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GovGuam revenue shortfall: $47M

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GovGuam revenue shortfall: $47M

EMPTY: Many of the businesses in Tumon remain closed such as JP Superstore, T-Galleria, Little Pika's and a number of shops in The Plaza as seen panoramic photo taken Tuesday, July 14, at the intersection of Pale San Vitores Road and Riviera Lane in Tumon. David Castro/The Guam Daily Post

Reports of the government’s finances show a $47.4 million shortfall in revenue collected in the first eight months of the fiscal year compared to the $558.2 million that was anticipated.

That’s an 8.5% shortfall according to a table in the Consolidated Revenue/Expenditure Report.

That won’t trigger a fiscal realignment plan, which would adjust the budget, in light of the existing shortfall. That’s because the government is projecting tax collections this month – leading to a much smaller 1% variance between what was budgeted and their new projections. 

The shortfall isn’t a surprise to local residents and representatives of the business community. In Saipan and Hawaii, their governments, which also rely on the tourism industry, have reduced the current fiscal year budgets and have announced plans for government furloughs in light of lower revenues.

On Guam, nearly 40,000 people have reduced hours or are totally out of employment as many businesses are closed temporarily. Several have announced plans to close for good as the tourism industry remains closed. In this environment, much of the taxes that would normally be collected to support government services aren’t coming in, and some are questioning whether plans are being made for when the federal funding help stops. 

“Even before this administration, we’ve said ... the government is too big. And what we have seen, in the pandemic, is that the government continues to hire and increase its payroll,” said Catherine Castro, Guam Chamber of Commerce president. “This is a big concern and it should be a concern for everybody, because while the private sector has done what the government has asked (and) shut down ... tightened its belt, and very reluctantly, and with heavy hearts, reduced and furloughed employees ... the government hasn’t taken any steps.

“I believe there’s going to be a cutoff,” she said, referring to the federal programs such as the Pandemic Unemployment Assistance, a portion of which ends this month. “But when that happens they might not be ready for it. And that’s going to affect us all.”

Lester Carlson, Bureau of Budget and Management Research director, noted that about $37.8 million of the shortfall is attributed to individual income taxes and corporate taxes “in which the filing date was pushed to July as opposed to April."

“The adopted level is based on the original filing deadline of April," he said. "The projected level accounts for individual income taxes and corporate taxes to be received in July as opposed to April, resulting in the 1% variance as opposed to the 8% variance.”

Guam mirrors the Internal Revenue Service tax code, which pushed back the tax filing and paying deadline from April to July 15. That means revenues anticipated in April wouldn’t be received until July.

“July would be the primary indicator of where total revenue collections from the General Fund for fiscal year 2020, as the due date for tax filing was moved to July due to the pandemic,” Carlson said. “We will know more about the General Fund cash position by the time the July 2020 CRER is due in August.”

Fiscal year 2020 ends Sept. 30.

While there’s been a noted shortfall in special funds dependent on tourism activity, including the Tourism Attraction Fund and Customs and Quarantine Agency Fund, Carlson said agencies relying on those funds “will continue to operate during FY 2020.”

“Sufficient revenue was collected prior to COVID to support these agencies and the infusion of federal funds to combat COVID assisted as well to ensure public health and public safety are prioritized,” Carlson said.

Guam has received hundreds of millions of dollars in federal Coronavirus Aid, Relief, and Economic Security (CARES) Act aid, but those moneys have specific uses.

Carlson noted CARES Act funds can be used for expenses directly related to COVID-19 “as outlined in the U.S. Treasury Guidance.”

“Such guidance also states that the funds cannot be used to supplement revenue shortfalls,” he stated.

And while federal funds provided to residents don’t all funnel directly into government coffers, it does help.

“PUA funding is taxable, in which the government of Guam is receiving withholding taxes from such payments as they are distributed to qualified applicants,” Carlson stated. “The bureau notes that all forms of business are subject to (gross receipts taxes) with the exception of utility entities, meaning any dollar spent from federal assistance funds to a business results in residual (GRT) to be collected.”


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