the future and understand this is the time that we are called to make the decisions that are necessary this is the defining moment."
As far as Fiscal Year 2007 is concerned, revenues are tracking at $454.8 million as of April 30, 2007. While the actual spending is tracking at $490 million the FY2007 budget authorizes $469 million of spending. The governor says he can only propose policies, but it's up to lawmakers to make them into law.
Review S&P's assessment of the Government of Guam's credit rating
GovGuam placed on 'Credit Watch with Negative Implications' press release
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