Senators should be cautious, honest about EITC spending

GUAM CONGRESS BUILDING: The Guam Congress Building is seen Aug 30. Kevin Milan/The Guam Daily Post

An upcoming federal reimbursement for the earned income tax credit is looking like a popular source of funds for a lot of our lawmakers.

It’s becoming the answer for a number of budgetary needs, including building a new hospital and a new prison; tourism recovery; utility connection subsidies; higher education scholarships; repairs to village gyms; capital projects at the University of Guam and a “sacred burial ground” to place ancestral remains.

Measures to pay for these ideas and more have been introduced since it was announced that Congress, for the first time since the EITC was created, would pay Guam for the benefit, instead of the local treasury footing the bill. Since the 1990s, governors have refused to pay for the previously unfunded mandate, or invoked it as an excuse for the yearslong wait it once took to pay tax refunds.

In the middle of an economy-busting pandemic and a sea of federal bailout money senators can’t spend, the newly authorized reimbursement, estimated to be around $53 million, is an easy target for lawmakers. And it should have leveraged into easy wins for them, too.

The most obvious, easiest, and perhaps most prudent, use of the money is tax refunds. After all, our residents definitely would benefit from $53 million in tax refunds being paid more quickly. And since it is a reimbursement for EITC, a component of the refunds, it makes sense for the federal funds actually to reimburse the local treasury.

Instead, senators, especially those who continue to push EITC spending bills, have put themselves in a concerning position. The recently passed budget law for the next fiscal year and their spending bills identify the same pot of money – and that should be simple for our lawmakers to see.

The American Rescue Plan, the congressional aid package that authorized the reimbursement, directs the federal government to pay the EITC for territories including Guam in “calendar year 2021 and each calendar year thereafter.”

The fiscal year 2022 government of Guam budget, which goes into effect in October, is projected to spend more than $55.8 million of this upcoming subsidy.

That’s why it’s puzzling, even after enacting this law, that senators are collectively proposing to spend an additional $67.5 million from this same pot of money – a funding source they’ve been advised will top out around $53 million.

More concerning still, some of these proposals are moving forward. A public hearing held last week received testimony in support for spending millions of dollars to renovate the old F.Q. Sanchez Elementary School, and hundreds of thousands to support two private sector partners.

Those who could benefit from this money, including job creators and the village of Humåtak, deserved more honesty from the lawmakers pushing these proposals. Every potential recipient of money from these EITC spending bills should hear the harsh truth, and it should be told by the senators who promised these projects.

The truth is, there isn’t any more money this year for the EITC reimbursement to stretch beyond the budget. Worse, even if the budget didn’t use this money, all the spending bills introduced so far couldn’t be afforded with the projected EITC reimbursement alone anyway. But the worst case scenario, however, would be lawmakers proposing to spend money that they have no control over – something they’ve been warned about.

“Should the Internal Revenue Service and U.S. (Department of the) Treasury avail EITC reimbursements via a trust fund account, those funds would not be subject to legislative appropriation,” the Bureau of Budget and Management Research has advised senators through fiscal notes submitted on EITC spending bills.

We ask lawmakers to either withdraw legislation they concede can’t be funded any longer or amend their spending measures to tap into a viable source of funds, because EITC is tapped out for at least the next 12 months.

Leaving these appropriations as is amounts to an empty promise to the businesses, communities and causes the bills are supposed to help.


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