The government of Guam is approaching a fiscal cliff

Illustration courtesy of Ken Leon-Guerrero of the Guam Citizens for Public Accountability

Our newly elected politicians, drunk on "Victory Kool-Aid," are racing to the edge of the fiscal cliff the same way Puerto Rico's politicians spent their way into a complete government financial collapse. This proves once again there are big differences between campaigning and governing.

We heard our elected leaders promise to fully fund Guam Memorial Hospital, which costs a yearly subsidy of $30 million plus; build a new GMH birthing center, $7.5 million; and replace the government hospital's power panel for $6 million.

We heard commitments to fully staff the Guam Police Department, Guam Fire Department, and Department of Corrections for another $30 million; replace the Emergency 911 funds, which amounts to $4 million; upgrade and repair Government House for $2 million; fully fund the Department of Education, $100 million; support Guam Regional Medical City, $5 million; pay DOC's health care costs, $12 million; and upgrade the Department of Youth Affairs for $1 million.

We heard plans to upgrade the Department of Administration's computer system, $75 million; and to reinstate incremental pay increases for GovGuam employees, $20 million – all of which will increase the cost of governmental operations by a whopping $302 million above fiscal year 2019 budget levels.

Wake-up call

What we haven't heard from our elected officials are steps they've taken that reduced the cost of governmental operations. They need to learn they can't squeeze blood from a rock, so here's their wake-up call.

1. Guam has a small population. Of the 163,272 residents, only 63,510 – 39 percent – have jobs. Of those employed, 87 percent earn less than $40,000 annually.

2. Guam has a weak consumer market. There are 44,662 households, and 60 percent have a combined income per household of less than $50,000 annually. Also, 34 percent of all households receive Supplemental Nutritional Assistance Program benefits, which are a $120 million boost to the local economy courtesy of the federal government.

3. Guam doesn't have a vibrant middle class. The median income, which has been stagnant for five years, is forcing low-wage earners out of the rental market, creating an explosion in the number of multigenerational households on Guam. Children in multigenerational households are waiting until their 30s to get married and start families.

4. Guam doesn't have a "free market" economy. Government expenditures are 36 percent of Guam's economy. Government jobs provide better wages and benefits than private sector jobs, causing a perpetual flow of employees from the private sector to the government sector.

5. Guam's workers are "economic hostages." Travel costs to competing markets for labor from Guam keep wages artificially low. A one-way ticket from Guam to Los Angeles is $1,700. A one-way ticket from Puerto Rico to Miami is $159, to Atlanta $179, and to Raleigh $215.

6. Guam's cost of living is rising. Housing is the largest factor driving the cost of living. Rents are rising as the "unnatural market forces" created by military housing subsidies, Airbnb-type operations converting apartment buildings into vacation rentals, and the Section 8 vouchers are driving rent at remaining rentals upward at double-digit rates.

7. Guam's economy is stagnating. As rents increase, disposable income decreases, forcing people to shop more online. More online shopping lowers local sales, lowers tax collections and lowers employment levels, while increasing government welfare expenses.

8. Guam's economy drives outbound migration. Guam creates 1,300 new jobs – mostly low-wage service jobs – annually. Guam's education system graduates 2,500 high school/college students annually; explaining why so many join the military right out of school.

9. Guam's tax base is shrinking. Young families looking for more opportunities and a better quality of life are leaving Guam in record numbers, as are retirees looking for lower living costs and affordable medical care. With each departure, taxable incomes and large sums of money including from the sale of assets leave Guam forever and are permanently removed from the tax base.

10. Guam's debt load is approaching "debt bomb trigger" levels. Currently, the "per person" share of GovGuam debt is $30,291; only $365 less than the debt load carried by Puerto Rican citizens when their government declared bankruptcy.

We are rapidly approaching the edge of the fiscal cliff. The only way this picture gets any better would be for Guam's elected officials to act as if they are more concerned about the welfare and financial security of the people of Guam than they are about the welfare and financial security of politically well-connected insiders.

Based on their actions so far, that doesn't look likely to happen.

Ken Leon-Guerrero is the spokesperson for the Guam Citizens for Public Accountability.

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