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Governor responds to Legislature

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by Sabrina Salas Matanane

Guam - Governor Eddie Baza Calvo has issued his response to a letter sent to Adelup late Tuesday outlining their concerns with his new budget bill or Bill 1-2-S. The letter signed by all 14 senators Tuesday night with the exception of Senator Dennis Rodriguez, Jr. who is off island, asked the Governor to either submit a new budget bill which addresses their six areas of concerns or provide in writing suggestions on how their concerns can be addressed.

Here's a summary of their concerns and Calvo's response:

Legislature's Concern:

1-Limit immediate borrowing to the current debt ceiling, without removing the existing bond authority for expansion of a northern high school (Okkodo) to meet overcrowding needs, and without removing the existing debt capacity for the UOG Student Services Center and Engineering Facility or the Department of Land Management Building.

Calvo Response:

1.      To create new debt and borrow for building facilities before paying tax refunds. CLARIFICATION. Governor Calvo clarified that the indenture of bonds for these capital facilities will use debt capacity meant for tax refunds and create new debt. The Governor made it clear the priority is to pay tax refunds and COLA. He offered support for these capital projects next year, when the government's financial advisors believe there will be more debt capacity.

 

Legislature's Concern:

2-Restore language in the bill which mandates that refunds are paid annually as they become due, by restoring GRT set aside proportional to revenue collections

Calvo's Response:

2.      To include the GRT lockbox. OFFERED AMENDMENT. Governor Calvo clarified the GRT lockbox will cause massive layoffs and make the bonds for tax refunds and COLA unmarketable. He offered instead to divert income taxes into a lockbox, as established under current Guam law.

Legislature's Concern:

3-Restore the hiring freeze provisions to prevent growing deficit or growing government operations

Calvo's Response:

3.      To restore the hiring freeze. AGREED. Governor Calvo does not have a problem with this, except the freeze should not apply to positions critical to an agency's core mission.

Legislature's Concern:

4-Restore the provisions requiring the Department of Administration to submit government cash balance reports to the Legislature on a monthly basis to allow independent tracking of collections and expenditures

Calvo's Response:

4.      To mandate cash balance reports. CLARIFICATION. Governor Calvo clarified  this is not possible because of the very nature of cash reporting. The timeline for the required cash report will precede the actual bank reconciliation. This will make the report incomplete and inaccurate.

Legislature's Concern:

5-Remove any further tax credits for the Tiyan facility as JFK has been removed from the premises and these taxes can now be applied to the JFK interest payments and maintenance

Calvo's Response:

5.      To remove tax credits for the Tiyan facility once occupied by JFKHS. AGREED. Governor Calvo clarified this amendment was placed in because of statements made by Sens. Respicio and Guthertz on the legislative floor in support of using the facility. He has no problem with the legislature taking it out.

Legislature's Concern:

6-Restore continuing appropriations to critical agencies in order for those agencies to sustain critical government services during FY2012.

Calvo's Response:

6.      To restore continuing appropriations. CLARIFICATION. There are no revenues to support these lapses.

Lawmakers also requested for the Governor to consider separating the two bonds and incorporate several other changes. To which Calvo issued the following responses:

Legislature's concern:

1-Raising the debt ceiling must be preceded by the development of a deficit reduction and fiscal reform plan by the governor's deficit commission. We ask that you make said plan a prerequisite of any change in the debt ceiling or any future borrowing above the current debt ceiling.

Calvo's Response:

-          To make the second series of bonds contingent upon development of a deficit reduction and fiscal reform plan by the Governor's deficit commission. AGREED. The Governor has no problem with this, but asks the legislature to immediately authorize the issuance of the first series of bonds, and to not separate the two series' authorization.

Legislature's Concern:

2-Its is a matter of law that the retirement fund must be restored prior to any borrowing, either for $180 million, $343 million or any amount in between. The retirement fund agreed to forego collection of amounts owed to it by the government in the current fiscal year, upon your request for supplemental appropriations, and is relying on the promise by the Legislature and the Governor to restore the amounts due as the first priority of any borrowing. We ask that you account for said priority and submit a revised borrowing proposal.

Calvo's Response:

-          To pay $26 million to the Retirement Fund through the bond. CLARIFICATION. The law requires the government to pay this to the Retirement Fund in its next General Obligation bond issuance. The bond in consideration now is a Limited Obligation bond.

Legislature's Concern:

3-Borrowing to lower the deficit must not be used to fund current year operations. The inclusion of borrowing for health insurance is clearly borrowing for operations and may affect the rating of any bond (small or large), not to mention how it singles out ensuring that the government's health insurance provider gets paid when there are so many operational shortfalls not being implemented due to cash situation and in need of equal attention, including law enforcement 3rd increment and others waiting in line for better times.

Calvos' Response:

-          To not fund health insurance. CLARIFICATION. This provision in the bond was not the Governor's idea. This was taken from whomever drafted Substitute Bill No. 145, the budget bill passed by the legislature. In his original submission, Governor Calvo proposed to pay all health insurance costs through the General Fund.

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